Fulfillment and delivery news for online retailers

Mexican antitrust commission: Amazon, Mercado Libre hinder effective competition

Abbas Haleem — Thu, 15 Feb 2024 21:48:25 +0000

Amazon and Mercardo Libre both face regulatory scrutiny, following the release of new findings in Mexico.

A report from the Federal Economic Competition Commission (COFECE) — an agency in the Mexican government responsible for regulating anti-competitive behavior — found that Amazon and Mercado Libre control too much of the ecommerce market’s sales and transactions in the country, impeding new merchants from successfully entering the market.

Amazon and Mercado Libre are the largest online marketplaces in Mexico. Together, the report says, they control more than 85% of online marketplace sales and transactions in the country.

“We are aware of this preliminary report and are closely collaborating with COFECE,” Amazon said in a statement.

Mercado Libre issued a statement saying it was analyzing COFECE’s preliminary report, which the marketplace described as the start of the process. It also pledged its cooperation.

Amazon.com Inc. is No. 3 in the Global Marketplaces Database. MercadoLibre Inc. is No. 8. The Digital Commerce 360’s database ranks the largest online marketplaces around the world based on third-party gross merchandise value (GMV).

Amazon, Mercado Libre investigated in antitrust report

“There are no conditions of effective competition in the marketplace service market for sellers,” according to a translation of the preliminary opinion in the COFECE antitrust report. The report cites an investigation the commission held from March 31, 2023, to Oct. 27, 2023.

The report found that in Mexico, Amazon and Mercado Libre also:

Have the ability to set prices
Create barriers to entry into the market
Exert significant competitive pressure over smaller competitors

It says although there are some competitors in the market, most of them are much smaller in size compared to Amazon and Mercado Libre. As such, the smaller competitors’ ability to exert competitive pressure is not significant, the regulator asserted. Additionally, it states that Amazon and Mercado Libre are the only competitors that have systems for collecting and processing large volumes of data. Those systems allow the companies to offer sellers various tools within their platforms. The tools then incentivize sellers to remain on the marketplaces. That ensures a sufficient number of users to generate and maintain industry effects, according to the report.

COFECE report proposes corrective measures

Among the barriers to competition cited, COFECE identified that Amazon and Mercado Libre artificially influence buyer behavior by offering streaming services in their loyalty programs. As a corrective measure, COFECE proposes the marketplaces dissociate streaming services from their memberships and loyalty programs.

Another barrier to competition is the lack of transparency in offer management. It asserts that Amazon and Mercado Libre’s marketplaces use algorithms to manage offers. The regulator is concerned that a lack of transparency in that process could undermine efficient market functioning.

“COFECE also orders Amazon and Mercado Libre to take all necessary and sufficient actions to ensure that sellers can find comprehensive information about the variables and weighting factors they consider in selecting the featured offer,” according to a Mexico Business News report on the COFECE findings and corrective measures.

Also at issue is the idea that a preference for proprietary logistics solutions creates a third obstacle for market competitors.

“Amazon and Mercado Libre give preferential treatment to products from sellers who use their fulfillment services,” the report said, according to Mexico Business News.

“A seller would be unable to hire a single company that offers fulfillment in a comprehensive manner, and from there participate in various sales channels,” the report said.

As a solution, COFECE proposes that the marketplaces modify the criteria for the “Prime” and “Full” labels on products eligible for delivery using the marketplaces’ fulfillment networks. It suggests modifying the criteria so the labels are not exclusively or preferentially assigned to sellers who use the marketplaces’ fulfillment services.

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Instacart announces layoffs, revenue growth on same day

Abbas Haleem — Wed, 14 Feb 2024 22:39:16 +0000

Maplebear Inc., the company that does business as Instacart, announced that its board of directors approved workforce layoffs, according to a Feb. 9 report it filed with the U.S. Securities and Exchange Commission. The same day, Instacart announced revenue growth for its fiscal fourth quarter and year ended Dec. 31.

The SEC filing shows that Instacart’s plan “includes a reduction of approximately 250 employees, representing approximately 7% of the company’s global workforce as of January 31, 2024, with most of these reductions expected to occur by March 31, 2024.”

Instacart layoffs and executive-level changes

Instacart estimates the restructuring plan will cost $19 million to $24 million in non-recurring charges, according to the SEC filing. That’s predominantly tied to “cash expenditures for employee transition and severance payments and employee benefits.” Although Instacart will have to incur expenses this year due to accounting rules, it said $17 million to $22 million of the expenses will affect cash flow in the future.

In the same filing, Instacart noted that chief operating officer Asha Sharma informed the company of her decision to resign, effective March 1. Instacart said in the filing that it does not plan to hire or appoint a new COO “at this time.”

CEO Fidji Simo said in a Feb. 13 earnings call with investors that its chief technology officer (Varouj Chitilian) and chief architect (JJ Zhuang) are also departing the company. Simo said the company is “taking the opportunity to streamline my management team and create more autonomous teams with all the levers they need to execute on our critical initiatives.”

She added that the company will look for a new CTO. As with the COO role, though, it does not expect to backfill the chief architect position, she said.

Instacart Q4 results

Simo said on the call that Instacart fulfillment speed improved in Q4, adding that the fill rate increased for the sixth consecutive quarter. Fill rate is the percentage of customer orders that a business can ship right away, without any backorders, stockouts, or missed sales.

Instacart grew orders 5% year over year in Q4 to reach 70.1 million. Gross transaction volume (GTV) also increased year over year, up 7% to $7.89 billion. Instacart also announced $803 million in total Q4 revenue. That’s a 6% year-over-year increase that represents 10.2% of GTV.

Instacart transaction revenue grew 6% year over year to reach $560 million. That represents 7.1% of GTV for the quarter.

Instacart 2023 full-year results

For the full year, Instacart grew orders to 269.2 million, a 3% year-over-year increase. Instacart GTV grew 5% over 2022 to reach $30.32 billion.

Meanwhile, Instacart total revenue in 2023 grew 19% year over year, reaching $3.04 billion. That represents 10% of GTV. Transaction revenue represented 7.2% of GTV, as it grew 20% year over year to reach $2.17 billion.

Recent Instacart announcements

Instacart will partner with grocery chain Hy-Vee to offer same-day delivery, Hy-Vee announced days before Instacart’s earnings call. Hy-Vee will benefit from the nearly 600,000 shoppers in Instacart’s network that can pick up, pack and deliver orders, Instacart said.

Meanwhile, Instacart announced it will be available for Whole Foods deliveries in select parts of Canada.

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Online grocery sales grow in January to start the year

Abbas Haleem — Mon, 12 Feb 2024 22:30:26 +0000

Online grocery sales grew 2% year over year in January, but 2024 still began with mixed results, according to data from the monthly Brick Meets Click and Mercatus Grocery Shopping Survey.

Survey data showed that the number of households that bought groceries online grew. However, there was a downward year-over-year trend in order frequency and average order value (AOV), Brick Meets Clicks and Mercatus reported.

They conducted the survey at the end of January 2024 with 1,745 respondents who shop for groceries online. Results compare with those from a January 2023 survey of 1,735 online grocery shoppers.

January online grocery sales in the US

Brick Meets Click and Mercatus define the three receiving methods for online grocery sales as:

Delivery: Includes orders received from a first- or third-party provider like Instacart, Shipt or the retailer’s own employees.
Pickup: Includes orders received by customers either inside or outside a store or at a designated location/locker.
Ship-to-home: Includes orders that are received via common or contract carriers like FedEx, UPS, USPS, etc.

Ship-to-home online grocery sales grew 7.8% year over year to reach $1.5 billion in January. That makes it the only segment of the three to grow year over year, as delivery remained flat at $3 billion and pickup declined 1.9% to $4.0 billion. Ship-to-home also saw a larger order volume in January 2024 as well as a 7% AOV increase.

Still, pickup had the most sales of the three categories, finishing the month with nearly half (47.4%) of online grocery sales. Meanwhile, the 3% growth in AOV for online grocery sales opting for delivery did not offset the larger decline in order volume, Brick Meets Click said.

“When more than 10% of U.S. households have less money to spend on groceries this year than they did last year, changes in buying behavior are certainly expected,” said David Bishop, partner at Brick Meets Click. “The reduction in SNAP payments that took effect at the end of February 2023 is one of the factors driving the flight-to-value trend which we’ve observed and tracked since mid-2023.”

Amazon, Walmart and the online grocery sales arena

Walmart and other mass merchants continued to outperform the broader online grocery sales market, Brick Meets Click said. Mass merchants expanded their bass of monthly active users by almost 10%, according to Brick Meets Click data. They also grew AOV in January, helping to compensate for flat year-over-year order frequency.

At the same time, the number of monthly active users at supermarkets declined more than 5%, and the average number of orders fell at a larger rate, Brick Meets Click said without specifying that rate.

Amazon accounts for the largest share of ship-to-home online grocery sales, Brick Meets Click said. The retailer’s sales improved compared to 2023, “but those improvements need to be put into context,” Brick Meets Click added.

Amazon had lost a “large” number of monthly active users in January 2023, making the growth in January 2024 “driven partially by easier comparable results,” Brick Meets Click said.

“Overall, Amazon’s year-over-year MAU gains more than offset the drop in order frequency, and moderate AOV gains also helped drive its positive sales results,” Brick Meets Click said.

Amazon is No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Walmart ranks No. 2.

“Competing online is only getting more challenging for regional grocers as customer expectations continue to increase,” said Mark Fairhurst, global chief growth officer at Mercatus. “So, beyond improving key elements of the experience, like fill rates, wait times, and product quality, regional grocers also need to work even harder to identify additional ways to help their customers save money.”

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Deloitte report: Loyalty can help retailers overcome headwinds in 2024

Abbas Haleem — Thu, 08 Feb 2024 21:57:59 +0000

Two key trends will shape the future business environment, according to Deloitte’s 2024 U.S. retail industry outlook. Those trends are tighter labor markets and higher long-term interest rates, Deloitte said in the report, which focuses on how retailers can rekindle “profitable loyalty through experiences, personalization, and trust.”

“First, slow labor force growth and continued high demand require companies to offer higher wages to lower-skilled workers and to be more imaginative about hiring,” Deloitte economists Danny Bachman and Akrur Barua said. “Second, long-term interest rates are unlikely to return to the lows of the late 2010s.”

Interest rates and inflation overall had a noticeable impact on consumer spending at a critical time, according to the report.

“The pandemic-induced ecommerce surge and supply chain disruption caused a loyalty calamity,” the Deloitte report’s authors wrote. “Three in four consumers tested new brands and stores as they faced empty shelves. When life began normalizing, retailers focused on enticing customers back to their stores and keeping them in the so-called family. Then inflation hit.”

Deloitte weighs loyalty vs. better pricing

Half of the retail executives Deloitte surveyed expect consumers to prioritize price over loyalty this year. The fact that the online marketplace Temu’s app was the most downloaded on Apple’s store in the U.S. last year suggests that expectation makes sense, Deloitte said.

Just over two-thirds (64%) of retail executives Deloitte surveyed expect inflation-weary consumers to purchase fewer goods — something that also concerns consumer packaged goods (CPG) companies as they pivot to profitable volume.

Consumer spending at discount retailers increased significantly year over year

Deloitte lists in the report three key tips for retailers to gain — or regain — consumers’ loyalty in 2024.

1. Lean into loyalty programs

Even among loyalty program members, not all customers spend the same way. By creating tiers within loyalty programs, retailers can give extra perks to the biggest spenders in a more financially viable way, according to Deloitte.

“While tiering programs are not new, we see more investments occurring behind the scenes that take a more scientific approach to segmenting,” the report’s authors wrote. “This includes providing different offers, benefits, and communication to higher tiers and working toward migrating people up.”

Loyalty programs can also be cobranded, as is the case with Target and Ulta, Kohl’s and Sephora, and other cases. Target also offers its members free trials on Apple services. This reduces the retailer’s responsibility to provide all the benefits, Deloitte said. For example, consumers can earn rewards toward their Target and Ulta rewards programs when they buy Ulta products from Target. The same applies for Kohl’s shoppers buying Sephora products in Kohl’s stores and on its website. Retailers should also consider joint promotions with travel programs that involve airlines, hotels and restaurants, Deloitte said.

“By co-branding the benefits, retailers can get greater exposure and plug into a broader set of consumers while providing exciting benefits with shared costs, potentially improving the program’s profitability,” Deloitte’s researchers said in the report.

With all this first-person purchasing data, loyalty programs give retailers the opportunity to personalize suggestions to consumers, giving room for additional revenue, Deloitte said. This can be valuable to retailers that have extensive data from digital and in-store shopper visits.

Nearly two-thirds of retailers share or plan to share loyalty data with retail media network advertisers, Deloitte said, citing data from a Deloitte Digital report. Deloitte Digital released the report, called “Harness the power of Retail Media Networks to elevate the brand to consumer connection,” in December 2023.

2. Enhance omni-experience through in-store investments

Omnichannel inconsistencies and poor execution can be detrimental to loyalty, Deloitte said.

It cited its December 2023 omnichannel holiday analysis report, which reviewed 145 companies’ omnichannel capabilities from Nov. 21 to 23, 2023. It found that buy online, pick up in store (BOPIS) and buy online, return in store (BORIS) “were widely available,” but only one in 10 retailers offered alternative delivery pickup.

Meanwhile, “a third failed to indicate how long it would take to receive a refund. Shipping was also a sore spot; by December 5, only a third listed shipping cutoff times for Christmas arrival. And when we tested the claims of 17 companies offering on-time delivery of holiday gifts purchased on Dec. 19, nearly one-quarter of the holiday delivery orders arrived after Dec. 24.”

Whereas the pandemic’s digital acceleration benefited omnichannel shopping, Deloitte said, retailers need to maintain “a cohesive, consistent omni-experience.” It said the experience “is often lacking, potentially eroding trust” despite pandemic-induced tech upgrades and new last-mile and return options.

According to Deloitte data, the top four growth opportunities that retail executives anticipate in 2024 are:

Strengthening loyalty programs (54% of executives selected this)
Strengthening ecommerce offerings (44%)
Enhancing in-store customer experience (36%)
Enhancing omnichannel experience (32%)

3. Drive individual engagement at scale with trustworthy AI

Building on first-party data that retailers acquire through loyalty programs and visits to their ecommerce sites and physical stores, retailers have an opportunity to further personalize product recommendations and tailored interactions, Deloitte said.

Half of retail executives are prioritizing AI-driven personalized product recommendations in 2024, Deloitte said. However, only five in 10 retail executives are confident in their company’s ability to use AI effectively across their businesses, it added.

Meanwhile, eight in 10 consumers from Deloitte’s holiday study said they had little to no trust in retailers’ ability to use artificial intelligence responsibly.

“Retailers also see this as a challenge, as more than three-quarters said using next-generation AI technologies in the next five years will strain consumer trust and heighten their concerns around privacy violations, surveillance, lack of transparency/accountability, and job displacement,” Deloitte said.

Trust in a brand drops 144% for customers who know a brand is using AI, Deloitte data found. To build trust, Deloitte said, brands should focus on four factors:

Humanity: Retailers should focus on building human interactions, Deloitte said. “AI should be trained with an expansive set of rules to be responsive to the context of the customer.” That can include training AI to give condolences if a consumer mentions a death in the family, Deloitte said as an example.
Transparency: Retailers should explain how and why chatbots are being used, providing specific details about their purpose and function, Deloitte said.
Capability: Retailers should give employees the chance to use AI tools in a zero-risk environment. From there, retailers should highlight the tools’ benefits “while underscoring that the tools do not undermine their work and value.”
Reliability: Retailers should make clear what consumers can expect from AI tools so as to “drive perceptions of reliability.”

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Whole Foods will be available on Instacart in Canada

Brian Warmoth — Thu, 08 Feb 2024 17:28:59 +0000

After Amazon acquired Whole Foods, the grocer’s presence on Instacart became an early casualty. The companies worked together as far back as 2014, but Instacart eventually found itself competing with Amazon’s own grocery-delivery ambitions. In Canada, however, Whole Foods is back on Instacart, with its own storefront on Instacart.ca.

Amazon’s Whole Foods working with Instacart in Canada

Instacart announced the new addition to its app and website on Feb. 7, including delivery availability for 14 Whole Foods Market stores in the Vancouver, Victoria, Toronto and Ottawa metro areas.

Amazon ranks No. 1 in the Top 1000, Digital Commerce 360’s ranking of the largest North American online retailers. Amazon is also No. 3 in Digital Commerce 360’s Global Online Marketplaces Database, which ranks the 100 largest such marketplaces by 2023 third-party gross merchandise value (GMV).

“Our mission at Instacart is to create a world where everyone has access to the food they love, and working with beloved retailers like Whole Foods Market helps us make that mission a reality,” said Chris Rogers, chief business officer at Instacart, in a released statement. “With this launch, we’re proud to welcome Whole Foods Market Canada to the Instacart marketplace, making same-day delivery in as fast as 30 minutes available to their loyal Canadian customers.”

Whole Foods on Instacart availability

Whole Foods, meanwhile embraced the delivery option, framing it as a win for customers.

“We strive to create the best shopping experience for our customers both in stores and online, including finding ways to provide convenience without sacrificing quality,” said Rick Bonin, senior vice president of operations at Whole Foods Market. “We’re excited to work with Instacart in Canada to provide our shoppers with a quick and easy way to get their favorite high-quality foods and products delivered directly to their doorstep.”

The chain will look to benefit from access to tens of thousands of Instacart users in Canada as the deliveries begin, according to Instacart’s press release.

“Both companies are incredibly passionate about providing an exceptional experience to customers, and we’re excited to help Whole Foods Market make its fresh produce, pantry staples, and so much more available to millions of Canadians through Instacart,” said Rogers.

Participating locations

Initially, 11 Whole Foods stores will participate, and three more will follow. Instacart promotes delivery in as little as 30 minutes in some circumstances. Delivery for Whole Foods orders over 35 Canadian dollars will be free for Instacart+ subscribers.

In addition, Instacart touted the use of its recently announced artificial intelligence-based features for order recommendations, recently announced at CES. The app serves orders for groceries, as well as alcohol and prescriptions.

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2024 has mounting supply chain issues. Here are new ways to handle them.

Yikun Shao — Fri, 02 Feb 2024 22:20:41 +0000

Yikun Shao, head of supply chain for North America, Alibaba.com

Businesses have been carefully watching the state of global supply chains as they have had to maneuver around obstacle after obstacle to ensure they meet the increasing demands of customers. In 2024, businesses will continue to feel the brunt of existing challenges, as well as meet new ones, and it will be critical to anticipate and find new ways to manage these issues while living up to customer expectations.

Crowdsourced delivery allows businesses to scale their shipment operations and achieve delivery timeliness and efficiency.

Of note, nearly four in ten (38%) small businesses think the global supply chain outlook will have a negative impact on their business, according to an Alibaba.com survey, so it will be important to watch for changes throughout the year and monitor for potential concerns.

One of the most pressing challenges the industry faces is a shift of issues from the supply to the demand side. On the supply side, more raw materials are available, and there are fewer transportation obstacles.

However, on the demand side, there has been rising inflation globally, and backlogged inventory, especially in the U.S. and E.U., has led to a decrease in demand, compounded by decreased demand for certain products. While the U.S. saw a return to pre-pandemic consumer holiday season spending in 2023, businesses may still want a more conservative approach and order products in smaller quantities, meaning that meeting shipping requirements may become more difficult. Demand is not able to meet the products that the supply side is able to provide.

On top of this, recovery from the COVID-19 pandemic is ongoing as supply chains are still readjusting from related interruptions. There is more stability, but recovery takes time, especially as new challenges arise.

Mounting Concerns Businesses Should Monitor

Businesses are also facing a number of additional issues that could spell trouble for them throughout the year that they should be watching carefully:

Cyber attacks: Threats from bad actors continue to be a growing issue. Small businesses are three times more likely to be targeted by cybercriminals, and the cost of cybercrimes to small businesses reached $2.4 billion in 2021.
Labor and government shutdowns: 70% of small business owners say a government shutdown would negatively impact their business, and 93% say it would hurt their revenue. Additionally, labor strikes can also impact small businesses by disrupting vendors or shipping partners.
Natural disaster events: With 2023 on track to be the hottest year on record and extreme weather events increasing, supply chains could be increasingly disrupted by natural disasters and unworkable conditions.
Panama Canal disruptions: The drought in Panama, largely caused by the El Niño climate phenomenon, has caused major delays and bottlenecks for those in the logistics industry. Scientists believe climate change may be prolonging dry spells and increasing temperatures in Panama. As such, the situation has become dire and expected to continue into at least mid-2024, as the number of ships allowed through the canal will decrease into February.
The state of the U.S. economy: 47% of small business owners feel the economy will get worse in the next 12 months, and 58% said their business is being impacted by higher interest rates.

It will be crucial for businesses to monitor these and other issues and adapt as necessary by tapping into innovative industry tools and resources.

Digital Tools Address the Changing Supply Chain Landscape

As supply chain and logistics trends continue to evolve, digital tools can make it easier to manage operations to ensure on-time deliveries. There are a variety of tools on the market that can help businesses stay up-to-date on shipping and inventory processes. Companies can also invest in data analytics programs to assess patterns in inventory management and customer demands. There are even technology offerings that can help model and then execute on needs as supply chains come under greater stress. The goal in utilizing digital solutions like these is to predict trends, streamline processes and increase efficiency no matter the current supply chain landscape.

To make the biggest impact, specifically engineered intelligent tools, like Alibaba.com’s Smart Assistant, are also available, and they can provide better insight into the sourcing process. They can include features surrounding supplier transparency, direct communication with translation, shipment tracking, protections for wrong or delayed orders, and digital inventory awareness. These functions allow businesses to keep tabs on their orders and adjust to changes to time orders accordingly and, most of all, have peace of mind when sourcing their products.

However, employing digital tools is just one avenue businesses can take for upping their supply chain game.

Alternative Shipping and Warehousing Methods

Thinking outside the box when updating your shipping practices can also help to increase efficiencies, meet the growing demand for faster deliveries and stay resilient during supply chain setbacks.

There is a newer phenomenon in the form of crowdsourced delivery. This allows businesses to scale their shipment operations and work with other businesses to achieve timeliness and efficiency in deliveries. This communal form of shipping will continue to grow and become highly utilized in the coming years as technology becomes more widely adopted.

Beyond crowdsourced delivery, the localization of supply chains is also helping keep things closer to home, reduce logistics costs and cut order fulfillment time for small businesses. Localization may take the form of strategically built warehousing networks to maintain inventory closer to major customer bases. Some businesses are also using third-party warehouses, but these can have numerous and complex restrictions, which are constantly evolving. With that in mind, regional warehousing could be a viable alternative.

The world of ecommerce logistics and supply chain is constantly changing, but digitization, localization and omni-channel distribution are the three areas of innovation that businesses should consider taking advantage of. New technologies are bringing more transparency to the process than ever before. While these trends are growing, it will be critical for businesses to stay vigilant and monitor for new innovations and supply chain developments in order to be ready to tackle future challenges and seize new opportunities to evolve and improve their supply chains.

About the author:

Yikun Shao is Head of Supply Chain for North America at international marketplace Alibaba.com.

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Ecommerce earnings recap: What you missed from Amazon, Tractor Supply and more

Mary Meisenzahl — Fri, 02 Feb 2024 20:58:25 +0000

More retailers in Digital Commerce 360’s Top 1000 list of leading ecommerce retailers in North America reported ecommerce earnings results for the most recent fiscal quarter. Retailers reported mixed results on demand returning to normal levels. Here’s the ecommerce earnings summary you need to know from this quarter. Read more ecommerce earnings coverage here.

Parentheses indicate the merchant’s ranking in the Top 1000.

Amazon.com Inc. (No. 1)

Amazon beat expectations with earnings for its fiscal fourth quarter ended Dec. 31, 2023. Its net sales in the quarter grew 14% year over year to $170.0 billion.

Full-year sales grew 12% to $574.8 billion in 2023, up from $514.0 billion in 2022.

Read more about Amazon’s earnings here.

Boot Barn Inc. (No. 366)

Boot Barn reported that net sales grew 1.1% to $520.4 million in its fiscal third quarter ended Dec. 30. Ecommerce same-store sales declined 11.5%, and retail same-store sales declined 9.4%.

“Our online channel has felt pressure due to less efficient online marketing spend, partly caused by an increase in digital spend by a handful of vendors and competitors,” CEO Jim Conroy said. “Our objective continues to be to maximize profitability for our online business, so we will remain disciplined with our digital spend so as not to erode earnings and our desire to grow the top-line sales,” he said. The retailer expects further ecommerce declines next quarter.

Columbia Sportswear Co. (No. 149)

Columbia reported net sales declined 9% to $1.1 billion in its fiscal fourth quarter ended Dec. 31. Net sales declined 1% for the full year. U.S. net ecommerce sales declined by a high single-digit percent, the retailer said without specifying further.

“Softer consumer traffic and weather weighed on results. Our DTC business performed well during peak sales windows like Black Friday and Cyber Monday, but fell off during non-peak periods,” CEO Tim Boyle said.

Costco Wholesale Corp. (No. 6)

Costco said net sales grew 6.1% to $56.72 billion in its first fiscal quarter of 2024 ended Nov. 26, 2023. Ecommerce comparable sales grew 6.3% in the same period. E-gift cards, snacks and pet items were all strong in the ecommerce channel, the retailer said.

Deckers Brands (No. 74)

Deckers reported revenue grew 16% to a record $1.56 billion in the fiscal third quarter ended Dec. 31.

“Our brands delivered Deckers’ largest quarter in history, with record revenue and earnings as both HOKA and UGG drove exceptional performance in the quarter, led by our DTC channel and high levels of full-price selling,” CEO Dave Powers said in a statement.

Pitney Bowes (shipping carrier to the Top 1000)

Pitney Bowes announced revenue declined 4% to $872 million in its fiscal fourth quarter ended Dec. 31. Full-year revenue declined 8% to $3.3 billion. Revenue from global ecommerce declined 7% in the fourth quarter to $381 million and was down 14% for the full year. Meanwhile, domestic parcel volume grew, it said.

Pitney Bowes is a shipping carrier to 104 retailers in the Top 1000.

Sally Beauty Supply LLC (No. 523)

Sally Beauty said consolidated net sales declined 2.7% to $931 million in its fiscal first quarter ended Dec. 31. Comparable sales declined 0.8% during the period. Online sales remained flat with the year-ago period, comprising $91 million in sales.

The beauty retailer reported some improvements in demand, with a return to normalcy among customers over the holiday season.

Skechers USA Inc. (No. 302)

Skechers said sales for the fiscal fourth quarter ended Dec. 31 grew 4.4% to $1.96 billion. Annual sales grew 7.5% to a record $8.0 billion. Direct-to-consumer sales, which encompass ecommerce, grew 20.3% in Q4 and 24.3% for the whole year. Meanwhile, wholesale sales declined 8% for both the fourth quarter and full year.

Online DTC sales recorded double-digit growth, Skechers said.

“The momentum in our direct-to-consumer segment is indicative of strong consumer demand driven by the combination of our fresh and innovative product paired with effective brand marketing. We are excited about our omnichannel growth opportunities as we continue to deliver on our strategy to expand our direct-to-consumer presence worldwide,” said John Vandemore, chief financial officer.

United Parcel Service Inc. (shipping carrier to the Top 1000)

UPS consolidated revenue declined 7.8% to $24.9 billion in its fiscal fourth quarter ended Dec. 31. Consolidated operating profit declined 22.5% during the same time period to $2.5 billion. The carrier said it will eliminate 12,000 jobs this year as a plan to generate $1 billion in cost savings as revenue and package volume decline.

532 online retailers in the Digital Commerce 360 Top 1000 use UPS for their fulfillment — either exclusively or in combination with other carriers.

Target Corp. (No. 5)

Third-quarter sales declined 4.9% for the mass merchant, to $25 billion from $26.12 billion in its fiscal third quarter ended Oct. 28. Meanwhile, Target online sales decreased 6% year over year. Moreover, Target’s online sales declined 6.7% year over year for the first nine months of its fiscal year.

Read more about Target’s earnings here.

Tractor Supply Co. (No. 99)

Tractor Supply reported net sales declined 8.6% to $3.66 billion in its fiscal fourth quarter ended Dec. 30. The retailer did not share ecommerce sales for the quarter but said annual online sales topped $1 billion for the first time in 2023. It also reached 7 million mobile app downloads, with 2 million of those downloads in 2023.

“We continue to capitalize on opportunities to accelerate our growth,” CEO Hal Lawton told investors. “Between our website and our mobile app, we have more visitors online now than we do in our stores. These digital assets are essentially the front door to Tractor Supply. We’ll be focused this year on improving our digital customer experience and capability as we look to accelerate conversion rate.”

Lawton cited poor weather, high interest rates and inflation as headwinds facing Tractor Supply and impacting consumer demand.

Walmart Inc. (No. 2)

Walmart reported that U.S. online sales grew 24% for its fiscal 2024 third quarter ended Oct. 27. Global ecommerce sales grew 15% over the same period, while international ecommerce declined 3%.

U.S. comparable sales grew 4.9%, and total revenue grew 5.2% to $160.8 billion.

Read more about Walmart’s earnings here.

1-800-Flowers.com Inc. (No. 47)

1-800-Flowers revenue declined 8.4% to $822.1 million in the second fiscal quarter ended Dec. 31. Ecommerce revenue declined, but slightly more slowly. It was down 6.6% to $738.4 million. Average order value grew 3% year over year as higher-income consumers became a larger percentage of the customer base and tended toward more expensive gifting purchases, the retailer said. Meanwhile, lower-income consumers continued to be impacted by macroeconomic pressure and cut back spending.

During the first half of our fiscal year, we have been prudent with our marketing spend in a challenging consumer environment in which we didn’t see an adequate return on investment,” president Thomas Hartnett said.

So what does it mean?

UPS and Pitney Bowes both recorded declining revenue during the peak holiday season. UPS is still grappling with the fallout of its near strike last year and recovering volume it lost during that period.
Footwear retailers Skechers and Deckers both recorded significant growth in their most recent quarters, with major gains in DTC sales. Other apparel retailers did not report the same gains in consumer demand.

Ecommerce earnings calendar

Here’s when other ecommerce earnings are scheduled to report this quarter:

Amazon.com Inc.: Feb. 1
Best Buy Co Inc.: Feb. 29.
Costco Wholesale Corp.: Dec. 14
The Home Depot Inc.: Feb. 20
Lowe’s Cos Inc.: Feb. 27
Target Corp.: March 5
Walmart Inc.: Feb. 20

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Amazon sales grow 14% in Q4

Mary Meisenzahl — Fri, 02 Feb 2024 15:00:45 +0000

Amazon.com Inc. beat expectations with earnings for its fiscal fourth quarter ended Dec. 31, 2023. Its net sales in the quarter grew 14% year over year to $170.0 billion. That surpassed expectations of 8% to 13% growth.

Full-year sales grew 12% to $574.8 billion in 2023, up from $514.0 billion in 2022.

How much did Amazon make in Q4 sales?

North American sales made up the bulk of revenue in the fourth quarter, growing 13% year over year to $105.5 billion. International sales, however, grew at a faster clip. The segment increased 17% year over year to account for $40.2 billion in sales. Sales from Amazon Web Services (AWS) grew 13% to $24.2 billion.

Operating income also grew in the quarter. It reached $13.2 billion in the fourth quarter, nearly five times the $2.7 billion in operating income Amazon recorded in the year-ago period. Net income totaled $30.4 billion, up from a net loss of $2.7 billion in Q4 2022.

Amazon records a successful holiday season

“This Q4 was a record-breaking holiday shopping season and closed out a robust 2023 for Amazon,” CEO Andy Jassy said in a statement. The online retailer said customers purchased more items on Amazon during the 2023 holiday season than in any previous season, culminating in a record-breaking Black Friday and Cyber Monday.

Amazon customers ordered more than 1 billion items during the holidays, with 500 million of those orders coming from third-party sellers, it said.

During the same period, millions of new consumers signed up for an Amazon Prime Membership. Amazon has 176 million Prime members as of December 2023, according to research from Consumer Intelligence Research Partners (CIRP). That’s the highest level ever recorded by CIRP, which has monitored Prime membership since 2013. Membership is up about 5% from 168 million in December 2022, per CIRP. Those estimates are for Amazon customers with Prime membership, not households.

Amazon fulfillment improvements

Ahead of the earnings release, Amazon announced results of fulfillment advancements in 2023 and plans to continue growing the area in 2024.

“The regionalization of our U.S. fulfillment network led to our fastest-ever delivery speeds for Prime members while also lowering our cost to serve,” Jassy said in a statement.

The ecommerce giant delivered 7 billion units by same-day or next-day delivery to Prime members in 2023. More than 4 billion of those deliveries took place in the U.S., and more than 2 billion were in Europe.

The number of items delivered on the same day or overnight grew 65% year over year in the U.S. in 2023, Amazon said. More than 70% of Prime orders in the U.K. arrived the same day or next day in the fourth quarter of 2023. Amazon celebrated its billionth same-day delivery in the U.S. in December.

“We’ve challenged every closely held belief for our fulfillment network and reevaluated every part of it, and found several areas where we believe we can lower costs while also delivering faster for customers. Our inbound fulfillment architecture and resulting inventory placement are areas of focus in 2024, and we have optimism there’s more upside for us,” Jassy told investors on Feb. 1.

Amazon will add incremental fulfillment capacity going forward, based on demand for same-day delivery sites and automation, said Brian Olsavsky, chief financial officer.

Amazon on generative AI

The company discussed its advances in generative artificial intelligence (AI) across the company in its earnings presentation, too.

It announced the beta test of Rufus, a new generative AI shopping assistant trained on Amazon’s product catalog. So far, the assistant is available to a small subset of U.S. customers to answer shopping questions and make recommendations, Amazon said. It will roll out to all U.S. customers in a few weeks.

The retailer also introduced a generative AI tool that will allow brands to produce lifestyle imagery for advertisements, it said.

Amazon also added generative AI capacity to Amazon Connect, the AWS cloud contact center, it said. Generative AI will give customer service agents suggestions on how to help customers and generate summaries of conversations, it said.

“2023 also was a very significant year of delivery and customer trial for generative AI or Gen AI in AWS,” Jassy said. “Customers are also excited about our approach to generative AI. Still relatively early days, but the revenues are accelerating rapidly across all three layers, and our approach to democratizing AI is resonating well with our customers. We have seen significant interest from our customers wanting to run generative AI applications and build large language models and foundation models, all with the privacy, reliability and security they have grown accustomed to with AWS.”

How did Amazon do financially in 2023?

For the fiscal fourth quarter ended Dec. 31, Amazon.com Inc. reported:

Sales increased 14% to $170.0 billion, from $149.2 billion in the year-ago period.
Amazon Q4 North America sales grew 13% to $105.5 billion.
International sales grew 17% year over year to $40.2 billion.
AWS sales reached $24.2 billion, growing 13%.

For the 12 months ended Dec. 31, Amazon reported:

Amazon sales grew 12% to $574.8 billion, from $514.0 billion in 2022.
Operating income reached $36.9 billion, increasing from $12.2 billion in 2022.
AWS sales grew 13% to $90.8 billion.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s last quarter’s Amazon earnings article.

How big is Amazon’s total ecommerce business?

Amazon.com is the largest ecommerce retail company in the world with $412.1 billion in annual web sales (excluding all marketplaces and B2B companies such as Alibaba). Amazon’s business model is multifaceted, as it is one of the world’s largest marketplaces (No. 3) with over $650 billion in total GMV and over $400 billion in third-party sales. Its AWS unit climbed over $90 billion in sales in 2023, and its advertising sector brought in another $46.9 billion the same year.\

During 2020, Amazon grew its ecommerce business by over $54 billion. That’s nearly 10 times the size of Nordstrom’s annual ecommerce revenue.

Amazon’s first-party sales (online store)

If we split out Amazon’s online store sales, removing subscription services and its third-party seller fees, Amazon would still be the largest ecommerce player in the world by over $100 billion, as China’s JD.com (second largest, excludes Alibaba) sells over $125 billion annually. Those who follow Amazon.com closely can easily see the growing sectors of the ecommerce giant’s business. Its online store is not among them anymore. In fact, Amazon’s first-party sales are the slowest growing business arm with a 3-year CAGR of only 5.5%. Meanwhile, its third-party seller fees have a 16.4% 3-year CAGR, Amazon’s advertising services have a 22.7% CAGR, and its subscription services have a 12.5% 3-year CAGR.

How big is Amazon Prime Membership revenue?

Amazon makes over $40 billion annually just from its subscription services. To put that into perspective, if Amazon sold nothing else — without a single first-party product on its site, and all it sold was subscription services — Amazon.com would rank as the third-largest online retailer in North America. That would still make it larger than Apple (No. 3 with $35 billion in 2022 web sales) and Home Depot (No. 4 with $22.4 billion in 2022 web sales). Moreover, even comparing it to the combined total revenues from Nike (No. 9), Costco (No. 6) and Chewy (No. 13), Amazon’s subscription services alone would still be greater.

How large is Amazon’s advertising business?

Amazon’s annual advertising revenue sits at $46.9 billion. This is equivalent to more than half of Walmart’s entire ecommerce operation and more than twice the size of Target’s online revenue.

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UPS will cut 12,000 jobs after revenue and package volumes decline

Mary Meisenzahl — Wed, 31 Jan 2024 19:00:03 +0000

United Parcel Service Inc. (UPS) will cut 12,000 jobs this year, the carrier announced Jan. 30. That’s part of a plan to generate $1 billion in savings as revenue and package volume decline, CEO Carol Tome said.

UPS consolidated revenue declined 7.8% to $24.9 billion in its fiscal fourth quarter ended Dec. 31. Consolidated operating profit declined 22.5% during the same time period to $2.5 billion. For the full fiscal 2023 year, consolidated revenue declined 9.3% to $91 billion and consolidated operating profit declined 28.7% to $9.1 billion.

“2023 was a unique and quite candidly a difficult and disappointing year. We experienced declines in volume, revenue, and operating profit in all three of our business segments. Some of this performance was due to the macroenvironment and some of it was due to the disruption associated with our labor contract negotiations as well as higher costs associated with the new contract,” Tome told investors.

532 online retailers in the Digital Commerce 360 Top 1000 use UPS for their fulfillment — either exclusively or in combination with other carriers. 65.6% of Top 1000 sales come from retailers using UPS. The Top 1000 is a ranking of North America’s leading retailers by online sales.

UPS domestic revenue results

U.S. domestic segment revenue declined 7.3% to $16.9 billion in the quarter, UPS said. Average daily volume (ADV) ended the quarter 7.4% below 2022 levels. However, that still represented a step up from an “exceptionally low third quarter” that preceded the period, Tome said. Revenue per piece of mail was slightly positive, the carrier said without revealing more.

B2B made up 35.5% of domestic volume in the quarter, about flat from 2022. B2B ADV declined 6.8% year over year, due to declines in the retail, tech, and manufacturing sectors, UPS said.

Total air ADV declined 15% year over year, while ground declined 5.8%. Macroeconomic pressures pushed UPS customers toward ground products to cut costs, it said.

UPS international revenue results

Revenue and package volume also declined internationally, largely due to softening demand in Asia and Europe, Tome said. Revenue declined 6.9% year over year to $4.6 billion, driven by an 8.3% decrease in ADV. Revenue per piece grew 3.1%.

The carrier highlighted a few bright spots in the international segment. Volume from China to the U.S. grew 2.7%. That remains the most profitable shipping lane, UPS said. The growth was largely driven by small and medium-sized businesses. Volume in the Americas also grew, up 11.9%. That was the result of Canadian and Mexican customers using cross-border ground shipping services, UPS said.

2024 projections

UPS remains “cautious” looking ahead to 2024, it said. European export volumes are projected to increase, and the carrier expects volume from China to continue growing, too.

In the fourth quarter, UPS recovered much of the volume lost to a potential strike earlier in 2023, Tome said. The business will be burdened by rising costs this year, including from the higher labor costs won in union negotiations with the Teamsters. Eliminating the 12,000 positions is intended to mitigate those rising costs, she said. Layoffs will impact managerial positions, not union jobs, it said. UPS has about 495,000 employees as of January, Tome said. That’s down from a high of 540,000 during peak COVID-era demand.

UPS said the first half of 2024 will likely be difficult, while projecting profit to grow 20 to 30% in the second half of the year.

UPS quarterly earnings

For the fiscal fourth quarter ended Dec. 31, 2023, UPS reported:

Consolidated revenue declined 7.8% to $24.9 billion.
Consolidated operating profit declined 22.5% to $2.5 billion.
UPS average daily package volume declined 7.5%.

For the 12 months ended Dec. 31, 2023, UPS reported:

Revenue declined 9.3% to $91.0 billion.
Operating profit declined 28.7% to $9.1 billion.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

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Amazon says Prime deliveries were faster than ever in 2023

Mary Meisenzahl — Tue, 30 Jan 2024 21:43:30 +0000

Amazon.com Inc. announced Prime deliveries in 2023 reached their “fastest speeds ever” in a statement released Tuesday.

The ecommerce giant delivered 7 billion units by same-day or next-day delivery to Prime members, CEO of worldwide Amazon stores Doug Herrington wrote in the blog post. More than 4 billion of those deliveries took place in the U.S., and more than 2 billion were in Europe.

It did not share comparable delivery figures for 2022, but the number of items delivered on the same day or overnight grew 65% year over year in the U.S. in 2023, Amazon said. More than 70% of Prime orders in the U.K. arrived same-day or next-day in the fourth quarter of 2023. Amazon celebrated its billionth same-day delivery in the U.S. in December.

Amazon ranks No. 1 in the Digital Commerce 360 Top 1000. The Top 1000 is a ranking of North America’s leading retailers by online sales. It also ranks No. 3 in Digital Commerce 360’s Global Online Marketplaces database. The database ranks the 100 largest such marketplaces by third-party gross merchandise volume (GMV).

Amazon changes logistics in 2023

Amazon achieved its record delivery speeds by shortening delivery distances, improving inventory placement, and expanding its same-day delivery range, Herrington said.

The online retailer divided its U.S. delivery regions into smaller areas, shipping 600 million more items from in-region fulfillment centers in Q4 2023 than in Q4 2022. Transporting orders from in-region fulfillment centers to delivery centers in the same region minimizes the stops per package and cuts down on the need for air transportation, Amazon said. Both factors lead to less time between order and delivery. Amazon made a similar move in the U.K., shortening the average distance a package traveled by 25 kilometers year over year.

Amazon prioritized sorting inventory in the right fulfillment centers where consumers were most likely to want to order those goods, it said. That allows Amazon to grow its same-day delivery footprint in the U.S. As of January 2024, Amazon operates 55 dedicated same-day delivery sites in the U.S., with 18 cities added in 2023. Those sites serve as both fulfillment centers and delivery stations, where orders are fulfilled, sorted and delivered all in one setting.

Amazon using AI to improve delivery speeds

Amazon will use artificial intelligence (AI) to further improve delivery speeds in 2024, Herrington said. The retailer is using AI to understand what products are most likely to be reordered on a recurring basis, like dog food or paper towels, and stock them in each delivery region in appropriate quantities. That will eventually mean shorter wait times for those deliveries, Amazon said.

The marketplace will also use AI on the other side, to monitor incoming inventory from vendors and sellers. The technology will give the operations team a better view of what inventory is coming into facilities and how often, he said.

Robots and drones part of Amazon’s fleet

Amazon’s Herrington shared information on other technologies the online retailer will use more of in 2024. It will expand the use of the Sequoia robot storage system, which launched in a Houston fulfillment center last year. Sequoia robots identify and store inventory at fulfillment centers up to 75% faster, Amazon said. That speed contributes to a 25% reduction in order processing time for the customer. The system will launch in more fulfillment centers this year.

The retailer made progress in its drone-delivery capabilities, too. The test recorded its fastest delivery to date in December at 15 minutes and 29 seconds from College Station, Texas. Prime Air will expand to the U.K., Italy, and a new U.S. location this year, Amazon said.

How many Amazon Prime members are there?

Amazon’s latest delivery speed figures encompass Prime members, who are eligible for expedited two-day, next-day and same-day delivery. It costs $14.99 per month, or $139 per year.

Amazon has 176 million Prime members as of December 2023, according to research from Consumer Intelligence Research Partners (CIRP). That’s the highest level ever recorded by CIRP, which has monitored Prime membership since 2013. Membership is up about 5% from 168 million in December 2022, per CIRP. Those estimates are for Amazon customers with Prime membership, not households.

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