Between Meetings - November 20th
Friday round up of this week's top market stories
We are D-6 from Black Friday and an unprecedented Cyber 5 week. As we head into the 11th hour, I’ve got my eye on the shipping crunch and any updates from the major platforms. I put together a little meta-analysis of the upcoming logistic puzzle at the end of this week’s wrap! As always, I’ll also be sharing A Book, A Show, and A Podcast from this week!
Facebook
Updates
New Messaging Features Now Available for Instagram and Messenger
The first – Watch Together – is available now. When you update to the new messaging experience on Instagram, you and your friends can tune into IGTV, Reels, TV shows, movies and trending videos in real-time over video chat.
The second feature is chat themes such as tie-dye and love so you can personalize your conversations.
The third feature, vanish mode, is coming soon and is an opt-in feature that makes seen messages disappear after you leave a chat thread.
Community Standards Enforcement Report, November 2020
Today we’re publishing our Community Standards Enforcement Report for the third quarter of 2020. This report provides metrics on how we enforced our policies from July through September and includes metrics across 12 policies on Facebook and 10 policies on Instagram.
FB IQ: Content, consumption and culture: Perspectives from the entertainment industry
The COVID-19 pandemic is radically altering how we live, work and play. Between shelter-in-place orders and social distancing measures, it's no surprise that the media is taking on an increasingly important role in consumers' lives. It's projected that there will be approximately 289 million new over-the-top video streaming users in 2020, an increase of 24% year-over-year1. And, as a result of the pandemic, 62% of the content that video streaming viewers have watched on streaming services was new to them2. As people continue searching for ways to stave off boredom, cope with anxieties and stay connected to others, on-demand has never been so in demand.
In this report, we examine five consumer shifts that have affected the media and entertainment landscape across the globe.
5 Considerations to Make Shopping Online Easier for Your Customers
To help you build out a seamless customer journey from end to end, we’ve put together tips and guidance for improving online transactions. Click above to read the entire piece.
Is this experience mobile friendly?
Can customers check out in as few clicks as possible?
How fast does your site load?
Which payment methods do you accept?
What is your return process?
Case Studies
Swiggy (APAC / Technology) The Indian delivery app’s Facebook Augmented Reality ad invited people to play a game that matched the best restaurant food to supplement their home-cooked meals, and reached over 16 million people.
OLIPOP(N. America / CPG) The beverage brand ran a Facebook campaign to increase online sales, and saw a 2.1X lift in online purchases when using a larger ad budget, while maintaining an efficient return on investment.
Centrepoint (EMEA / Retail) The UAE-based retailer boosted incremental sales by 29% after using value optimization to optimize its Facebook dynamic ads.
Independence University(N. America / Education) The online university used a Facebook cross-publisher conversion lift study to measure the performance between its Facebook ads and branded ads in search, and found that it had been under-crediting Facebook ads for leads by 57%.
Consumer Tech & Culture
Twitter has launched “fleets”, a disappearing tweeting feature (version of stories), in a bid to increase engagement on its platform
Google is completely revamping its approach towards payments, banking, and general financial services
Google is rolling out end-to-end encryption in Android messages beta, enabling messaging privacy on the most popular smartphone platform
Netflix is further borrowing the short-form video concept from social apps by experimenting with a Tik Tok-like feed of short comedy clips
Apple will reduce App Store cut to 15 percent for most developers - those earning <$1 million/year -through a new App Store Small Business program
Microsoft is introducing the ability to integrate popular workplace apps, such as Asana, into meetings on its Teams Collaboration Platform and making its Power Platform - which provides low code tools to build and deploy apps - available within Teams
Twitch is testing “multi-player ads”, triggered by streamers and watched by all viewers, in experimentation of ad formats different from standard targeted video ads formats
Amazon is making the Echo Frames - glasses that let you talk to Alexa - available to the general public next month
Alexa is moving most of its device operations onto the Inferentia computer chip produced by Amazon - a migration from the Nvidia chips - giving Amazon more control of its voice assistant
Business & Investing
Baidu is acquiring Joyy's live-streaming service, YY Live, in China for $3.6 billion as it further diversifies beyond its core search business and plays catch-up in video entertainment
Privacy group accuses Apple of unlawfully installing identification for advertisers (IDFA) on it’s devices claiming that Apple uses them to track users' behavior and consumption preferences without their consent
Yubo raises a Series C of $47.5 million. Yubo is a French social media app focused on people under 25 and has 40 million users
Nexi, the Italian payments processor, is buying Nets, a Nordic payments provider for $9.2 billion to create a European payments giant
It’s IPO season again!Affirm, Airbnb, Roblox, and Wish file to go public. Other notable names in consumer tech that are going public: DoorDash, Upstart, C3.ai, and Pubmatic.
A Book, A Show, A Podcast
This week I needed to reset my mindset and reread Ben Horowitz’s The Hard Things About Hard Things. An excellent collection of thoughts from a16z founder on tackling the toughest problems he faced as a founder. As I prepare for a mini-war of my own with the clients I advise, his lessons are a good reminder about how to handle things during the toughest of times.
I’m watching (just like everyone else) The Mandalorian. This week’s episode was incredible. I’m not going to spoil it for you, because I like you.
I’m listening to The Jason & Scot Show Episode 238: Holiday Shipaggedon. This is the best wrap so far on the upcoming shipping crunch, and the hosts break down how we arrived at this problem, what businesses are doing about it, and what we can expect in the next two weeks. You’ll find a lot of their thoughts in my note below on Q4 Logistics.
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Q4 2020 eCommerce Logistics
Sharing some thoughts below as we are D-10 from the largest Cyber 5 and Holiday ever, and many of our advertisers are going to facing a very unique shipping challenge.
TL;DR: There will be way more demand for packages than there is shipping capacity. Bigger players have means to absorb cost or find alternative distribution, but smaller players (esp. USPS / hybrid shipping) need to take action to ensure they maintain margins, customer satisfaction, and work around a much earlier than normal cut off date.
American consumers have been conditioned for 8 months to shop online, and we are in the middle of facing another surge of cases (Wave 2 or Wave 3 depending on who you ask). Many states have recently announced rollbacks in reopening, including San Francisco, Washington, and New York. Coupled with record growth in eCommerce year to date and more record shattering expected in Q4, it’s important for us to be aware of the shipping situation and help our partners where possible to optimize the customer experience, merchandising, sales and pricing, and shipping strategy, and advise on how to adjust their marketing appropriately.
Business media outlets and industry experts have already been covering the upcoming logistics crunch
eCommerce Growth
Q1 Growth - 15%
Q3 Growth - 45%
Q4 Growth (est. eMarketer) - 35%
Note: eMarketer forecasted 18.8% growth in May, actuals were 40%
35% is absolutely conservative with resurgence of cases
For reference, Amazon growth was approximately 37%, closer to 39% without offline component
Depending on category, growth will be greater or lower than this 35% estimate (i.e. CPG vs. travel products)
Logistics
Inventory side, businesses producing oversees are having trouble booking Less than Container Load both due to highly inflated rates and general capacity issues.
Many businesses are operating with less inventory for certain categories, especially in consumer categories where uncertainty of the economic rebound or lack of relevance to stay-at-home economy prevented businesses from stocking normal or excess levels in preparation for holiday.
Net impact is inventory to sales ratios are at all time lows
Doug McMillon / CEO of Walmart interviewed saying that certain categories will simply have less inventory than expected demand
Shipping side, the vast majority of businesses are fulfilling through USPS, FedEx, and UPS. A small number of businesses lean on or operate their own DSPs (delivery service partners), like Amazon’s in-house program. FedEx and UPS generally offer capacity quotas to larger businesses like a Walmart or Target, and the hypothesis is that there will be more shipping demand than quota available. Smaller shippers are typically not offered a capacity quota by these two players, and USPS does not offer capacity quotas.
Big Players (Walmart, Targets, etc.)
Pre-booking capacity with UPS and FedEx
Large scale omni-channel players don’t need to post as large of a profit on the eCommerce business (historically), and can rely on eating or partially subsidizing more expensive 2-day Express options through these players.
Walmart is setting up 42 pop up fulfillment centers to increase their ability to ship to consumers
Amazon was 18 months early and already investing heavily ($9Bn in Q2’20) into logistics, going from 15% YoY growth in capacity in 2019 to 50% YoY in 2020
Small Players
Sellers on eBay, Etsy, Shopify
Generally digital only (or closed retail during COVID), and must be profitable on their eCommerce revenue
Do not have the flexibility of larger players on unit economics so either rely on USPS or injection shipping (FedEx + UPS logistics with USPS last mile)
These options are typically the slowest and these businesses will be subject to earlier last ship cut off dates
eMarketer is projecting $39Bn in GMV throughout Cyber 5 with $12Bn on Cyber Monday alone.
Industry average of ~$50 to $100 AOV translates to 240 to 120 million packages on Cyber Monday
780 to 390 million packages across Cyber 5
Standard capacity across UPS, FedEx, USPS is approx. 44 million packages per day, with a generous high end estimate for 75 million packages per day representing a 75% increase in capacity
Based on 390 to 780 orders across Cyber 5, we could see a minimum of 5 days (unlikely) to much more than 10 days at an aggressive 75 million per day capacity to work through the spike in demand.
Assumes there are no packages currently taking up capacity, which is not true with increased front loading of Cyber 5 promotions and marketing
Assumes all ordering ends after Cyber 5 which is also not true
Realistically Cyber 5 logistic crunch moves into the second week of December, if not slightly longer for businesses that are using one of the cheaper shipping options
Carrier cut-offs for Christmas this year are December 10th to December 15th, which is likely before when Cyber 5 volume is fully fulfilled
Ground shipping is closer to the 15th
Hybrid injection shipping closer to the 10th
Cut-offs further exacerbated if you are using a 3PL (many smaller businesses), since 3PLs will ask for a cushion on cutoff, so expect December 6th to 9th
How can businesses adjust in the final hour?
Evaluate whether the business is better positioned to have earlier cut off dates or have delayed delivery.
Hallmark gift items like a Peloton should have an earlier cut off date. Non-critical gift items like CPG may be okay with delayed delivery.
Implement a clear early-promotion strategy
Front-load promotions, many businesses are doing this already
Communicate clearly, early, and often to consumers that the Cyber Monday or Cyber 5 promotions are the ‘best’
Many businesses historically hold out certain deals or better deals
Consumer are conditioned to wait to buy on certain items in hopes there will be a better offer
Leverage multiple touchpoints - ads, emails, on-site banners, etc.
Implement strategies to increase same-order AOV
Free shipping thresholds
Discount thresholds
Curated ‘packages’
Consider unit economic impacts and carefully strategize pricing / merchandising strategy
It may make sense to increase free or discounted shipping thresholds
It may not be worth it to heavily compress margins to get low profitability items out in time for holidays
It may make sense to merchandise around high profitability / easily fulfilled products
Consider how strategy would change knowing this year most businesses cannot operate under ‘sell as much as we can’
Ensure the work is done to prepare for delays and uncertainty in shipping
Communicating early and often to set right expectations for delivery
Pad the expected delivery time if possible. The difference on receiving on 12/20 vs. 12/24 is negligible for Christmas day gifts.
Maximize customer confidence to reduce cancellations, returns, and refunds
Take advantage of alternative distribution if possible
Using physical retail as ‘curbside pickup’ destination
Partnering and collaborating with other businesses to co-use physical footprint