Traffic to Flash Sales Sites Falling Off

chart-of-the-day-flash-sales-site-traffic(1)Business Insider featured the flash sales space in their Chart of the Day on Friday (October 11, 2013). The above chart is bad news for sites like Fab.com, which recently raised $165Mil at a $1Bil valuation (total funding: $336Mil). Fab.com’s earlier fundraising and the beginning of their move away from flash sales was documented in this previous post: Fab.com + $105Mil: No Longer a Flash-Sales Site. Business Insider also confirms this move in their analysis of the above chart.

Fab.com still has one of the best shopping experiences on the web. But it appears they may need to broaden their selection away from “design friendly”, sometimes gimmicky, products to deliver on their $1Bil valuation (i.e. an exit >$3Bil). Fab.com has ~5% the unique visitors of Zulily (Compete, August 2013), which will IPO later this year. Zulily recorded $331Mil in sales during 2012 and has recorded $272Mil during the first 6 months of 2013. Assuming Zulily turns $750Mil in sales in 2013 then their end of year valuation will be around $1.5-2.6Bil, using bullish P/S multiples for retail (2×-3.5x).

In response to the above chart Fab’s PR team mentioned “In e-commerce, especially at Fab, it’s about quality of customers, not quantity. And we are VERY happy with the quality of our customers (they’re buying, repeatedly).” While this may be true, some simple assumptions make it hard to believe that the lifetime value of a Fab.com customer is dramatically higher than a Zulily customer. For example, moms are known to be stickier customers than “design friendly” customers.  Also, it is hard to believe that Fab.com’s contribution margin is massively higher than Zulily’s, which it would need to be based on the above traffic numbers. In line with the above traffic data, Zulily reports they have 2.2Mil customers, which spend an average of $210 per year.

Looking forward to watching how this space unfolds over the next 12-18 months.

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Shopbop Launches Men’s Site, East Dane

Amazon affiliate, Shopbop, just launched East Dane, its long awaited men’s site. As an Amazon employee and the husband of an avid Shopbop customer, I am extremely excited for this launch.

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If Shopbop’s success is any indicator of the team’s marketing prowess and customer service, then East Dane should avoid the fate of Park&Bond and a few other premium men’s e-commerce sites. The East Dane shopping experience is personalized and very similar to Shopbop’s.

Shopbop Comparison

Check out East Dane’s selection here. Most importantly, you can login into East Dane using your Amazon credentials, and they have free worldwide delivery in 3 days or less.

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Kickstarter Project, NICE LAUNDRY, Goes Live!

NL logoNice Laundry, a Kickstarter project that ended on April 15, 2013, officially launched its e-commerce site on Monday (Aug 12, 2013). Nice Laundry raised $120K from 2k backers on Kickstarter. The project set a Kickstarter record for a fashion project by gaining 279 backers in the first day.

Nice Laundry is a new men’s socks company that aims to decommoditize the sock buying experience. The company offers “NICE LAUNDRY” branded socks in packs of six, and each pack has a different theme (e.g. Chief, Exec, Ladies Man). Nice Laundry also offers a $99 sock drawer makeover that includes 18 pairs of socks (3 sets of 6). Similar to other recent e-commerce startups, Nice Laundry has an altruistic side – they will pay the postage cost for you to ship your old socks to their chosen sock recycling company.

6-NiceLaundry

Nice Laundry was founded by two LivingSocial alums: Ricky Choi and Phil Moldavski. Learn more about their story here.

I just purchased my first pack of six. We’ll see how long it takes for them to cross the pond to London.

To learn more about the sock revolution, check out Modern Fellows post: Where to Buy the Best Socks Online, Part 1: Power Socks.

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RetailMeNot Valued @ $1.5B post IPO

retailmenotThe online coupon site RetailMeNot went public last Friday and its shares are now 32% above their IPO price. RetailMeNot is a coupon marketplace that was founded in 2007 and started on its current trajectory after being acquired by WhaleShark Media. WhaleShark Media was started as a coupon rollup play by ex-MySpace VP John Faith and ex-BankRate COO Cotter Cuningham. WhaleShark was founded in 2010 with an initial investment from Austin Ventures of $750K. WhaleShark then embarked on a buying spree that included the purchase of 10 coupon startups, including sites in the UK (VoucherCodes.co.UK), Germany (Bons-DE-Reduction.com), Netherlands (Actiepagina.nl), and France (Ma-Reduc.com). WhaleShark changed its corporate name to RetailMeNot in 2013.

RetailMeNot’s investors include Google Ventures ($12.5M), Austin Ventures ($37.3M), IVP ($50M), Norwest Venture Partners ($50M), and Adam Street Partners ($15M). RetailMeNot raised $280M over 4 rounds before going public and had 2012 revenues of $144M. The company is currently valued at 9.3x sales (i.e. $1.5Bil). Below are some more statistics on the company’s IPO and venture funding. This business will be fun to watch as a public company.

Stats

Data Source: SEC: Form S-1
Further Articles:
Bloomberg: High Rollers After RetailMeNot Whats Next for Austin Ventures
WSJ: Coupon Site RetailMeNot’s IPO Soars 32% in First Day
Crunchbase: WhaleSharkMedia

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Fred Wilson’s PandoMonthly Interview

Check out Sara Lacy’s interview with Fred Wilson on PandoMonthly. Fred’s comments on e-commerce are especially interesting. Forward to the 1:20.00 mark for the e-commerce Q&A.
 

 
I completely agree with his thesis for investing in marketplaces over e-retailers. This is exactly why I joined Amazon’s Merchant Services business last month.

I also think he is spot on when he states that “Most e-commerce companies fool themselves into thinking that the lifetime value of their customer is in excess of their acquisition cost when it’s not…and the only reason that they stay in business is that venture capitalist keep getting seduced into thinking that too…giving them money at higher and higher prices and then the whole thing is eventually revealed to be an emperor that has no clothes.” Learn more about the LTV/CA ratio in my previous post: The Most Important Formula for Startups.

 

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The Next Chapter…

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The past two years at the University of Michigan have been a terrific learning experience, and the relationships will last a lifetime. Completing my MBA at the University of Michigan was the best decision of my career. While the MBA chapter of my life closes, a new chapter is beginning.

This week I began work at Amazon.co.UK, managing the fashion and consumables categories of the Fulfillment by Amazon (FBA) business. Learn more about the FBA business here. In a nutshell – Amazon offers other merchants the ability to store their inventory in Amazon’s fulfillment centers, and Amazon will pick, pack, and ship the inventory for the merchant. Amazon will also provide customer service (including processing returns) for all items that are fulfilled by Amazon. All third party merchandise that is fulfilled by Amazon is also eligible for Amazon Prime or Super Saver Shipping. Merchants are also able to use the FBA service to fulfill orders across channels (e.g. their own website, eBay, etc). Mark Mahaney put it best in a recent Bloomberg interview (see here).  Mark emphasizes how FBA increases liquidity in the Amazon marketplace by providing first party service to third party orders, which is something other marketplaces can’t yet duplicate. The Mark Mahaney video is worth a watch (it’s 2min).

For those that don’t follow Amazon closely, FBA is one of several merchant services offered by Amazon.  Amazon has a large marketplace business not just a retail business, and often the items you are viewing on Amazon might be sold by a third party. Below is a screenshot of what FBA looks like from a consumer’s standpoint.

FBA Image

I am extremely excited to join the FBA team in the UK. Not just because of my passion for the marketplace business, but also because I am anxious to learn more about the UK market and culture. Expect upcoming blog posts about the UK e-commerce market…it is a fascinating market. As for my blog, I expect to become more active and it will continue to represent my opinions and interest.

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Fashion Fridays: April 19, 2013

Finally getting back to blogging after a busy few months. There are several new posts on the horizon, including an important announcement in the very near future. For a hint..check out this weeks Fashion Fridays post.

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1. = French Connection – Aubrey Slub Jumper, $100, French Connection
2. = Ettinger – Bridal Hide Nut Billfold Wallet, $275.99, Ettinger
3. = Burberry Brit – Steadman Slim-Fit Jeans, $350, Mr.Porter
4. = Ben Sherman – Saddle Loafer, $120, Ben Sherman
5. = Gucci – iGucci Orange, $1,028.90, Amazon

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E-Commerce Now Represents 4.9% of Retail Sales & VCs Invest the Most in Retail Since 2000

Below is a quick rundown of some interesting statistics that were just released.

Last Friday, the Department of Commerce reported that e-commerce sales were up 17% YoY in Q3 ’12. Retail sales were up 4% during the same period. The Department also announced that e-commerce sales now represent 4.9% of retail sales, which is up from 4.3% of retail sales in Q3 2011 and 3.3% during Q3 2007. Below is a chart summarizing the DoC’s statistics since Q4 1999, which is when they started tracking e-commerce.

E-Commerce Sales as a Percent of Retail Sales Q4 1999 – Q3 2012 | Data: Department of Commerce

This Monday, Bloomberg published an article titled “Most E-Commerce Froth Since 2000 Stirs Up Investor Doubts: Tech.” Based on that article I decided to dig up the NVCA/PwC statistics on VC investments in retail over the past 13+ years. The below chart summarizes these statistics. Note that the average deal size in Q3 2012 is almost as high as it was during 2000. That said, the number of deals per quarter are below average. There were an average of 15 deals per quarter during 2011 and 2012, this is down from an average of 20 per quarter since 1998. Most notably, the industry has already raised more in 2012 than in any year since 2000.

Annual VC Investments in Retail/Distribution Companies Q2 1997 – Q32012 |Data: NVCA/PwC MoneyTree
Quarterly VC Investments in Retail/Distribution Companies 1998 – Q32012 | Data: NVCA/PwC MoneyTree

Lastly, in honor of Black Friday. It is worth looking at IBM’s Benchmark report on Thanksgiving shopping. Earlier today, IBM released an estimate that Thanksgiving e-commerce sales are up 17.4% versus 2011. I don’t have my hands on the actual data at this point, but here are some good articles on the subject: Business Insider, Internet Retailer and Seeking Alpha.

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Fashion Fridays: November 23, 2012

By request of a close friend, today’s Fashion Fridays features men’s overcoats. For more suggestions check out Nordstrom’s The Ultimate Coat Guide.

ONE. = Burberry London – Single-Breasted Trench Coat, $1,195, Park & Bond
TWO. = Hentsch Man – Wool-Blend Tweed Overcoat, $665, Mr.Porter
THREE. = Canali – Water-Resistent Wool Coat, $1,710, Mr.Porter
FOUR. =  Gant Rugger – The Double Double-Breasted Wool-Blend Coat, $495, Mr.Porter
FIVE. =  Jack Spade – Bonded Trench Coat, $595 $417, Park & Bond
SIX. = Theory – Pawel Three-In-One Overcoat, $795 $519, Barneys New York

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