Retail Unwrapped from The Robin Report

How a D2C Brand Beat the Odds in Scaling to Retail

Retail Unwrapped — Fri, 28 Nov 2025 05:01:00 +0000

Sometimes it takes tenacity combined with fearless confidence to launch a retail brand. That’s how Hulken achieved what most brands consider impossible: Pitching Target in June and landing their rolling totes on the shelves by November. Join Shelley and Hulken co-founder Alex Schinasi to learn why the most successful omnichannel strategies aren’t about being everywhere, but about identifying the few channels significant enough to actually move the needle on revenue. Alex shares how a lean team of six full-time employees operates with surgical precision, why they spent two years perfecting the product before spending a dime on marketing, and how their industrial packaging background created a competitive moat that fashion-forward competitors can’t replicate in Hulken’s popular rolling totes. One key lesson for D2C brands? The shift from 95 percent direct-to-consumer selling to physical retail-focused growth requires brands to make sure that the margins and distribution can support the scaled business model. Alex shares that selecting the right retail partners is essential for D2C brands to scale by navigating complex vendor requirements and operational standards.

Special Guests

Alex Schinasi, co-founder, Hulken

Transcript

The AI Agent Survival Guide for Retailers

Barry McGeough — Thu, 21 Aug 2025 04:01:00 +0000

Recently, I sat down with Steve Statler, CEO of AmbAI, expert in Ambient AI technologies, author of “Beacon Technologies,” and host of the Mr. Beacon Ambient IoT Podcast, to discuss the dramatic advances in AI. This report is the distillation of our wide-ranging conversation that we offer as a survival guide for retailers and brands.

The irreversible shift is already happening. ChatGPT is answering 1 billion searches per week. Traffic from AI to retail websites jumped 1,200 percent in a single month. Nearly 40 percent of consumers now use AI as a shopping assistant for researching products or planning purchases.

But research is just the beginning. The next wave of AI will be “agentic,” moving beyond answering questions to taking actions on our behalf, including making purchases. This represents a fundamental disintermediation threat from AI agents acting as intermediaries between brands and customers. Will this help or harm the brand and retailer connection to the consumer? Will this enhance or impede sales?

Once AI has unfettered access to product data, it becomes much harder to control the terms of engagement. The brands that survive won't be those with the biggest marketing budgets or the most shelf space. They'll be the ones who recognized that in an AI world, controlling the data bridge between digital intelligence and physical products is the ultimate competitive moat.

AI Agent Advantage

Like any procurement professional, this new generation of agents will seek to weaken the position of suppliers by restricting information flow, to get the best possible deal. Imagine a world where your AI agent negotiates directly with a supplier’s AI agent to purchase groceries, select insurance, or replace your T-shirts, jackets, worn-out shoes—all without you ever seeing a brand website, video, or advertisement. The negotiation strips away the positioning information and storytelling, which can bring value to products, by commoditizing the product that the brands are selling. Agent-to-agent transactions could spell the death of the branded experience, limiting all transactions to the lowest common denominator transactions, with us being none the wiser as to what we are being served. Clearly, this is a problem for brands, and the time is ripe for a proactive solution.

The solution lies in building a strategic alliance of brands, retailers, and technology partners that controls the data flow between consumers using AI to buy and the retailers and brands that supply them. This alliance would ensure brands maintain direct customer relationships while leveraging AI’s power to enhance rather than commoditize the shopping experience and storytelling that makes products valuable.

The Coming Disintermediation

Consider the structural and cultural shift we’re facing. AI is positioning itself between brands and customers, armed with three unprecedented advantages:

Intimate customer knowledge: While Amazon knows what you’ve bought, AI knows why you bought it, what you use it for, and whether you really needed it. Through conversations about relationships, health, finance, and daily life, AI platforms are building the most comprehensive customer profiles ever assembled.
The power of consumers’ automation bias. As termed by the National Institutes of Health, this bias is the very real and prevalent phenomenon when people, consumers, favor or give greater credence to information supplied by technology like AI agents and ignore contradictory evidence. When agents talk, with uncanny knowledge of our preferences, better mimicking human nuance and empathy and with more authority, we will listen.
Complete product intelligence: AI can parse every specification, review, and data point about every product from every competitor, then analyze, compare, and negotiate faster than any human buyer.

This combination of customer knowledge and product intelligence is potent. Users won’t need to navigate websites or deal with limited store staff. AI will understand requirements, shop around, negotiate, and even create personalized content to tell the story of why Product X is perfect for Customer Y.

Traditional merchandising tools—placement, positioning, brand relationships—become irrelevant when a superintelligent purchasing agent is making decisions based purely on data and customer intimacy.

Walmart just announced it will focus its AI efforts on agency, hoping to attract more shoppers away from Amazon with four new super agents, with the goal that AI will drive its ecommerce growth, aiming for online sales to account for 50 percent of its total sales within five years. Designed to operate with minimal human oversight and execute complex tasks across Walmart’s vast ecosystem, the four agents include:

Sparky (customer-facing)
Associate (employee support)
Marty (supplier automation)
Developer (AI testing)

Walmart may be the first to announce such a fully automated decision-making platform for both brands and consumers, but it certainly won’t be the last.

AI: Disruptor in Chief

We can already see the evidence of agents’ disintermediation. Website traffic is falling measurably across the board as AI summaries are presented on the Google home page. These summaries satisfy a user’s question with zero click throughs to brand websites. Existential question: How can you directly influence consumers if they never see your messaging?

The AI powerhouses are actively preparing to take on purchasing tasks on behalf of your customers. Over one in four of the integrations recently announced by Anthropic was with payment systems PayPal, Square, and Stripe.

OpenAI announced its first services for brands, enabling purchases directly from ChatGPT. There will be no shortage of brands that accept the offer to participate in this pilot, desperate to show shareholders that they have an AI strategy that goes beyond writing marketing copy more efficiently.

The Data Fortress Strategy

The solution lies in controlling something AI desperately needs but currently can’t access at scale: real-world product data. Today, AI’s view of the physical world is surprisingly limited. Show ChatGPT a photo of a product, and it sometimes guesses wrong. AI typically can’t navigate auto-ID systems, struggles with barcodes and QR codes, and has no connection to RFID or emerging ambient IoT data streams.

But this data represents the largest untapped information pool in the world—trillions of physical items, each with massive datasets about ingredients, provenance, authenticity, location, and lifecycle history. This isn’t just defensive data—it’s the foundation for new business models around transparency, sustainability, and customer engagement.

This isn’t theoretical. The EU is mandating Digital Product Passports (DPPs) for apparel, toys, and furniture within two to three years. Products entering the world’s largest regulated market will need digital IDs with comprehensive provenance data. Like EMV chip-and-pin standards, what starts as regulatory compliance becomes a competitive advantage through reduced fraud, improved efficiency, and enhanced customer trust.

Any brand wanting to sell into Europe will need to develop its DPP systems. This will eventually be a formidable war chest of data that the AI companies won’t control. Brands already have an amazing cache of product information that they can use to differentiate a direct, brand-controlled, AI-enabled, shopping experience, which can make for a better, more consultative retail experience. Think of all the instruction manuals, recipes, videos and product information that can be fed into a brand-controlled AI.

Building an Alliance Moat

No single brand can defend against AI disintermediation alone. A single brand app with AI, no matter how good it is, will not stem this tide. We’ve seen most brands fail when they attempt to drive meaningful usage of an app that works with their products exclusively.

An alliance must include three key constituencies working in concert:

Leading brands across categories (CPG, fashion, electronics, automotive) that control rich product data
Progressive retailers who understand the value of customer relationships over pure efficiency
Technology partners who can build and operate the neutral infrastructure required

If we are to offer utility, get frequency of use, and the intimacy that is key to an effective selling experience, a multi-tenant platform will be required that helps consumers manage their pantry, wardrobe, drinks cabinet and tool chest with a one-stop shop. This kind of platform lends itself to being used regularly, having utility, and building trust if it helps customers keep control of their data in a way that the AI giants are not disposed to do.

Timing is one crucial advantage: AI’s connection to the physical world is still being built. Like setting smartphone rules for teenagers, we get one chance to establish ground rules before the AI floodgate opens. Once AI has unfettered access to product data, it becomes much harder to control the terms of engagement.

The brands that survive won’t be those with the biggest marketing budgets or the most shelf space. They’ll be the ones who recognized that in an AI world, controlling the data bridge between digital intelligence and physical products is the ultimate competitive moat.

The Crossroads

Brands face an immediate binary choice: Build an alliance now while you still can or become a commodity product in an AI-driven marketplace where you have no direct customer relationship and compete solely on AI-optimized metrics. Europe is already on the case building a defense that will provide rich data about products that should not be handed over to the AI giants lightly.

While big tech races to capture consumer data, they’re conveniently overlooking a fundamental issue: giving consumers actual control and portability over their product ownership data, usage habits, and preferences.

The question is whether brands will proactively shape a system that leverages these opportunities in a way that consumers can trust or reactively comply with whatever emerges from Silicon Valley. This Alliance needs founding members now—brands willing to lead this new model of cooperative competition. The window for establishing ground rules is closing rapidly. Every day that passes without coordinated action is a day closer to permanent disintermediation.

Winter is coming. The question is whether retailers will work together to build the alliance moat or find themselves on the wrong side of it when the battle for market dominance begins.

Aging QVC Pins Its Dreams on TikTok

Pam Danziger — Wed, 25 Jun 2025 04:01:00 +0000

Once the company now known as QVC Group had a lot going for it. In 2017, when it acquired HSN to consolidate its lead in the television shopping market, it was number one in video commerce. iMedia, which operated under Evine, ShopNBC and ShopHQ, wasn’t even close and has since gone under. And more significantly, QVC was number three in ecommerce. But that was then, this is now: QVC is hanging on by a thread.

QVC turned its attention to the over-50 crowd in an “Age of Possibility” campaign that launched in April 2024 with a Las Vegas Q50 Summit. It showcased 50 distinguished women of a certain age sharing inspiring stories, including Christina Applegate, Queen Latifah, Naomi Watts, Patti LaBelle, Rita Wilson, Kathie Lee Gifford, Billie Jean King and Martha Stewart.

Trouble in TV Shopping Land

QVC revenues peaked at $12.5 billion in 2020, adjusted for the sale of Zulily in 2023, and have fallen ever since, down to $10 billion in 2024 and off another 10 percent in the first quarter ended March 31. Customer counts have dropped from 11.6 million at the end of 2020 to 7.4 million this year. And most recently, QVC’s share of new customers has fallen by almost half, from 48 percent in 2020 to 25 percent most recently.

Not one product category has delivered positive growth since 2023. Electronics has been the biggest loser, dropping 20 percent in 2023, 13 percent in 2024 and 18 percent in first-quarter 2025. Home – QVC’s largest reporting segment with just under 40 percent of sales – along with apparel, and jewelry sales declined by low single digits throughout 2023 and 2024. However, in the first quarter this year, both home and apparel sales losses increased to 9 percent, while jewelry sales dropped even further by 21 percent. Beauty and accessories were off by high single digits in 2024, and both have crossed over to low double-digit losses so far this year.

Can’t Change the Tide

QVC bought some time selling off Zulily in May 2023 ending that year with $10.9 billion in revenues and $590 million operating income – but that didn’t hold for long as operating income plunged to an $809 million loss in 2024. So earlier this year it remediated.

In late March, QVC laid off some 900 employees, about 5 percent of staff, and relocated the HSN studio and broadcasting hub from St. Petersburg, FL to QVC headquarters in West Chester, PA.
After a reverse stock split in May this year, it chose to voluntarily delist from the Nasdaq Capital Market effective May 27 and has applied for its stock to be listed on the OTCQB Venture Market.

Even so, Fitch recently downgraded QVC’s credit rating from “B” to “B-.“ It foresees continued “ongoing topline headwinds” and projects revenues to fall another 5 percent this year, which raises “concerns about the timing and degree of long-term operating stability.”

Fitch may be underestimating QVC’s projected decline this year, given its track record of losing customers and not having a pipeline to replace them. Tariffs will also weigh heavily on QVC since nearly 50 percent of its products are sourced from China.

“If tariffs persist at the current elevated levels, it is our expectation the market will likely see lower consumer demand, particularly in discretionary retail,” QVC CFO Bill Wafford said in the first quarter earnings call. While it pursues finding new sources of supply and negotiations with vendors, QVC prices are bound to increase as the year progresses.

QVC Is Showing Its Age

Although QVC maintains that its customer base includes shoppers of all ages, its core demographic remains middle-aged women. The common perception is that TV shopping is a pastime for older folks. Accepting, even admitting to that reality, QVC turned its attention to the over-50 crowd in an “Age of Possibility” campaign that launched in April 2024 with a Las Vegas Q50 Summit. It showcased 50 distinguished women of a certain age sharing inspiring stories, including Christina Applegate, Queen Latifah, Naomi Watts, Patti LaBelle, Rita Wilson, Kathie Lee Gifford, Billie Jean King and Martha Stewart.

“QVC has a longstanding relationship serving the 50+ customer, and we’re uniquely positioned to launch this dedicated effort that we hope will spur a cultural shift in attitude and behavior towards women over 50,” said Annette Dunleavy, QVC vice president of brand marketing, as she explained that after age 50, women feel largely invisible in the marketplace.

Specifically, a survey conducted by YouGov among nearly 4,000 women found that only 31 percent of women aged 50-to-70 feel supported by brands, compared to nearly 60 percent of women between the ages of 18 and 29 and 41 percent of women aged 30-49.

“QVC is making it our mission to champion women over 50 and build a community and platform where they can come together to share their experiences and celebrate who they are. We are proud to be one of the first mainstream brands stepping up in this way to show dedicated support and celebration for this chapter in women’s lives,” she continued.

It sounds like a worthy cause, but it clearly didn’t move the needle in sales, so QVC came back with a reboot in May. This time, the Age of Possibility event took place in Santa Monica, CA, and it was livestreamed on TikTok. It also focused more on the possibilities of QVC shopping than on the existential possibilities of aging. Yet, if generating sales to women over 50 was the goal, TikTok was an odd choice as a streaming partner. Some 70 percent of TikTok users are under 35, and a mere 14 percent are 45 years and older.

QVC’s Live Streaming

Video streaming is upending traditional cable and broadcast media; Nielsen reports streaming is the top choice for American viewers, used by 44 percent of households in April 2025, against 25 percent for cable and 21 percent for broadcast television. QVC is eyeing live-streaming social commerce as its path to the future with TikTok as its premiere chosen partner. That said, it currently has a QVC Live platform on Facebook and plans are in the works to extend QVC live streaming across YouTube TV, Hulu and Netflix.

QVC first launched on TikTok Shop in August 2024 and now claims some 74,000 TikTok creators have featured QVC items on their shoppable videos and livestreams. It also offers original content created exclusively for TikTok Shop, unlike on Facebook, where it repurposes its regular broadcast segments.

“We are uniquely suited to bring our large-scale, high-volume, live social shopping experience to TikTok,” QVC CEO David Rawlinson II shared, adding that QVC is the original innovator of live shopping and produces more live shoppable content than anyone else – some 49,000+ hours per year. Our agreement [with TikTok] will be a catalyst to transform shopping and discovery, not only for QVC Group but also for social shopping at large,” he continued. As social media channels go, TikTok ranks as the world’s fifth largest, behind, in reverse order, WhatsApp, Instagram, YouTube, and Facebook at number one.

TikTok’s Uncertain Future

Since TikTok Shop launched in the U.S. in September 2023, Capital One reports that Americans spend an estimated $32 million per day shopping on TikTok. Overall, TikTok Shop’s gross merchandise value reached $33.2 billion globally, with the U.S. being its largest market, accounting for approximately $9 billion in GMV.

Of course, Congress passed a law, and the Supreme Court upheld a ban on TikTok in the U.S. unless Chinese-owned ByteDance sells the platform to an American company. President Trump issued an executive order extending the ban timeline, but a deal has yet to be made.

Despite the uncertainties surrounding TikTok’s future, QVC remains optimistic. “While we can’t speculate on the exact outcome between the U.S. government and TikTok, we believe there will be a path forward for TikTok in the U.S., given that 170 million people use the platform,” a QVC spokesperson shared with me.

Losers Win

Overseeing QVC’s growth strategy across social selling, streaming, and digital is Alex Wellen, the newly appointed president and chief growth officer. Wellen, who holds a law degree from Temple University, brings a wealth of media experience, most recently CEO of MotorTrend Group, and before that, 13 years with CNN and two as executive producer with the New York Times. But Wellen has no retail experience, just like Rawlinson, who joined QVC from NielsenIQ.

Perhaps in the world of live-stream social commerce content, how you sell, comes before what you sell. But simply changing platforms from linear broadcasting to social media channels won’t fix the underlying problems at QVC.

In the TV shopping landscape, QVC perfected a winning formula, blending persuasive, well-trained veteran hosts with captivating brand storytellers as guests presenting compelling merchandise. That formula created a genuine connection with the audience and product sales followed.

For example, David Venable, host of the “In the Kitchen with David” show, was QVC’s highest-paid host, earning $500,000 last year. Entrepreneur Kim Gravel serves as both the host of her own Saturday night show and the representative of her $1 billion fashion, beauty, and home business that launched on QVC in 2016. Her brand was the first to sell over $250 million in one year on QVC.

Yet, for every winner like Venable and Gravel, there appear to be more losers, as the company’s numbers indicate. QVC has more work to turn around its business than just switching to live-streaming platforms, like TikTok, as Fitch observed in its recent ratings note: “Its social media platform remains somewhat nascent, and Fitch notes potential execution risks as the company reworks content production and other operations elements to align with new platforms.”

Even in a best-case scenario where QVC successfully manages the social-commerce shift, Fitch expects revenue declines to improve toward low single digits in 2026. That is hardly enough to reverse QVC’s continued downward trajectory.

QVC seems to have lost sight of the “Quality, Value, Convenience” retail formula in a search for trendy new platforms and modern creative content. The fact is quality, value and convenience never get old in retail no matter what platform you choose.

Indonesia’s eCommerce Economy Driven by Innovation

Ross O'Brien — Mon, 11 Dec 2023 11:00:28 +0000

After China, Indonesia is Asia’s largest digital ecosystem retail battleground, currently dominated by GoTo, Grab and Shopee. Indonesia’s 250 million consumers enjoy an advanced, vibrant ecosystem with choices of digital wallets and app-based shopping fueled by home-grown digital retailers and consumer brands. Innovative new technologies are also giving rise to new domestic digital retail experiences, many of them are tapping into fast-growing demand for sustainable, eco-friendly products and services among Indonesia’s younger digital native consumers.

Many Indonesians are turning to social media to buy products, rather than established (and formally licensed by the Ministry of Trade) ecommerce platforms. Japanese ecommerce analysts Rakuten Insight conducted a survey in March 2023 which found over 90 percent of respondents had used social media channels to purchase items in the last 12 months, and nearly 40 percent say they did so six or more times.

Digital Commerce on the Fast Track

The rapid growth of digital commerce in Indonesia has radically redefined the retail economy of the world’s fourth-largest population with over $700 billion in annual consumer spending. Over 40 percent of Indonesia’s consumers are under 25, and all sporting smartphones loaded with one or more digital wallets enabling tap-and-go transactions as well as online shopping. Think about it again: 100 million consumers are under the age of 25.

The meteoric rise of digital channels has fostered a cadre of ecommerce unicorns—such as GoTo, Indonesia’s largest internet commerce platform provider, with over $39 billion in transaction volume in 2022.

But there are concerns that Indonesia’s emerging digital retail ecosystem is fragile, and the newfound fortunes of domestic brands and producers could be undone by stronger foreign (largely regional) players. In response, the government has put into place new internet commerce regulations designed to restrict the use of international social media platforms to sell to Indonesian consumers in a bid to protect the country’s own brands and retailers. This creates a further danger because those restrictions could limit the growth of the vibrant digital economy on which Indonesian retailers depend. Catch 22 Indonesian style.

Savvy Digital Commerce Giants

Singapore-based ecommerce research firm Momentum Works estimates that Indonesia accounted for over half of Southeast Asia’s Gross Merchandise Value purchased online in 2022—nearly $52 billion. Much of that market is facilitated by digital ecosystem players, which combine last-mile food, shopping and service delivery with ride-hailing, digital wallet and microfinance services.

The development of digital wallets and mobile banking and shopping apps has also spurred one of the world’s largest financial inclusion projects. Digital wallet payment transactions surpassed cash transactions in 2022, according to Visa’s Consumer Payment Attitude Study. There are well over 300 million digital wallets in service in Indonesia, and an estimated 94 percent of consumers use them, compared to the roughly half of the adult population that have actual bank accounts. Additionally, over 30 million Indonesians use a national standard QR code-based payment system, the Quick Response Code Indonesian Standard (QRIS).

Mobile Economy

The rapid expansion of mobile money in Indonesia has triggered an expanded retail economy, which has boosted domestic brands and further fuelled the sales of international brands. Indonesia’s digital commerce ecosystem is growing alongside a broader domestic venture capital market, out of which are springing hundreds of ecommerce, green technology and social media startups.

And yet, despite this promise, Bloomberg reported that GoTo was the poorest performer of all large-scale tech IPOs in 2022; GoTo shares lost roughly 75 percent of their value within the first year following its April 2022 listing, and have languished ever since. What’s going on here? GoTo’s initial poor stock performance has been in part blamed on investor concern over the company’s high-cost structure—not only its tremendous sales and marketing expenses needed to acquire and retain customers, but also its generous compensation packages, particularly for management (GoTo’s total management costs in 2022 were reported to be the $516.5 million, while its net losses were $1.3 billion). Many other Indonesian online marketplace players, such as PT Bukalapak.com have shared similar fates. While they have garnered consumers in the millions, Indonesia’s e-tailers are still largely underwater. GoTo reported some $59 million in losses for the third quarter of 2023 which, while encouragingly only a quarter of the losses suffered a year ago, was only achieved with significant cost-cutting which, though surely pleasing for pleasing for investors, is not ideal for a local player in growth mode still struggling to defend its market share.

The precarious progress of Indonesia’s digital domestic champions has begun to reawaken its government’s traditionally protectionist instincts. In recent months, it has passed a law which curtails ecommerce sales over foreign social media platforms such as Facebook and TikTok. This is seen as necessary protection of a fragile local industry–but will these guardrails succeed against emerging global best practices?

Digital Drives Innovation Around Sustainability

Okki Soebagio, head of the Bali Investor Club, is one of a growing cohort of technology-oriented venture capitalists who feel Indonesia’s ecommerce space creates opportunities for cleaner, greener retail businesses. The Bali Investor Club is an impact-oriented venture capital group that invests in Indonesian technology and commerce businesses that support environmental or social objectives as well as commercial goals. “We have actively and carefully vetted more than 250+ impact startup initiatives since 2021. We have proudly invested in five impact startups so far (BukaPO, Indosole, Rekosistem, Robries and Magalarva).

“One of the Club’s first stakes was in BukaPO, an app-based food delivery service begun in Bali during the pandemic when many professional chefs from the island’s tourism sector were locked down at home. It now has a network of over 3,000 cooks and chefs, mostly home-based micropreneurs making traditional cuisine for extra income. Buka Payo generated $4.2 million in revenue last year, which Soebagio attributes to the rapid normalization of app-based commerce in the average Indonesians’ lifestyle that has endured after the lockdowns stopped. “The average Indonesian family orders their meals about 30 percent of the time. GoTo’s biggest revenue earner is GoFood (its food pick-up and delivery business). SuperApps are part of our lives. My daughter goes to school and back using apps, we order food in, you can use GoClean for maid services—there is also GoMassage!”

Another Bali Investor Club investment is IndoSole, a Bali-based footwear brand that sells high-end sandals made out of recycled Indonesian tires globally, primarily in beach and surf communities. Soebagio says the goal now is to capitalize on its successful green fashion brand; Indosole is expanding into new designs, as well as link-ups with other global brands looking to burnish their own sustainability credentials: “We’ve set up a collaboration with Kawasaki Puccetti Racing, to launch IndoSole Kawasaki addition, creating sandals with the team’s used superbike tires,” he adds.

Indonesian consumers’ growing interest in sustainable living, combined with their app-based lifestyle, has also served as a catalyst for Nafas, a Jakarta-based air quality monitoring service that develops and sells a line of home sensors and purification devices. CEO Nathan Roestandy reckons Nafas has installed the country’s largest network of air quality sensors across 15 cities, with 200 across Jakarta alone. Consumers can access real-time data on airborne particulates via apps, a digital service that also drives awareness for Nafas’ home and office monitoring and purification services.

“We’re not selling devices–we\’re selling healthier air quality,” Roestandy explains. Nafas’ modular purification devices and the network infrastructure and analytics which connect them are sold to homeowners and businesses as a subscription service based on the square meterage covered, for as little as $30 per month. This cloud-based offering is, he believes, gaining traction because of “Indonesia’s younger demographic—these are the consumers that are more aware of liveability issues, and more willing to use apps which allow them to build their knowledge about health and sustainability issues faster.” Roestandy believes that Nafas’ longer-term play is to “eventually connect other company’s devices to our platform,” such as in-building appliances as air conditioning or smart home controllers, or wearable fitness devices to become “a wellness operating system.” He points out that most health and wellness consumer offerings, from exercise to nutrition or air quality, “are all categories enabled by apps and mobile devices, and when we build this at scale we can offer a ‘health fingerprint’” which will allow Indonesian consumers to track and manage all these indicators.

Digital Native Next Gens Go Social

Indonesia’s large emerging market, filled with aspirational, digitally native shoppers, has become an attractive market for global FMCG, fashion and other retail brands. Unilever has seen its Indonesian revenue grow some 67 percent over the last decade, to over 13.9 trillion rupiah ($908 million) in 2022 sales.

Many Indonesians are turning to social media to buy products, rather than established (and formally licensed by the Ministry of Trade) ecommerce platforms. Japanese ecommerce analysts Rakuten Insight conducted a survey in March 2023 which found over 90 percent of respondents had used social media channels to purchase items in the last 12 months, and nearly 40 percent say they did so six or more times. Most social media sales are predominately Chinese or other imported products sold in small amounts over local TikTok or Facebook accounts, a trend that concerns regulators. In response, the trade ministry passed Regulation 31 in late September, which prohibits social media companies from facilitating payment transactions, or formally acting as a sales platform.

Guardrails or Overprotection?

The social media regulation is proving controversial: Is it a useful guardrail, or a drag on momentum? “I think many in Indonesia’s retail space still don’t really know what ecommerce will become, or what domestic internet players can do to remain competitive,” says Avi Hazuria, a Jakarta-based marketing and communications strategist. “There is a strong feeling that the government should give domestic players some breathing room while they find their feet.”

Indeed, there are some indications that the government’s protective instincts are warranted. Singapore-based SuperApp Grab, for instance, has been gaining market share of GoTo (then Gojek’s) ride-hailing delivery business when it entered Indonesia. That said, the Indonesian incumbent has successfully fought back Grab to maintain a 50 percent market share and routinely emerges as a preferred brand in consumer satisfaction polls.

There are also other signs which suggest Indonesian brands are resilient and competitive, both at home and abroad. FMCG giants such as Wings and Indomie command dominant shares in cleaners, instant noodles and other categories. Local consumer brands have also used M&A activity to attach themselves to global brands. Beverage maker PT Sinar Sosro, after years of unsuccessfully convincing McDonald’s to carry its best-selling Tehbotol iced tea, in 2009 it purchased its master franchise, and now operates more than 200 McDonald’s restaurants across Indonesia—all of which offer Tehbotol with their Big Macs.

The Indonesia Digital Economy is a Major Player to Watch

In the less than two months since its passage, Regulation 31 has indeed had a significant impact on Indonesia’s digital economy—although perhaps not strictly in the way the government intended. Indonesia’s Minister of Cooperatives and SMEs recently observed that since the social media retail ban was passed, only 20 percent of shoppers on TikTok Market had directly switched to domestic marketplaces. The ban forced TikTok into discussions with domestic e-commerce players, and given rise to speculation that the Chinese social media giant is looking to invest directly in GoTo to circumvent the ban–and perhaps giving GoTo the market share edge it has struggled to achieve.

Digitalization has expanded the size and purchasing power of Indonesia’s consumer class. It has also helped spark domestic innovation, and even possibly one of Asia’s largest green retail economies. While Indonesia’s digital ecosystem players may be currently struggling against larger, often more experienced regional digital commerce giants to fully capitalize on this domestic market opportunity, exposing themselves to foreign competition will likely help them grow stronger—and have more global market opportunities—than hermetically sealing them into a protected domestic market

Winter Arrives for Ecommerce Darlings

Adam Levine-Weinberg — Wed, 14 Dec 2022 22:00:27 +0000

Just a year or two ago, many people believed that the Covid-19 pandemic had sparked a massive, permanent acceleration of ecommerce adoption. This thesis became the conventional wisdom among executives at pure-play ecommerce retailers and other companies that stood to benefit from ecommerce growth.

These rosy forecasts haven’t panned out, though. Many consumers have returned to their pre-pandemic shopping habits over the past two years, favoring brick-and-mortar stores. High inflation and a shift in spending priorities away from merchandise categories that were popular during the pandemic have added to the top-line pressure for some ecommerce retailers. Making matters even worse, costs are soaring due to a tight labor market, high fuel prices, and ongoing instability in the supply chain.

The recent woes of Carvana, Wayfair, and Amazon demonstrate that while consumers still like the convenience of ecommerce, creating a sustainable, profitable ecommerce business model is challenging.

This perfect storm has forced a slew of ecommerce companies to slam the brakes on their growth strategies in 2022. Layoffs, cost cuts, and canceled investment plans have become the norm. The current downturn could even prove fatal for some overextended ecommerce players.

Wayfair and Carvana: Stunning Reversals of Fortune

The pandemic initially proved to be a boon for Wayfair and Carvana. With consumers spending more time at home and avoiding public transit, demand for home furnishings and used cars soared. Meanwhile, the ease and safety of shopping online propelled huge market share gains for both ecommerce giants.

Wayfair’s revenue jumped 55 percent in 2020 and continued to grow quickly in the first quarter of 2021. Carvana reported even more impressive gains, growing revenue from less than $4 billion in 2019 to $12.8 billion in 2021. Just as importantly, both companies turned profitable during the pandemic, following years of losing money while investing to drive growth.

Business trends have taken a sharp turn for the worse since then. By the second quarter of 2021, Wayfair’s revenue was already shrinking, as consumers returned to in-person shopping and began shifting spending towards other merchandise categories. Revenue has continued falling throughout 2022. In Q3 2022, Wayfair posted revenue of $2.84 billion: down from $3.84 billion two years earlier.

Wayfair’s revenue last quarter was still up by 23 percent compared to the same period in 2019. But prior to the pandemic, Wayfair was consistently growing its top line more than 30 percent annually. Furthermore, TJX’s HomeGoods chain has also grown its revenue 23 percent over the past three years, whereas it was growing more slowly than Wayfair before the pandemic hit. Contrary to the prediction that the pandemic would catalyze a permanent shift towards ecommerce, Wayfair’s market share growth has actually tailed off.

Moreover, after turning profitable in 2020, Wayfair has plunged deep into the red again. It racked up an operating loss of more than $1 billion in the first nine months of 2022.

Carvana’s revenue has also started to decline recently, though the used car retailer remains on pace to post revenue growth on a full-year basis in 2022. But Carvana’s foray into profitability proved even briefer than Wayfair’s. Carvana lost nearly $1.5 billion in the first nine months of 2022, as unfavorable macroeconomic conditions caused sales growth to grind to a halt just as the company was aggressively ramping up its capacity to buy, recondition, and sell used vehicles.

Fighting for Survival

Thanks to their incredible results early in the pandemic, Wayfair and Carvana both achieved $30 billion-plus stock market valuations as of August 2021. But now, both ecommerce leaders are fighting just to survive as independent companies. Wayfair’s market capitalization has fallen to $3.4 billion, while Carvana’s has plunged below the $1 billion mark.

Despite posting better top-line growth than Wayfair, Carvana is in more danger. The company has $7.4 billion of debt, compared to only $2.3 billion of committed liquidity, and it burned over $1 billion of cash in the first nine months of 2022. Conditions could get worse before they get better. High interest rates are putting pressure on used vehicle demand. And if car prices decline from the elevated levels of the past two years, Carvana could rack up big losses on the vehicles in its inventory today.

Thus, Carvana must cut costs quickly to stem its losses so it can live to fight another day. It laid off 2,500 employees (roughly 12 percent of its workforce) in May and recently announced another 1,500 layoffs. CEO Ernie Garcia acknowledged to staff that management was blindsided by how quickly business conditions soured.

With nearly $1.3 billion of cash and investments on hand and only $3.1 billion of debt, Wayfair is not in quite such dire straits. Still, the company has burned $1.1 billion of cash over the past year: a pace that clearly isn’t sustainable. Wayfair can’t expect market conditions to improve quickly, either: inflation is crimping discretionary budgets, and home furnishings spending isn’t a high priority for most consumers right now.

As a result, Wayfair has also made job cuts in an effort to right-size its cost structure. In August, the company laid off 870 employees: around 5 percent of its total workforce and 10 percent of its corporate staff. Like his counterpart at Carvana, Wayfair CEO Niraj Shah issued a mea culpa, noting that he had personally pushed for expanding the company’s headcount to meet expected growth that never materialized.

Amazon Pulls Back, Too

Even mighty Amazon has found itself overextended in the current economic climate. On the bright side, revenue is still growing at a healthy clip, even excluding the Amazon Web Services (AWS) technology division. However, profitability has plummeted.

Amazon’s North America segment, which accounts for the majority of its revenue, posted an operating loss of $2.6 billion for the first nine months of 2022, down from a $7.5 billion operating profit a year earlier. The international segment has fared even worse, reporting a $5.5 billion operating loss year-to-date, compared to a $703 million profit in the same period last year. And while AWS continues to earn huge profits, Amazon has burned through about $20 billion in cash in the last 12 months.

Various inflationary pressures have contributed to weak profitability in Amazon’s core retail business. But an overly aggressive level of investment has been the main factor weighing on profitability and cash flow. CEO Andy Jassy told Bloomberg earlier this year that Amazon decided in early 2021 to expand its logistics capacity to meet the high end of its demand forecast. Those projections have proved overly optimistic.

While Amazon is on stronger financial footing than either Wayfair or Carvana, it can’t afford to burn $20 billion a year. Accordingly, it has closed several logistics facilities in recent months and canceled or delayed the construction of dozens more. Amazon is still expanding its fulfillment network, but not nearly as rapidly as previously planned.

Amazon has also axed numerous unprofitable side projects during 2022. It abruptly closed all of its Amazon Books, Amazon 4-Star, and pop-up stores early in the year. It has also discontinued its telehealth service and a program aimed at developing autonomous delivery robots.

Most recently, Amazon has begun a big round of layoffs, aiming to cut 10,000 high-paying jobs. The division responsible for the retailer’s Alexa voice assistant appears to be the main casualty. Amazon has been losing nearly $10 billion a year there, as it has struggled mightily to monetize customers’ usage of Alexa.

What Can We Learn from Chewy?

The recent woes of Carvana, Wayfair, and Amazon demonstrate that while consumers still like the convenience of ecommerce, creating a sustainable, profitable ecommerce business model is challenging. Moreover, Wall Street has become wary of funding “growth” businesses that routinely lose money and burn lots of cash. Going forward, unprofitable companies will find it much harder to raise capital to fund growth initiatives than was the case just a year or two ago.

But not all ecommerce pure plays are struggling. Chewy has been a notable standout this year. The pet specialist has continued to grow sales at a double-digit rate while improving its profitability, despite the current macroeconomic headwinds. Chewy generated positive free cash flow in the first half of fiscal 2022, demonstrating the strength of its business model. Furthermore, Chewy has over $600 million of cash and no debt, giving it ample flexibility to navigate any future challenges.

Recurring revenue is the secret to Chewy’s success. Customers who participate in the company’s “Autoship” program for consumables like food and pet health items now account for nearly three-quarters of total revenue. The ongoing nature of Chewy’s customer relationships has helped it build on the market share gains it made during the pandemic, rather than giving them back like Wayfair.

Of course, Chewy isn’t immune to broader economic trends. But it doesn’t have to fight for each sale as many other ecommerce companies do, which is helping its bottom line. Its more predictable revenue growth has also saved it from the overinvestment problems that have plagued Wayfair, Carvana, and Amazon this year.

Notwithstanding the recent bumps, ecommerce is poised to capture a growing share of retail spending over time. But if today’s largest ecommerce retailers fail to create enough predictability in their businesses to become consistently profitable, they won’t be the ones to capitalize on this secular trend.

Full disclosure: The author owns shares of TJX.