Teespring’s comeback story

Startup stories are often too reductive — an entrepreneur dreams up an idea, snags some co-founders, raises a bit of money, and presto: success and riches.

It’s nearly never true. Even breakout successes like Slack that may feel straightforward have complicated stories. Amongst the most valuable startups there are hidden crises and disappointing quarters. Some famous startups even had to execute a hard pivot after their original idea flopped. Slack was originally a gaming company, Twitter was a podcasting platform and YouTube wanted to be a dating service.

But not all startups that struggle and eventually make it have to completely toss out their original idea. Some just need to shake up operations before seeing the sort of success they’d hoped for.

Social e-commerce and fulfillment platform Teespring is one such company.


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From a 2017-era round of layoffs and restructuring, the company is on an impressive, profitable growth curve today.

I was part of the reporting team that covered the company’s earlier struggles, which came after it raised more than $50 million in venture capital. So when Teespring wanted to discuss the numbers behind its recent growth, I was more than curious.

This morning, let’s look at how one startup found its groove a few years after we’d figured it was a done deal.

A comeback

Rewinding the clock, Teespring’s 2017 was a difficult period. The company had sharply cut staff as sales declined, cost reductions that helped push the startup from regular deficits into profitability.

At the time, reporting indicated that Teespring’s revenue fell off after it lost some power sellers and investments in goods other than T-shirts failed to materially improve its financial results. After the layoffs, Teespring raised $5 million at a diminished valuation to get back on its feet.

Cannabis VC Karan Wadhera on why the industry, which took a hit last year, is now quietly blazing

Early last year, excitement over the burgeoning cannabis industry was palpable in Silicon Valley, with a small number of venture firms writing their first checks to cannabis-related startups. Among them is the cross-border venture firm DCM, which even hosted an “inaugural” cannabis “tech summit” in May 2019 that drew so many investors that finding a seat was difficult.

Yet the buzz began to fade soon after, owing to a confluence of events, including a bubble in publicly traded cannabis companies; legalization that moved more slowly than hoped in certain states like New York; and an outbreak of lung injuries tied to vaping last fall.

The industry is still navigating around some of these trends, but it’s also proving more durable than outsiders might imagine, according to Karen Wadhera, a managing partner at Casa Verde Capital, the cannabis-focused venture firm founded by Snoop Dogg back in 2016. “Four plus months into COVID, cannabis has really proved itself to be a non-cyclical industry,” he told in a chat last week, where we talked about what went so wrong, what’s happening right now, and whether he ever worries that Casa Verde might be too early to the cannabis party. Parts of that chat, edited for length, follow.

TC: The last time I saw you in person, last year, there was a lot of interest in cannabis. Since then, the headlines have pretty consistently been bad. What’s going on?

KW: What happened to the public perception of the cannabis industry is not too dissimilar to the dotcom bubble of the late ’90s, where there was a lot of hype — a lot of it driven by public companies — and a lot ofspeculative trading and valuations that weren’t really founded in reality. [We’re talking about] projections multiple years out into the future, and then crazy revenue multiples on top of that. Things just got really frothy, and that eventually burst, and last April or May was sort of apex of that of that moment. It’s when things started to trade off. And it’s been those names, the public names in particular, that have been hit particularly hard.

TC: Why?

I don’t know if it was driven purely by scarcity value, but there was definitely an incentive to go public. So you had a lot of companies go public well before they were prepared to. And then you’ve had a lot of companies, which are just, quite frankly, poorly run, with poor management teams, and some with even real ethical concerns [regarding] how they ran their businesses. So I think that all started to come to a head and led to a pretty serious implosion.

It was pretty painful, for sure. But what’s so interesting is that even though that has been the public perception based on these stocks, the reality is the macro has continued to improve. Sitting here today, four-plus months into COVID, cannabis has really proved itself to be a non-cyclical industry. Cannabis has been deemed an essential business everywhere across the U.S. We had record sales in March, April, and May, and the trend has has continued. And now that we are getting into an environment where governments are going to be looking for additional sources of tax revenue, the potential urgency around cannabis legalization is going to be there, which is going to be massively positive for the industry.

TC: I thought the governor of Massachusetts was concerned about people bringing COVID into the state, but I guess he reversed course on dispensaries as essential businesses?

KW: Yeah, he was the one outlier, and he reversed course. What’s been interesting is first, as you can imagine in a moment where people are especially anxious, cannabis has been something many people have been turning to. Then, beyond that, what’s also been interesting is that like many other areas of the economy, we’ve seen e-commerce really [take off]. One of our businesses, Dutchie, which enables retailers to launch their own e-commerce and have their own delivery and pickup, has seen its gross merchandise value increase by like 600% [since March].

TC: You’re also an investor in [the same-day delivery startup] Eaze, where former executives were accounting for consumer sales as if they were transactions made to third party vendors. What do you think of that situation? 

KW: It’s certainly in the past, but as you know, there’s always been a massive issue with the cannabis business [in that it] can’t really access traditional banking like other industries can, and one of the big issues there is credit card processing. So it sounds that an issue earlier in Eaze’s history was that it was able to process credit card payments potentially by not fully disclosing what was actually being transacted. I don’t know a ton of the details and where that lies currently, but I know that’s not anything that Eaze is involved in anymore.

TC: Bigger picture, does it tarnish the industry and make it harder for everyone to raise money? What are you seeing? Are new investors coming to the table? Are early investors still believers in this opportunity?

KW: It’s been fascinating for sure. The conversations have changed dramatically from when I first entered the industry to today. Initially, we [as a venture firm] were unable to get in front of a lot of pensions and endowments to have those conversations. Now, we’re at least having those conversations and they’re interested to hear about what we’re doing. I’m not quite sure if they’re ready to pull the trigger, but certainly even just the fact that they’re interested in understanding the industry better is a huge change.

TC: What are the biggest pockets of opportunity you see in cannabis investing right now?

KW: We have two main areas of focus. We love the ancillary tech-lead opportunities for businesses that are going to benefit from the overall macro theme of legalization and globalization of the cannabis industry, whether it’s software for retailers or manufacturers, or ancillary services like staffing and financial services. One of our businesses is Bespoke Financial, which helps with short-term financing for the industry. So we still see a lot of development in those areas.

We’re also very interested in consumer-facing brands. For a long time, cannabis sales were driven by potency and price. To use the alcohol equivalent, it would be as if every consumer made their decisions by walking into a liquor store and asking what’s the highest-proof vodka for the best price. We know that’s not how decisions are made.

TC: You and I talked before about precision dosing, soon after you’d invested in a vaping company that made it easier to understand how you’ll be impacted by what you’re ingesting.

KW: So that is business called Indose, which has created a medical-grade device that [enables users to] dial in the exact amount that they’re taking in . . . It’s much more of a business that’s going to be working with other consumer brands and allow them to use its technology to have that precision.

TC: How are these consumer-brands reaching customers? Do they have to be more . . . careful?

KW: Yeah, I mean, again, with cannabis businesses, that’s another huge restriction that a lot of them face. You can’t use a lot of the traditional channels that would be available to to non-cannabis businesses, so no Facebook ads, no Instagram, no Google AdWords, things like that, which is now a lot of the new brands’ playbook. So you have to be creative. There’s a lot of marketing happening in store within the dispensaries. You can rent billboards. Experiential marketing, pre COVID, was something that was people were very actively doing. There is also influencer influential marketing online that can still happen through Instagram channels or [channels] that a brand may own. But oftentimes those get get shut down as well. So yeah, it’s a tricky world from a marketing perspective for cannabis businesses.

TC: From a 20,000-foot level, one of the limitations of investing in cannabis would seem to be exit opportunities. There aren’t a whole lot of companies that are in a position to buy a cannabis business because of legal issues in part. How do you address that?

KW: There are a few ways to look at that. I think for ancillary, periphery businesses, there will be a lot of acquisition opportunities in the future from strategics that decide that they want exposure to the cannabis industry and may get it by buying a point-of-sale business or an e-commerce player or a financial services businesses, because that’s less directly touching the plant.

It’s going to be a question of how comfortable you are on the risk curve. Until we see kind of full-scale legalization, or until we see at least some of the the current bills in front of Congress passed or the rescheduling of cannabis from schedule 1 to schedule 2 or lower [by the Drug Enforcement Agency], some companies are going to be concerned about jumping into the space. But that’s the opportunity, as well, and as long-term investors, that’s how we see it.

In the meantime, we’ve had a couple of exits driven mainly by follow-on investors who want portions of our business, [including] a private equity firm that’s pursuing the roll-up of a particular category, and [to] a financial investor.

TC: Do you see the climate changing around acquisitions and legalization with a Biden administration?

KW: I think regardless of who’s in office, we’re going to see we’re going to see a lot of progress in the next four years. And that’s because this is no longer purely a partisan issue. I think Biden will be very helpful. He has laid out many of the things that he wants, and [while] he isn’t taking it as far as full-scale legalization, he’s certainly in favor of full-scale decriminalization, [meaning] letting states have full authority over what happens with their businesses, and also the rescheduling of cannabis down from the current schedule 1 level. So all of that will be incredibly helpful and will bring a lot more players who will feel comfortable investing in the space and potentially acquiring some of these businesses, as well.

To listen to this interview in its entirety, you can find it in podcast form here.

Walmart Marketplace seller additions surge following Shopify deal, up 3x from January

Walmart’s recent partnership with Shopify to expand its online marketplace appears to already be paying off.  The retailer in June announced it was opening its marketplace to Shopify’s small business sellers with the goal of onboarding 1,200 new sellers by the end of 2020. Following the Shopify announcement, the marketplace added 3,000 more sellers in June and is expected to exceed 3,600 in July, according to a new report from research firm Marketplace Pulse. That’s triple how many sellers it was adding at the beginning of 2020, the firm’s numbers indicate.

The e-commerce intelligence firm, which works directly with retailers and marketplaces and produces industry analysis, looked into Walmart Marketplace’s accelerated growth following the Shopify deal. It found that within the first six weeks after the June 15th partnership announcement, Walmart’s Marketplace added over 5,000 new sellers.

In comparison, Walmart’s Marketplace added only 1,296 new sellers in January 2020. That figure grew to 2,290 in April, then 3,296 by June. With July’s estimates included, the marketplace will have topped 15,000 new sellers in 2020 by this month’s end. To date, the marketplace has surpassed 50,000 sellers — which is double in size from June 2019.

Walmart’s marketplace growth is much slower than Amazon’s, the firm notes. But this is, in part, due to its process around adding sellers. Its marketplace requires sellers go through an approval process, which is something it does in an attempt to avoid counterfeiters and other issues. Amazon, meanwhile, adds thousands of sellers daily.

Of course, not all this recent growth can be attributable to Shopify. The pandemic has sent a surge of customers to shop online and sellers are arriving to meet that demand. But Marketplace Pulse believes Walmart has already surpassed its goal of 1,200 new Shopify sellers by year-end.

These newly added Shopify stores aren’t distinguished from other sellers on the website, so there’s not an automated way to count their numbers. But the firm says manually checked dozens of new additions to confirm their Shopify affiliation and believes the accelerated marketplace growth is closely tied to the new e-commerce deal.

Of course, seller growth is not the only metric used to judge a marketplace’s success. Walmart’s catalog size has actually decreased despite all the new additions, the report noted. Since the start of 2020, the total number of products has shrunk by nearly 15 million, from around 50 million down to 36 million, the firm said. This was related to a few large sellers delisting their catalogs of mostly products in the Home and Books categories, though. Walmart disputes this figure, saying it still has 75 million, not ~35 million, which is stable year-over-year.

The report also added that what matters most is not the size or the number of sellers, but rather the sellers’ performance. On that front, the firm recently found that Walmart’s marketplace, though smaller, was outperforming both Amazon and eBay, driven by the significant increase in Walmart.com shoppers during the pandemic. That increased traffic was also aided by Walmart’s merging of its Grocery app into its main app, a transition that is still underway. Around a month after the merge began, the Walmart app on May 13th became the number one shopping app on iPhone.

 

All B2B startups are in the payments business

The COVID-19 pandemic has forced businesses to rethink how they accept and make payments. Paper invoices, checks and point-of-sale payments have given way to “corona-free payments” through mobile apps, electronic invoicing and ACH. Although significant, this is the sideshow to a more significant reshuffling of the payments industry.

Nearly $150 trillion in worldwide B2B and B2C transactions take place every year, but only a tiny portion are digital. A lot of technology companies want their piece of that massive pie. Until recently, though, only payment facilitators (aka, “payfacs”), gateways, banks and credit card companies had access to it.

That’s changing. Whether they know it yet or not, B2B tech platforms are becoming payments companies. Payfacs are competing to integrate their technology into these platforms, which drive an ever-growing number of transactions. Revenue-sharing deals are on the table, and payfacs are pushing the competitive advantages they can offer to the clients of these B2B platforms. Capabilities like cross-border payments, seamless customer onboarding, fraud protection, marketplace payments and B2B invoicing influence, which payfacs win in “integrated payments” (the jargon for this space) and which don’t.

B2B companies that use to leave the choice of gateway to their clients need to become savvy in payment technology, both to control the user experience and to tap this new business. There’s a massive amount of revenue on the table, and it’s just too easy to blow this opportunity and alienate clients in the process.

How we arrived here

A decade ago, the revolution in cloud computing led to a wave of B2B tech platforms promising to “disrupt” every industry. Gyms got gym management platforms. Hospitals got clinic management platforms. Retailers got commerce management platforms. Media companies got subscription management platforms. Many of these fill-in-the-blank management platforms — all independent software vendors (ISVs) — helped clients manage their operations and interactions with consumers or other businesses.

But ISVs didn’t get involved in payments, which was odd, given how complementary payments were to their platforms and how much money was at stake. Mastercard says there is about $120 trillion annually in B2B payments worldwide, and paper checks still dominate about half of the U.S.’s $25 trillion payment volume. Meanwhile, retail e-commerce sales account for $4.2 trillion out of $26 trillion in total retail, or about 16.1%, according to eMarketer. Less than 8% of global commerce is thought to occur online.

You’d think B2B software companies would find a way to generate revenue on some of that $146 trillion in transactions, but most did not. Payment processing is its own, messy, complicated niche. Payfacs go through a grueling underwriting process to provision a merchant account, which includes know-your-customer (KYC) and anti-money laundering (AML) checks. If a merchant defaults, the payfac is next in line to make good on the transactions.

When you run a venture-backed B2B platform, you have enough to worry about already.

So, B2B platforms stayed clear. They formed integrations with a basket of payfacs (Stripe, PayPal, Square, my company BlueSnap, etc.) and then let their clients choose which one to use. That’s a lot of integrations to maintain.

Instagram launches its redesigned Shop, now powered by Facebook Pay

Earlier this month, Instagram href="https://techcrunch.com/2020/07/07/instagram-swaps-out-its-activity-tab-for-shop-in-new-global-test/"> began testing new navigation in its app that gave its shopping destination a more prominent position. Today, the company is moving forward with its plans to promote Instagram as a place to shop with the launch of its new Instagram Shop, a place to shop from inside Instagram Explore, as well as the launch of Facebook Pay for purchases and donations in the U.S.

Both initiatives were announced previously, this year and in 2019, but had not yet rolled out.

Instagram Shop is described as a place to browse products from favorite brands and creators, as well as curated collections published by the Instagram-run @shop account. In the Shop tab, you’re able to filter by categories like beauty and home, for example, and then checkout directly in the app.

In its original announcement, Instagram Shop was to launch before the company swapped out the Activity tab for the Shop tab in the bottom nav bar, but the company chose to begin testing that latter change first. If you don’t have the Shop tab, you’ll have to visit Instagram Shop directly from Explore.

While there was already a way to shop within Instagram before today — and even check out from select accounts without leaving the app — the new Instagram Shop has been designed to encourage even more browsing and discovery of brands, creators, and products.

Shop itself grew out of how Instagram users were already using the platform to find new things to buy. The photo-centric app had naturally drawn in users who posted creative content, often including well-styled photos of fashion, beauty products, art, home décor, and more. And thanks to the rise of influencers and their numerous brands deals, Instagram was often a place where you’d find products being demoed and discussed, encouraging purchases.

Meanwhile, Instagram ads and their nearly perfected targeting capabilities would appear in your feed eerily suggesting the very thing you’re likely to buy.

The new Instagram Shop is the culmination of all this data and insight, put into its own destination. How well it will covert as a standalone product, however, remains to be seen. After all, Instagram’s ability to connect users to brands was often due to the massive amount of time users spent inside the Instagram app scrolling through photos — eventually, they’d see something they liked.

The new Instagram Shop experience is personalized to the end user. There are rows with your favorite brand and creators, for example, underneath large, attention-grabbing images at the top of the screen. There’s also a personalized “Suggested For You” section at the bottom.

Facebook Pay, meanwhile, was introduced last year as a way to transact securely across Facebook, Messenger, Instagram and WhatsApp.

In Instagram, it will allow U.S. users to make purchases as they shop, as well as donations to the businesses they’re supporting because of the coronavirus outbreak and related shutdowns, because of destruction by rioters, or any other reason.

If the business is using Instagram’s own Checkout feature a selling fee is involved. At scale, this could produce a new stream of revenue for the company, particularly now as consumers are shopping more online amid the pandemic.

The new features are rolling out starting today in the U.S.

Amazon U.S. sellers will have to display their name and address starting Sept. 1, 2020

Amazon on Wednesday informed its U.S. sellers they will soon have to display their business name and address on their Amazon.com seller profile page. For individual sellers, this will include the individual’s name and address. A similar system is already in place across Amazon’s stores in Europe, Japan, and Mexico, due to local laws. Amazon says it’s making the change to ensure there’s a more consistent baseline of seller information across its platform, so online shoppers can make informed buying decisions.

The change, of course, is not just about transparency.

Amazon’s U.S. marketplace is its oldest and largest, with 461,000 active U.S. sellers out of its 2.2 million worldwide actives. In total, there are 8.6 million registered sellers worldwide and Amazon adds around a million more per year, according to Marketplace Pulse data.

Amazon’s marketplace also accounts for around half the retailer’s sales. But as it’s grown, it’s been afflicted by a variety of issues and fraud, including problems with counterfeit goods.

Though Amazon has long been accused of avoiding these issues, it’s more recently pledged to spend billions to address the problem. Amazon even inserted itself into legal battles with fraudulent sellers and counterfeiters over the past couple of years, including those with designers and accessory makers, as well as others participating in the fake reviews economy.

Last year, Amazon also launched a set of tools for brands and manufacturers under its “Project Zero” initiative, which work to proactively combat counterfeiting.

And just this April, Amazon announced it was piloting a new system aimed at verifying the identity of third-party sellers over video-conferencing — a shift from its in-person verifications that had to stop due to the coronavirus outbreak. Through this system, Amazon checks that the individual seller’s ID matches the person and the documents they shared with their application, among other things.

Now Amazon is telling its U.S. sellers their business name and address will need to be on their profile by September 1, 2020.

The change will help businesses fighting fraud or taking legal action against sellers over counterfeit goods. Consumers will also have an address in case the product has caused harm and they need to contact the seller or even initiative legal action of their own.

Once the new system goes live in the U.S., the seller’s storefront on Amazon.com will display an expanded set of information about their business.

A photo from Marketplace Pulse shows how this may look, with a comparison of a U.K. seller page with its current U.S. counterpart:

 

Image Credits: Marketplace Pulse

In a statement, Amazon says the change is about consistently, avoiding the topic of online fraud.

“Over the years, we have developed many ways for sellers to share more about their business, including through features like the seller profile pages, ‘Store’ pages for brand owners, and Handmade ‘Maker Profile’ pages,” an Amazon spokesperson said. “These features help customers learn more about sellers’ businesses and their products. Beginning September 1, we will also display sellers’ business name and address on their Amazon.com seller profile page to ensure there is a consistent baseline of seller information to help customers make informed shopping decisions,” they said.

Instagram swaps out its ‘Activity’ tab for ‘Shop’ in new global test

Instagram today is starting a small global test of the Instagram Shop tab, first announced this May, which allows Instagram users to shop from top brands and creators via a new tab in the app’s navigation bar with just one tap. Here, users will be able to filter products by categories, as they can today via the existing Shop experience within Instagram Explore.

Though the company in May had also announced plans for a newly designed Instagram Shop with a different layout than what’s available today through Explore, those changes aren’t being tested at present. Instead, this new global test will direct users to the same “Shop” experience that U.S users been able to reach by tapping the “Shop” button in Explore.

The main difference is that the Shop icon will replace the heart icon (Activity) in Instagram’s main navigation.

Image Credits: Instagram

 

Thankfully, the Activity section isn’t totally gone. For those in the test, the Activity tab can either be accessed at the top right of your Feed (next to the paper airline Direct icon) or by going to your profile and clicking the heart icon from there.

In this version of Instagram Shop accessed from the main navigation bar, users can filter by brands they follow or by category, including things like Beauty, Clothing & Accessories, Home, Jewelry & Watches, and Travel, for example. In addition, not all products showcased in this version of Shop allow users to check out directly from Instagram’s universal cart. Instead, some brands have items tagged for shopping, but direct users to their own website to complete the transaction.

If the business is testing Instagram’s own Checkout feature, however, a small selling fee is involved.

An upcoming Instagram Shop experience will look a little different. Instagram had said in May it will feature collections from @shop, alongside selections from the user’s favorite brands and creators. These shopping options are laid out on the screen in a more intentional manner, with bigger images at the top of the screen, following by a scrollable row of brands, and then personalized content below in a “Suggested For You” section.

This new experience is still expected to arrive later this year, but an exact date has yet to be determined.

Instagram had already been testing today’s change with some portion of its U.S. user base. The expanded test will now introduce the change to a small number of users worldwide, including the U.S. 

Instagram says it will use the results of this test to determine how it will roll out Shop further down the road. It’s possible the company could revisit the idea of replacing Activity with Shop if it didn’t increase Shop traffic and conversions.

“This is a small global test of the Instagram Shop tab that we announced in May. We’ll use this test to assess how we decide to roll this out further,” a company spokesperson said.

This is not the first time Instagram has downgraded the Activity tab. Last year, it removed the feature that let users see which posts their friends and coworkers were liking.

U.S. online grocery shopping hits record $7.2 billion in June

Despite the slow reopening of the U.S. economy over the past several weeks, online grocery shopping is continuing to reach ever-higher numbers as Americans seem to be in no rush to return to the store. According to new research released today by Brick Meets Click and Mercatus, U.S. online grocery sales hit a record $7.2 billion in June, up 9% over May, as 45.6 million households turned to online grocery pickup and delivery services for a larger portion of their grocery needs.

This figure is higher than the $4 billion seen in March 2020, when the U.S. first went under coronavirus lockdowns. Since then, online grocery sales have been growing quickly — jumping to $5.3 billion in April, then $6.6 billion in May, as more consumers shifted their shopping to online services, grocery included.

The customer base for online grocery also grew from 39.5 million monthly actives in March to now 45.6 million as of June, the report found.

Remarkably, only 16.1 million customers were using online grocery as of August 2019, totalling then just $1.2 million in sales.

The growth isn’t just due to a large influx of new customers to online grocery, but also due to more frequent orders. Customers may be ordering from online services not only for their large “stocking up” trips, but also for those smaller grocery runs they would often do in between — to grab ingredients for their weekly recipes or to replace the more quickly depleted items, like milk, bread and other staples, perhaps.

According to the new research, order frequency ticked up from 1.7 orders per month for active households in May to 1.9 orders in June, demonstrating this increase.

In addition, more retailers, including independents, have added capacity for online order fulfillment amid the coronavirus pandemic to meet consumers’ changing needs. This has also resulted in an increase in sales as more customers are able to shop online and get a timeslot for delivery or pickup.

Walmart Grocery in April even began pilot testing a way to offer 2-hour “Express” grocery delivery service to customers who were willing to pay an upcharge. The company said this was a direct result of its newly added capacity aimed at serving its online grocery customer base. Instacart, meanwhile, added new features in April aimed at opening more delivery windows. And many retailers — including Amazon, Walmart, Instacart, and Shipt, among others — have been hiring to help address the growing number of online orders.

When asked about their increased usage of online grocery in June, consumers reported fears of contracting coronavirus as their main concern, the report said. Specifically, 44% of households claimed they had “high levels” of concern about someone in their home being infected, up 2 percentage points from the prior month. This increase was also almost entirely driven by the 9% increase among shoppers in the over-60 age segment.

But on the downside, the increased choice in online grocery providers has made it more difficult for services to attract repeat usage, the data indicates. As of June, the likelihood of a shopper to use a specific online grocery service again within the next 30 days now sits at 57%. While this figure did grow by 1 percentage point since May, it’s still far below the pre-COVID 74% repeat rate seen back in August 2019. 

General interest in online grocery was also growing. Among both active online grocery shoppers and those not active, 32% said they were either “extremely” or “very likely” to use a service in the next 90 days — up 2 percentage points from May. The interest, not surprisingly, was strongest in households which had used a online grocery service in June, with 57% showing strong interest, compared with only 17% of the non-active households.

The data for the research was sourced from 1,781 U.S. adults in June (6/24-6/25), with responses weighted by age to reflect the national population of U.S. adults. The firms’ prior surveys also used a similar methodology, timing and sampling.

“Even though some retailers have seen sales decline within their respective business, the new reality of increased capacity across the market – and related greater choice (or options) for shoppers – means that all grocery retailers will need to accelerate their efforts to make shopping online even more seamless to thrive going forward,” said David Bishop, partner and research lead, Brick Meets Click, in a statement.

Mexico City’s Jüsto raises a $12 million bridge round for its delivery-only grocery stores

Jüsto, the Mexico City-based delivery only grocery store chain, has raised another $10 million in financing as it looks to expand its now pandemically-relevant business of “dark stores” across the country.

The COVID-19 pandemic is changing consumer habits and increasing the use of delivery services across the world, and consumers n Mexico are no different.

A recent Nielsen study cited by the company found that 11 percent of respondents had purchased fresh food online for the first time in 2020, as lockdowns in cities across the world restricted movement for everyone but essential workers — with 70 percent of those surveyed saying they’d do it again within the year.

“Despite Covid-19 dramatically accelerating the curve of adoption of e-commerce, the penetration rate of e-grocers is still less than 1 percent,” in Latin America, according to Jüsto founder and chief executive, Ricardo Weder, in a statement. “That means there’s an enormous opportunity—and all the right conditions—to disrupt the grocery industry in Latin America.”

With the new bridge round Jüsto’s financing has hit just over $20 million in less than a year. Part of that can be attributed to the pedigree of the company’s founder. Weder was instrumental to Cabify’s growth in Latin America, according to Rodolfo Gonzalez, a partner at Foundation Capital, who led the firm’s investments into Jüsto. And Gonzalez also saw the opportunity in the company’s business model.

“We’ve seen that type of model of warehouse and D2C for groceries be very successful in other geographies,” Gonzalez told Crunchbase, when Jüsto announced its previous $10 million seed round. “But that model didn’t quite exist in Mexico yet.”

Other investors in Jüsto’s round include Mountain NazcaFEMSA VenturesQuiet Capital, and 500 Startups.

The Mexican company prides itself on selling both local and international brands in categories including: fresh produce, dry goods, personal hygiene and beauty care, home and cleaning goods, beverages, organic food, and pet supplies.

“We have these darkstores and hold the delivery,” says Manolo Fernandez, a spokesperson and member of Jüsto’s founding team. “At traditional supermarkets the fill rates are lower and the product is less fresh. One of our core tenets is to reduce waste. We don’t have fruits and vegetables sitting outside in the store.”

Jüsto also claims that it’s prices come in at roughly equivalent to those of a regular supermarket. The company has delivery options ranging from express delivery, same day, and next day delivery.

The company isn’t the first startup to look at unused real estate and internet shopping habits and see an opportunity. Darkstore is a company that has raised nearly $30 million to convert empty space into third-party fulfillment centers. Istanbul’s Getir, which recently raised $25 million from Sequoia’s Michael Moritz, is doing the same thing. And Samokat has adopted a similar strategy in Russia, promising over 3,000 SKUs and an under 45 minute delivery time fulfilled via their urban darkstores.

These companies are focused on being third party logistics players for delivery rather than creating their own brands, but Jüsto shows that there’s an opportunity for purpose built direct to consumer grocery businesses to use the same infrastructure and create actual brand loyalty.

We have the technology, talent, and infrastructure to scale our expansion to more cities in Mexico and begin our international expansion, beginning with Colombiam” Weder said. 

Google brings free product listings to its main Google Search results

Earlier this year, Google made a significant change to its Shopping search tab in the U.S. to allow the service to primarily feature free product listings selected by Google’s algorithms, instead of paid ads. Building on that change, Google is today introducing a shift to free product listings in the main Google Search results page in the U.S. Before, it would only showcase sponsored links in its “product knowledge panel.”

This panel appears when a Google user searches for a product that has matching listings on e-commerce website. But until now, those links were paid ads. Google says, starting this summer, these panels will instead feature free listings.

This change will roll out first in the U.S. on mobile, followed later by the desktop.

Shopping ads aren’t going away, however. These ads will appear separately at the top of the page, where they’re marked like Google’s other ad units.

Since its shift to free listings in April of this year, Google says it’s seen an average 70% increase in clicks and 130% increase in impressions across both the free listings and ads on the Shopping tab in the U.S. These metrics were based on an experiment looking at the clicks and impressions after the free listings were introduced, compared with a control group. The control group was a certain percentage of Google traffic that had not been moved to the new, free experience.

Image Credits: Google

 

Google has positioned its shift to free listings as a way to aid businesses struggling to connect with shoppers due to the impacts of the coronavirus pandemic. But the reality is that this change would have had to arrive at some point — pandemic or not — because of Amazon’s threat to Google’s business.

Amazon over the years has been steadily eating away at Google’s key business: search ad revenue. In a report published last fall, before the pandemic hit, analyst firm eMarketer said Google’s share of search ad market revenue would slip from 73% in 2019 to 71% by 2021, as more internet users started their searches for products directly on Amazon.

Now the coronavirus is pushing more consumers to shop online in even greater numbers, much to Amazon’s advantage. The online retailer reported the pandemic helped drive a 26% increase in its first-quarter 2020 revenue, for example. Meanwhile, a new eMarketer forecast estimates that Google ad revenues will drop for the first time this year, falling 5.3% to $39.58 billion due to pandemic impacts on ad spend — particularly the pullback in travel advertiser spending.

Google needed to change its Search service to return more than just paid listings to better compete. Paid listings alone wouldn’t always feature the best match for the user’s search query nor would they show as complete a selection — a problem Amazon’s vast online superstore doesn’t have. But Google’s shift to free listings also incentivizes advertisers to pay for increased visibility. Now, advertisers will need a way to stand out against a larger and more diverse selection of products.

“For many merchants, connecting with customers in a digital environment is still relatively new territory or a smaller part of their business,” notes Google’s, Bill Ready, President of Commerce. “However, consumer preference for online shopping has increased dramatically, and it’s crucial that we help people find all the best options available and help merchants more easily connect with consumers online.”