May Six

We now share an additional midweek Fix, going deeper on core topics. Today Merchant and we alternate with newTV. We will get this onto a separate database - but if you want to unsubscribe but not lose Fix / Friday let me know. And I would love your thoughts on how we make this better  - hit reply.


If any one sector typifies the Merchant world right now it’s Grocery. The US figures above are from a good WSJ article on The 2 months that tore the Food Industry apart. We know Europe is similar. 
Last week we mentioned Tesco have gone from 400k delivery slots to over 1million a week - it’s now around 1.2m. Ocado say their revenue so far in Q2 is up 40% ( versus 10% year on year in Q1) and Waitrose  say their deliveries have doubled - to 120k a week - since the crisis and are opening a new fulfilment centre that will let them double London delivery slots.
There are some big issues wrapped in this news. It seems clear that online grocery will stay attractive, especially as social distancing makes shops and supermarkets harder to navigate. But the way it is handled varies. Ocado has no stores and relies on its fulfilment centres so any increase in capacity in the short term is an issue. Tesco and Sainsbury tend to use pickers in their stores and by closing some 24 hour stores early, they convert them into a dark store (for a few hours) with hiring more pickers and having them work through the night. Waitrose also used store pickers but their new centre is coming on stream as their deal with Ocado ends. From September the bulk of non branded food on Ocado shifts from Waitrose to M&S - and many anticipate that will boost the Waitrose delivery business.
Amazon are converting UK fulfilment centres to improve their UK grocery offer yet in the US they are switching the first of their much vaunted Grocery stores in California to be a dark store for pickers.

The WSJ article gets into the effects throughout the food chain and we see many UK food firms turning to online to replace their old wholesale priorities. Again we think that will endure even when wholesale picks up again.

Action? For any CPG firm it is likely that your sales through online have doubled or tripled. What can you do to maximise the benefits? Smart promotions to get added to favourites can still be effective. And working on the assets so you maximise visibility and clarity of your product is vital. Unilever wrote the book on this with their focus on mobile packaging imagery. Lots to learn here. 
In the drinks industry the move to online has accelerated - particularly in the US where state by state legislation has made it hard for the incumbents and thus seen many start ups. There are some interesting adjacent business models - I liked this virtual wine tasting - reinventing Tupperware Parties - even if the economics in the thread need some adjustment to get any real scale.
With Waitrose pushing 2 hour delivery with their new Rapid service and Uber Eats running ads about their grocery service, quick delivery is going to rise in importance. Walmart has launched a 2 hour service called Express Delivery claiming they can supply 160k items across Grocery Electronics and Toys.
I think we will see the blurring between deliveries of Food for restaurants and of groceries etc. And the Amazon investment in Deliveroo is evidence as is the expansion of Uber delivery. 
It is still a fragmented business and we are seeing investment into intermediaries - Deliverect manages the range of delivery partners a restaurant may have.
Action? Could a 2 hour delivery improve your business? Who could you partner with to test this quickly and cheaply?

Shopify Shop
As the Shop launch from Shopify gets analysed there are differing views. 
This is a really good - long - interview with one of the smartest thinkers in the merchant space - now working for one of the most impressive agencies around  - Common Thread. Lots of insight and some good data too

A good piece from Stratechery on Google Shopping - written prior to the Shop launch - looks at the anti Amazon alliance and makes a good case for how Shopify could respond to Amazon. Much of the consternation around Shop hinges on what it could be, rather than what it is now.
Fix friend Tom Baker makes a good argument that it is a one sided marketplace and has some good ideas on how it could evolve. Another blog makes some similar points, concluding;
By creating Shop — by becoming a marketplace — Shopify is losing its neutral third-party badge, and is gaining the influence to directly affect sales. It’s like they are transforming from a supplier to a gatekeeper.
I think we should keep watching. Shopify have made few mistakes so far and it’s relatively easy to see how they could fix some of Shops issues. Quite how they see their ultimate role in commerce is the big question.

Action? - stay close to Shop and ensure you are doing everything you can to make your store compatible and suited to it. Shop is only available in the US Canada and Australia, but elsewhere you can get the Arrive app which Shop is based on

When you read that Coke lost 25% of its global volume in recent weeks you understand why they pulled their ad spend. Every business will need to rethink their business and having a direct relationship with your customers will be important for most. This piece looks at CPGs and one area with potential is loyalty - although i think the better term is Dialogue. For example Coke are looking at how they can use Dirty Lemon - a business they have invested in - to sell some products direct using messaging.
The latest results from Adidas saw them address these issues - chart 30 onwards talk of going after digital opportunities and they have increased their ecommerce goal for 2020 to $4bn.
Our friends at PSFK have outlined 9 strategies for success - essentially owing the infrastructure, the experience and the relationship.
Action? How can you think about the future in new practical ways? Ignoring the siren voices preaching IT focused Digital Transformation. Good businesses have banked the benefits of improved efficiencies and seen the banality of Post It note parades in Workshops. What’s next?
Whilst Coke have been criticised for pulling ad spend, they are not the only ones. ITV have announced that their April revenue it down by 42%. But as we have covered, some businesses are seeing good results from continuing to invest in ads. This long post from US Agency Common Thread is an impassioned plea to keep spending - but backed up by good data from their own clients.
Now it’s not a big surprise that people who make money from advertising would like you to keep spending. But there are new potential customers with time on their hands and money to spend. You should be testing whether your product might resonate with this audience.
Action? Experiment with your ads. Test new creative. Test new formats and new platforms with small spends.
VC & Merchants
More and more discussion over whether the VC desire for 10x returns is a good fit with DTC businesses. An ex Bonobos exec thinks the early gems have created unrealistic expectations. A good read and one I agree with as it fits well with my Bonsai Brand thinking
This unrelated piece makes a similar case for how Caspers and Harrys can survive by being less DTC.
‘It’s bullshit’: Inside the weird, get-rich-quick world of dropshipping
Stitch Fix’s CEO on Selling Personal Style to the Mass Market - good Harvard Business Review profile of a true Merchant
Fraud is a growing problem in ecommerce - criminals setting up Shopify sites and using Facebook ads to sell P&G (etc) products then disappearing with the money. Amazon are stepping up with Transparency: Helping Prevent Counterfeit & Verify Authenticity
Podcast interview with Shopify CEO Tobias Lütke - interesting that the 2008 crisis was key for Shopify as they saw lots of laid off people start new businesses on the platform. Now every 50 seconds a Shopify seller gets their first sale .
Primark say eCom wouldn't be profitable? Here's why that's bullshit
Luxury Brands Never Embraced E-Commerce in Japan. Now, They’re Regretting It.
The future of food: why we invested in Deliverect
Is imitation the highest form of flattery? Maybe not in DTC design
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