Flippa, an online marketplace to buy and sell online businesses and digital assets, announced its first venture-backed round, an $11 million Series A, as it sees over 600,000 monthly searches from investors looking to connect with business owners.
OneVentures led the round and was joined by existing investors Andrew Walsh (former Hitwise CEO), Flippa co-founders Mark Harbottle and Matt Mickiewicz, 99designs, as well as new investors Catch.com.au founders Gabby and Hezi Leibovich; RetailMeNot.com founders Guy King and Bevan Clarke; and Reactive Media founders Tim O’Neill and Tim Fouhy.
The company, with bases in both Austin and Australia, was started in 2009 and facilitates exits for millions of online business owners that operate on e-commerce marketplaces, blogs, SaaS and apps, the newest being Shopify, Blake Hutchison, CEO of Flippa, told TechCrunch.
He considers Flippa to be “the investment bank for the 99%,” of small businesses, providing an end-to end platform that includes a proprietary valuation product for businesses — processing over 4,000 valuations each month — and a matching algorithm to connect with qualified buyers.
Business owners can sell their companies directly through the platform and have the option to bring in a business broker or advisor. The company also offers due diligence and acquisition financing from Thrasio-owned Yardline Capital and a new service called Flippa Legal.
“Our strategy is data,” Hutchison said. “Users can currently connect to Stripe, QuickBooks Online, WooCommerce, Google Analytics and Admob for apps, which means they can expose their online business performance with one-click, and buyers can seamlessly assess financial and operational performance.”
Flippa has over 3 million registered users and added 300,000 new registered users in the past 12 months. Overall transaction volume grows 100% year over year. Though being bootstrapped for over a decade, the company’s growth and opportunity drove Hutchison to go after venture capital dollars.
“There is a huge movement toward this being recognized as an asset class,” he said. “At the moment, the asset class is undervalued and driving a massive swarm as investors snap up businesses and aggregate them together. We see the future of these aggregators becoming ‘X company for apps’ or ‘X for blogs.’ ”
As such, the new funding will be used to double the company’s headcount to more than 100 people as it builds out its offices globally, as well as establishing outposts in Melbourne, San Francisco and Austin. The company will also invest in marketing and product development to scale its business valuation tool that Hutchison likens to the “Zillow Zestimate,” but for online businesses.
Nigel Dews, operating partner at OneVentures, has been following Flippa since it started. His firm is one of the oldest venture capital firms in Australia and has 30 companies in its portfolio focused on healthcare and technology.
He believes the company will create meaningful change for small businesses. The team combined with Flippa’s ability to connect buyers and sellers puts the company in a strong leadership position to take advantage of the marketplace effect.
“Flippa is an incredible opportunity for us,” he added. “You don’t often get a world-leading business in a brand new category with incredible tailwinds. We also liked that the company is based in Australia, but half of its revenue comes from the U.S.”
In the UK, a 12-month grace period for compliance with a design code aimed at protecting children online expires today — meaning app makers offering digital services in the market which are “likely” to be accessed by children (defined in this context as users under 18 years old) are expected to comply with a set of standards intended to safeguard kids from being tracked and profiled.
The age appropriate design code came into force on September 2 last year however the UK’s data protection watchdog, the ICO, allowed the maximum grace period for hitting compliance to give organizations time to adapt their services.
But from today it expects the standards of the code to be met.
Services where the code applies can include connected toys and games and edtech but also online retail and for-profit online services such as social media and video sharing platforms which have a strong pull for minors.
Among the code’s stipulations are that a level of ‘high privacy’ should be applied to settings by default if the user is (or is suspected to be) a child — including specific provisions that geolocation and profiling should be off by default (unless there’s a compelling justification for such privacy hostile defaults).
The code also instructs app makers to provide parental controls while also providing the child with age-appropriate information about such tools — warning against parental tracking tools that could be used to silently/invisibly monitor a child without them being made aware of the active tracking.
Another standard takes aim at dark pattern design — with a warning to app makers against using “nudge techniques” to push children to provide “unnecessary personal data or weaken or turn off their privacy protections”.
The full code contains 15 standards but is not itself baked into legislation — rather it’s a set of design recommendations the ICO wants app makers to follow.
The regulatory stick to make them do so is that the watchdog is explicitly linking compliance with its children’s privacy standards to passing muster with wider data protection requirements that are baked into UK law.
The risk for apps that ignore the standards is thus that they draw the attention of the watchdog — either through a complaint or proactive investigation — with the potential of a wider ICO audit delving into their whole approach to privacy and data protection.
“We will monitor conformance to this code through a series of proactive audits, will consider complaints, and take appropriate action to enforce the underlying data protection standards, subject to applicable law and in line with our Regulatory Action Policy,” the ICO writes in guidance on its website. “To ensure proportionate and effective regulation we will target our most significant powers, focusing on organisations and individuals suspected of repeated or wilful misconduct or serious failure to comply with the law.”
It goes on to warn it would view a lack of compliance with the kids’ privacy code as a potential black mark against (enforceable) UK data protection laws, adding: “If you do not follow this code, you may find it difficult to demonstrate that your processing is fair and complies with the GDPR [General Data Protection Regulation] or PECR [Privacy and Electronics Communications Regulation].”
Tn a blog post last week, Stephen Bonner, the ICO’s executive director of regulatory futures and innovation, also warned app makers: “We will be proactive in requiring social media platforms, video and music streaming sites and the gaming industry to tell us how their services are designed in line with the code. We will identify areas where we may need to provide support or, should the circumstances require, we have powers to investigate or audit organisations.”
“We have identified that currently, some of the biggest risks come from social media platforms, video and music streaming sites and video gaming platforms,” he went on. “In these sectors, children’s personal data is being used and shared, to bombard them with content and personalised service features. This may include inappropriate adverts; unsolicited messages and friend requests; and privacy-eroding nudges urging children to stay online. We’re concerned with a number of harms that could be created as a consequence of this data use, which are physical, emotional and psychological and financial.”
“Children’s rights must be respected and we expect organisations to prove that children’s best interests are a primary concern. The code gives clarity on how organisations can use children’s data in line with the law, and we want to see organisations committed to protecting children through the development of designs and services in accordance with the code,” Bonner added.
The ICO’s enforcement powers — at least on paper — are fairly extensive, with GDPR, for example, giving it the ability to fine infringers up to £17.5M or 4% of their annual worldwide turnover, whichever is higher.
The watchdog can also issue orders banning data processing or otherwise requiring changes to services it deems non-compliant. So apps that chose to flout the children’s design code risk setting themselves up for regulatory bumps or worse.
In recent months there have been signs some major platforms have been paying mind to the ICO’s compliance deadline — with Instagram, YouTube and TikTok all announcing changes to how they handle minors’ data and account settings ahead of the September 2 date.
In July, Instagram said it would default teens to private accounts — doing so for under 18s in certain countries which the platform confirmed to us includes the UK — among a number of other child-safety focused tweaks. Then in August, Google announced similar changes for accounts on its video charing platform, YouTube.
A few days later TikTok also said it would add more privacy protections for teens. Though it had also made earlier changes limiting privacy defaults for under 18s.
The code also combines with incoming UK legislate which is set to apply a ‘duty of care’ on platforms to take a rboad-brush safety-first stance toward users, also with a big focus on kids (and there it’s also being broadly targeted to cover all children; rather than just applying to kids under 13s as with the US’ COPPA, for example).
In the blog post ahead of the compliance deadline expiring, the ICO’s Bonner sought to take credit for what he described as “significant changes” made in recent months by platforms like Facebook, Google, Instagram and TikTok, writing: “As the first-of-its kind, it’s also having an influence globally. Members of the US Senate and Congress have called on major US tech and gaming companies to voluntarily adopt the standards in the ICO’s code for children in America.”
“The Data Protection Commission in Ireland is preparing to introduce the Children’s Fundamentals to protect children online, which links closely to the code and follows similar core principles,” he also noted.
And there are other examples in the EU: France’s data watchdog, the CNIL, looks to have been inspired by the ICO’s approach — issuing its own set of right child-protection focused recommendations this June (which also, for example, encourage app makers to add parental controls with the clear caveat that such tools must “respect the child’s privacy and best interests”).
The UK’s focus on online child safety is not just making waves overseas but sparking growth in a domestic compliance services industry.
Bonner’s blog post also notes that the watchdog will formally set out its position on age assurance this autumn — so it will be providing further steerage to organizations which are in scope of the code on how to tackle that tricky piece, although it’s still not clear how hard a requirement the ICO will support, with Bonner suggesting it could be actually “verifying ages or age estimation”. Watch that space. Whatever the recommendations are, age assurance services are set to spring up with compliance-focused sales pitches.
Children’s safety online has been a huge focus for UK policymakers in recent years, although the wider (and long in train) Online Safety (neé Harms) Bill remains at the draft law stage.
An earlier attempt by UK lawmakers to bring in mandatory age checks to prevent kids from accessing adult content websites — dating back to 2017’s Digital Economy Act — was dropped in 2019 after widespread criticism that it would be both unworkable and a massive privacy risk for adult users of porn.
But the government did not drop its determination to find a way to regulate online services in the name of child safety. And online age verification checks look set to be — if not a blanket, hardened requirement for all digital services — increasingly brought in by the backdoor, through a sort of ‘recommended feature’ creep (as the ORG has warned).
The current recommendation in the age appropriate design code is that app makers “take a risk-based approach to recognising the age of individual users and ensure you effectively apply the standards in this code to child users”, suggesting they: “Either establish age with a level of certainty that is appropriate to the risks to the rights and freedoms of children that arise from your data processing, or apply the standards in this code to all your users instead.”
At the same time, the government’s broader push on online safety risks conflicting with some of the laudable aims of the ICO’s non-legally binding children’s privacy design code.
For instance, while the code includes the (welcome) suggestion that digital services gather as little information about children as possible, in an announcement earlier this summer UK lawmakers put out guidance for social media platforms and messaging services — ahead of the planned Online Safety legislation — that recommends they prevent children from being able to use end-to-end encryption.
That’s right; the government’s advice to data-mining platforms — which it suggests will help prepare them for requirements in the incoming legislation — is not to use ‘gold standard’ security and privacy (e2e encryption) for kids.
So the official UK government messaging to app makers appears to be that, in short order, the law will require commercial services to access more of kids’ information, not less — in the name of keeping them ‘safe’. Which is quite a contradiction vs the data minimization push on the design code.
The risk is that a tightening spotlight on kids privacy ends up being fuzzed and complicated by ill-thought through policies that push platforms to monitor kids to demonstrate ‘protection’ from a smorgasbord of online harms — be it adult content or pro-suicide postings, or cyber bullying and CSAM.
The law looks set to encourage platforms to ‘show their workings’ to prove compliance — which risks resulting in ever closer tracking of children’s activity, retention of data — and maybe risk profiling and age verification checks (that could even end up being applied to all users; think sledgehammer to crack a nut). In short, a privacy dystopia.
Such mixed messages and disjointed policymaking seem set to pile increasingly confusing — and even conflicting — requirements on digital services operating in the UK, making tech businesses legally responsible for divining clarity amid the policy mess — with the simultaneous risk of huge fines if they get the balance wrong.
Complying with the ICO’s design standards may therefore actually be the easy bit.
Chinese merchants selling on Amazon are having a moment. The scruffy exporters are used to roaming about suburban factory areas and dealing with constant cash flow strain, but suddenly they find themselves having coffee with top Chinese venture capital firms and investment representatives from internet giants, who come with big checks to hunt down the next Shein or Anker. While VCs can provide the money for them to scale quickly, many lack the expertise to help on the strategic side.
This is where brand aggregators can put their retail know-how to work. Also called roll-ups, these companies go around acquiring promising e-commmerce brands for operational synergies. After taking off in the United States, Europe, and lately Southeast Asia, it has also quietly landed in China, where traditional white-label manufacturers are trying to move up the value chain and establish their own brand presence.
The latest roll-up to enter China is Berlin Brands Group (BBG), which aims to buy “dozens of” brands in the country over the next few years, its founder and CEO Peter Chaljawski told TechCrunch. This will significantly boost the German company’s existing portfolio of 14 brands.
The move came on the back of BBG’s $240 million funding raised from debt and its announcement to commit $300 million on its balance sheet to buying up companies. The firm opted for debt in part because it has been profitable since its inception. The recent funding won’t be its last round and it may use other financial instruments in the future, said the founder.
Chaljawski doesn’t see VC and corporate investors as direct competitors in the hunt for brands. “There are tens of thousands of sellers in China that generate significant revenue on Amazon. I think the VC money applies to some of them, and the roll-up model applies also to only some of them. But ‘some’ is a very, very big number.”
BBG is no stranger to China. The 15-year-old company has been relying on Chinese manufacturers to make its kitchenware, gardening tools, sports gear and other home appliances, with 90% of its products still made in the country today. For the new brand buy-out initiative, it’s hiring dozens of staff in Shenzhen, which Chalijawski dubbed the “Silicon Valley of Amazon,” referring to the southern city’s key role in global export, manufacturing, and increasingly, design.
BBG hopes to offer a new way for Chinese consumer products to scale in Europe and the U.S. beyond being an anonymous brand on Amazon. Sellers may want to break free of the American behemoth to seize more control over consumer data, but building a direct-to-consumer (D2C) brand is no small feat.
Many merchants that are good at operating Amazon third-party businesses lack the infrastructure to go beyond Amazon, like an in-house logistics system, said the founder. In Europe, BBG manages 120,000 square meters of fulfillment centers, allowing it to shed dependence on Amazon.
Chinese brands may also want to find Amazon alternatives in Europe, where the e-commerce landscape is a lot more fragmented than that in the U.S, noted Chaljawski.
“If you look at the U.S., Amazon is dominant. If you look at Europe, Amazon only has 10% of the market share of online retail. So 90% is beyond Amazon. In the Netherlands, you have platforms like Bol. In Poland, you have Allegro, and in France, you have other dominant players.”
To bridge the gap for international brands targeting Europe, BBG operates close to 20 D2C web stores in major European countries, aside from selling on Amazon. Its sales growth in the U.S. has also been in full steam. Currently, over 60% of the firm’s revenues come from non-Amazon channels.
BBG is already in advanced negotiations with “some brands” in China but cannot disclose their names at this stage.
Best Buy says it has trimmed its headcount by 21,000 over the last year as the pandemic has accelerated the company’s transition to selling online. Most of those losses were due to attrition—including workers who were furloughed during the pandemic last year and then chose not to return to work. But Best Buy says that in recent weeks it formally laid off 5,000 workers. The company now has about 102,000 workers—including employees in its retail stores and corporate headquarters.
A company will often lay off workers because it is struggling. The last year has certainly been a challenging period for some brick-and-mortar businesses. This week, for example, electronics giant Fry’s shut down all of its stores.
But that doesn’t seem to be the situation at Best Buy, which has weathered the pandemic fairly well. In the last quarter, same-store sales at Best Buy’s brick and mortar stores were up 12 percent compared to a year earlier. Meanwhile, online sales were up an impressive 89 percent.
TikTok has a vaping problem. Although a 2019 U.S. law made it illegal to sell or market e-cigarettes to anyone under the age of 21, TikTok videos featuring top brands of disposable e-cigarettes and vapes for sale have been relatively easy to find on the app. These videos, set to popular and upbeat music, clearly target a teenage customer base with offers of now-unauthorized cartridge flavors like fruit and mint in the form of a disposable vape. Some sellers even promote their “discreet” packaging services, where the vapes they ship to customers can be hidden from parents’ prying eyes by being placed under the package’s stuffing or tucked inside other products, like makeup bags or fuzzy slippers.
In February 2020, the FDA first began to take enforcement action against illegally marketed e-cigarette devices, including those offering flavors besides tobacco or menthol, as well as those targeted towards minors — an action that was designed to target Juul.
As a result, disposable vapes like Puff Bar were adopted by some young people who were still in search of flavors like bubblegum, peach, strawberry and others. These cheaper disposables were easy to find, and continued to be available at convenience stores and gas stations.
But they’re also all over TikTok, ready to be shipped with anyone with a way to pay.
What’s more, when this content is reported to TikTok, it’s not always taken down.
TechCrunch found vape sellers marketing on TikTok who have been using the app to communicate with customers through both videos and comments. They also direct viewers to what appear to be illegally operating websites. Their TikTok videos often show off the seller’s current inventory of vapes, including disposables like Puff Bar in teen-friendly flavors.
Essentially, the sellers are using TikTok as a way to create vape advertisements they don’t have to pay for that are capable of reaching young consumers — an audience whose interest in vaping hasn’t necessarily declined because of the FDA’s action.
According to nonprofit tobacco control organization Truth Initiative’s latest study, use of Juul decreased between 2019 and 2020, but it remains the most popular e-cigarette brand among 10th and 12th graders who were current vapers at 41%. The report also found that disposable products such as Puff Bar (8%) and Smok (13.1%) have gained during this time.
“Taken together, the 2020 National Youth Tobacco Survey (NYTS) and the new e-cigarette sales data report illustrate how the current federal policy enabled youth to quickly migrate to menthol e-cigarettes (especially Juul menthol pods) when mint-flavored products were removed from the marketplace, and for inexpensive, flavored disposable e-cigarettes such as Puff Bar to soar in popularity,” Truth stated in September 2020.
“With kid magnet names like cotton candy and banana ice, the market share of disposable products nearly doubled in just 10 months from August 2019 to May 2020,” it said.
The scale of the problem on TikTok is also significant.
Today, U.S. teens account for an estimated 32.5% of TikTok’s U.S. active users, according to third-party estimates published by Statista. The company has around 100 million monthly active users in the U.S., it said last year.
Meanwhile, videos tagged with popular vape and e-cigarette brands and keywords have racked up hundreds of millions of views.
For example, the hashtag for leading vape brand Juul (#juul) has 623.9 million views on TikTok, as of the time of writing.
These are just the views associated with the hashtag itself. For every search, there are multiple variations. For instance, #puffbars, #puffbarplus and #puffbardealer have 66.8 million views, 9.6 million views and 8.9 million views, respectively. Tags like #juulgang (590.4 million views) have become popular enough that anti-vaping content creators have adopted them as a means of counter-programming against vaping content.
These trends are particularly concerning given the large, young demographic that uses TikTok. A third of its U.S. users may be 14 or under, in fact.
In addition to the popular vaping hashtags prevalent on TikTok, we uncovered numerous vape sellers operating under obvious account names such as “@puffsonthelow,” “@PuffUniverse” and “@Puffbarcafe,” for example. Their pages were filled with vape videos boldly marketing their current selections, hashtagged with vape-related terms like #puffbarchallenge, #puffplus, #vapetricks and others.
In some cases, we found vape sellers had even tagged their videos with #kids and other trending tags.
Knowing that their target market is often teenage vapers, many videos depicted how the seller could package the vape inside another product or hide it in the stuffing so parents wouldn’t find out. We saw videos of vapes packaged underneath candy, inside makeup bags, inside socks, underneath other lager products, and more.
Through links published to the account’s profile or referenced in the videos, TikTok users are redirected to the sellers’ websites or even Discord channels where they would only sometimes be presented with an age verification pop-up.
Often, they could just add items to a basket and check out. Many sellers also directed their customers to pay using PayPal, Venmo and/or Cash App, instead of accepting standard credit card payments.
None of this is legal, according to the Campaign for Tobacco Free Kids, a leading American nonprofit focused on reducing tobacco consumption, particularly among youth.
“It’s illegal to market these products or to engage in marketing that appeals directly to anybody under the age of 21,” Matt Myers, the president of the Campaign for Tobacco Free Kids, told TechCrunch. “And it’s illegal to actually conduct a sales transaction without age verification.”
Image Credits: TikTok screenshot
Plus, he adds, clicking a box on a website that says “I’m over 21,” does not qualify as a legal age verification for making these sales.
The FDA hasn’t issued specific guidance around online retail, but the law is clear that checking IDs is required to ensure retailers aren’t selling to underage users. That’s not happening with a pop-up box, and often there’s no box at all.
In addition, the FDA reminded TechCrunch that Congress recently established new limits on the mailing and delivery of e-cigarettes and other tobacco products through the United States Postal Service and through other carriers, which should limit access to these sorts of products through online retail purchases.
Myers, however, points out that the current FDA guidelines have made enforcement of this sort of “social” vape marketing more difficult than necessary.
“The images you’re seeing, the use of influencers, and the kinds of offers you’re seeing are governed by a federal standard by the FDA, which is very broad and very general,” Myers says. “The FDA’s failure to articulate clear, specific guidelines means that everyone is in a constant what I call ‘whack-a-mole.’”
Enforcement, then, often depends on the FDA stepping in, which Myers says happens “on a very sporadic basis.”
“In many respects, the behaviors, the actions and the things you’re seeing do violate the law. But the mechanisms for implementing it that were put in place under this past administration are woefully weak and inadequate,” he says.
Image Credits: screenshots of TikTok
Another complicating factor is that public health groups — like the Campaign for Tobacco Free Kids, for instance — don’t have a relationship with TikTok, as they do with other social networks.
Over the last couple of years, over 100 public health groups came together to ask leading social networks like Facebook, Instagram, Twitter and Snapchat to clamp down on tobacco-related content and the use of influencers in marketing. As a result of these efforts, Facebook and Instagram implemented new rules to prohibit social media influencers from promoting tobacco-related products and developed algorithms to pick up on that sort of content.
Overall, the health organizations have reported seeing a reduction in tobacco and vape content on top social platforms, but these efforts have not yet included TikTok.
The Campaign for Tobacco Free Kids has not given TikTok a comprehensive review, Myers admits, due to the app still being relatively new. But from what the organization has seen so far, TikTok is of growing concern.
“We’ve seen some of the most egregious marketing, use of influencers, direct offers of sale to young people [which] appear to be gravitating over to TikTok,” Myers says. “And we don’t see any evidence that TikTok has actually done anything.”
TikTok can’t claim ignorance of the problem, either.
Image Credits: TikTok screenshot
When a vape seller who unabashedly advertised “no ID check” was reported to TikTok through its built-in reporting mechanism, TikTok’s content moderation team said the content didn’t violate its guidelines. This same response was given when other vape sellers were reported, as well. (See below.)
TikTok claims this shouldn’t be happening. The company told us that it will remove accounts dedicated to posting vaping or e-cigarette content as soon as it becomes aware of them, and will reset account bios that link to off-platform tobacco or vaping sites.
It also says its Community Guidelines prohibit content that suggests, depicts, imitates, or promotes the possession or consumption of tobacco by a minor, and content that offers instruction targeting minors on how to buy, sell, or trade tobacco.
Image Credits: screenshots of TikTok reports
Reached for comment over whether it was aware of the problems on TikTok, an FDA spokesperson said it does not discuss specific compliance and enforcement activities.
However, an FDA spokesperson said the agency will closely monitor retailer, manufacturer, importer, and distributor compliance with federal tobacco laws and regulations and take corrective action when violations occur. In addition, the FDA said it conducts routine monitoring and surveillance of tobacco labeling, advertising and other promotional activities, including activities on the internet.
What’s been making matters more confusing is that the FDA has been accepting premarket applications for flavored vape devices, but has so far refused to list which companies — Puff Bar or otherwise — may have filed for these. That means health organizations don’t know which products the FDA has under review.
However, the agency told TechCrunch that regardless of whether a premarket application has been submitted, it’s enforcing lack of marketing authorization for any product where the manufacturer “is not taking adequate measures to prevent youth access to these products.”
That statement would then include these online Puff Bar retailers and their TikTok marketing efforts.
The FDA added that it has taken action against Puff Bar, specifically, in recent days.
It sent a warning letter to Cool Clouds Distribution, Inc. d/b/a Puff Bar, last July, notifying the company that it was marketing new tobacco products that lacked marketing authorization and that such products, as a result, were adulterated and misbranded.
Earlier this month, as part of an ongoing joint operation with the FDA, U.S. Customs and Border Protection seized 33,681 units of e-cigarettes, which included disposable flavored e-cigarette cartridges resembling the Puff Bar brand, including Puff XXL and Puff Flow, we’re told.
TikTok confirmed the activity we’re documenting is in violation of its guidelines and policies, but could not explain why there’s been such a disconnect between that policy and its enforcement actions.
“We are committed to the safety and well-being of our TikTok community, and we strictly prohibit content that depicts or promotes the possession or consumption of tobacco and drugs by minors,” a TikTok spokesperson told TechCrunch. “We will remove accounts that are identified as being dedicated to promoting vaping, and we do not allow ads for vaping products.”
Following Walmart’s pandemic-fueled earnings beat posted on Tuesday, Target today also handily beat Wall St. expectations to deliver a record-setting quarter across a number of key metrics. The retailer on Wednesday announced its strongest quarter to date for comparable sales, which grew 24.3% in Q2, driving Target’s profit up 80.3% year-over-year to $1.69 billion. Online ordering was particularly popular, Target noted, with digital sales growing 195%. Same-day services like Drive Up, Order Pick Up and Shipt also grew by 273%.
In the quarter, Target topped estimates for revenue, same-store sales, adjusted EPS, and gross margin. It reported $23 billion in revenue, vs. estimates of $19.82 billion. Its record-settinbg 24.3% increase in comparable sales was well above the expected 5.8%. Earnings per share came in at $3.38 vs. the $1.58 forecast. And its GM was 30.9% instead of the expected 28.98%.
The company attributed its sales growth to a number of factors, including its ability to remain open amid the pandemic as an essential business, its customers’ overall trust in the Target brand, its ability to get customers to shop across its product categories, its digital services, and most notably, the return of customers to its stores in Q2.
The latter item doesn’t necessarily mean Target shoppers were walking the aisles, however.
Instead, it speaks the investments Target made ahead of the pandemic in bridging the gap between online ordering and its physical stores. In Q2, Target’s In-store Order Pick Up grew more than 60%, as shoppers headed inside Target to pick up their web orders, for example.
Target’s Drive Up service, which allows customers to shop online then pull up in designated parking spots to have orders brought their car, was up by more than 700% in the quarter.
And Target’s Shipt same-day home delivery service Shipt was up 350% over last year.
That means that for much of what Target customers think of as “online shopping,” their sales were actually being fulfilled by Target’s stores. In fact, Target said its stores fulfilled more than 90% of its second-quarter sales.
Image Credits: Target
To build out its digital fulfillment services, Target took a tech company-like approach in leveraging internal engineering teams capable of iterating quickly on new ideas. A team of eight, including four engineers, originally built Drive Up starting back in April 2017, for instance. By summer 2017, Drive Up was being tested in internally. It then rolled out to Target’s home market by that fall. And as of August 2019, Target’s Drive Up service was available nationwide.
The results of these efforts are now paying off in a pandemic where customers don’t necessarily want to browse stores’ aisles in-person to shop. And that has led to Target seeng what Yahoo Finance today described as “tech company-like growth” for its retail business.
Store opening at Target Houston – Richmond on Wednesday, Nov. 8, 2017 in South Richmond, Texas. (Anthony Rathbun/AP Images for Target)
Target’s Chairman and CEO Brian Cornell additionally noted the company has added $5 billion in market share in the first 6 months of 2020, during which time it’s added 10 million new digital customers.
“Our second quarter comparable sales growth of 24.3 percent is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model. Our stores were the key to this unprecedented growth, with in-store comp sales growing 10.9 percent and stores enabling more than three-quarters of Target’s digital sales, which rose nearly 200 percent,” he said. “We also generated outstanding profitability in the quarter, even as we made significant investments in pay and benefits for our team. We remain steadfast in our focus on investing in a safe and convenient shopping experience for our guests, and their trust has resulted in market share gains of $5 billion in the first six months of the year,” Cornell continued.
“With our differentiated merchandising assortment, a comprehensive set of convenient fulfillment options, a strong balance sheet, and our deeply dedicated team, we are well-equipped to navigate the ongoing challenges of the pandemic, and continue to grow profitably in the years ahead,” he said.
The pandemic has played a role in what customers bought, too. Target said its sales were up across all five of its core merchandise categories. This was led by the strongest sales in electronics, a category that was up 70% year-over year due to people staying at home for work, school and entertainment, leading to more purchases of things like computers or gaming systems. Electronics were followed by home products, which were up by 30%, then increases of 20% for the beauty, food & beverages, and essentials categories. Apparel even shifted from a 20% decline in Q1 to double-digit growth in Q2. Customer basket size also grew 18.8%, as people shopped for more items on their Target runs.
Like Walmart, Target also saw a boost from government stimulus checks, which will likely taper off next quarter. But Target declined to offer further 2020 guidance, saying that the COVID-19 crisis makes consumer shopping patterns and government policies unpredictable.
DHL has acquired a minority stake in Link Commerce, a turn-key e-commerce company that grew out of MallforAfrica.com — a Nigerian digital-retail startup.
Link Commerce offers a white-label solution for doing digital-sales in emerging markets.
Retailers can plug into the company’s e-commerce platform to create a web-based storefront that manages payments and logistics.
With the investment one of the world’s largest delivery services looks to build a broader client-base globally using a business built in Africa.
“DHL is trying to get their hands more into global e-commerce…across the world and they figured our platform was a good way to do it,” Link Commerce CEO Chris Folayan told TechCrunch.
Folayan originally founded MallforAfrica, which paved the way for Link Commerce. DHL’s investment in the company — the amount of which is undisclosed — has roots in collaboration with Folayan’s original startup.
MallforAfrica began a partnership with DHL in 2015 and launched DHL Africa eShop in 2019. The sales platform is powered by Link Commerce and has brought more than 200 U.S. and U.K. sellers — from Neiman Marcus to Carters — online to African consumers in 34 countries.
Image Credits: DHL
Similar to MallforAfrica’s model, Africa eShop allows users to purchase goods directly from the websites of any of the app’s partners.
For the global retailers selling on Africa eShop, the hurdles that held back distribution on the continent — payments, currency risk, logistics — are handled by the underlying Link Commerce operating platform.
“That’s what our service does. It takes care of that whole ecosystem to enable global e-commerce to exist, no matter what country you’re in,” Folayan told TechCrunch in 2019.
Link Commerce was built out of Folayan’s startup MallforAfrica.com, which he founded in 2011 after studying and working in the U.S.
A common practice among Africans — that of giving lists of goods to family members abroad to buy and bring home — highlighted a gap between supply and demand for the continent’s consumer markets.
With MallforAfrica Folayan aimed to close that gap by allowing people on the continent to purchase goods from global retailers directly online.
MallforAfrica and Link Commerce founder Chris Folayan, Image Credits: MallforAfrica
The e-commerce site went on to onboard over 250 global retailers and now employs 30 people at order processing facilities in Oregon and the UK.
MallforAfrica’s Africa eShop expansion put it on a footing to compete with Pan African e-commerce leader Jumia — which went public on the NYSE in 2019 — and China’s Alibaba, anticipated to enter online retail on the continent at some point.
The Link Commerce, DHL deal won’t change that, but Folayan has shifted the hirearchy of his businesses to make Link Commerce the lead operation and Africa one market of many.
Image Credits: Link Commerce
“We changed the structure. So now Link Commerce is above MallforAfrica and MallforAfrica is now powered by Link Commerce,” Folayan explained on a recent call.
“Right now the focus is on Africa…but we’re taking this global,” he added.
Folayan and DHL plan to extend the platform to emerging markets around the world, where other companies may look to grow by wrapping an online store, payments, and logistics solution around their core business.
That could include any large entity that wants to launch an international e-commerce site, according to Folayan.
“Link Commerce is focused on banks, mobile companies, shipping companies and partnering with them to expand globally,” he said.
That’s a big leap from Folayan’s original venture, MallforAfrica.com
What began as a startup to sell brand name jeans and sneakers online in Africa, has pivoted to a global e-commerce fulfillment business partially owned by logistics giant DHL.
Record usage of grocery delivery services amid the COVID-19 pandemic has led to delayed orders, fewer open delivery windows, and an inability to even book a delivery time slot, on occasion. Walmart now hopes to capitalize on the increased demand for speedier delivery with the introduction of a new service that allows consumers to pay to get to the front of the line. The retailer confirmed today it’s launching a new Walmart Grocery service called “Express” which promises orders in 2 hours or less for an upcharge of $10 on top of the usual delivery fee.
The service has been in pilot testing across 100 Walmart stores in the U.S. since mid-April. Walmart says it plans to expand the service to nearly 1,000 stores in early May and it will be offered in a total of nearly 2,000 stores in the weeks after.
Some Walmart customers may have recently received a push notification alerting them to the launch.
To use Express delivery, you first fill your online Walmart Grocery cart with the $30 minimum required for delivery orders or more. The Express service offers over 160,000 items from across Walmart’s grocery, consumables, and general merchandise categories. At checkout, you’ll see an option beneath the calendar where you pick a delivery date to select the Express service. In many cases, there may no other standard delivery time slots available for the current day or even several days out, which makes the Express service even more appealing to shoppers who need their orders sooner.
Though Walmart is officially promoting Express as a “two-hour” delivery service, in the weeks it’s been piloting the program Walmart has been able to deliver these orders within 56 minutes, on average.
In our tests, we were shown an Express fee of $18.90 to receive a delivery in “55 mins or less,” the app informed us today, April 30. There were no other fees. Without choosing the Express option, the next available time slot was not until next week, on Monday, May 4.
A price of $18.90 is close to — but is not exactly — a $10 increase over Walmart’s typical delivery fees of $7.95 or $9.95, depending on time of day. But we understand the plan is to make Express a flat $10 upcharge moving forward. (Walmart hadn’t been planning to officially announce the launch until next week, so pricing is being updated.)
Like Walmart’s other grocery deliveries, Express deliveries are handled by Walmart’s external network of delivery partners, which vary by market. The retailer won’t comment on if those additional fees are split with their partners, or how, if so.
There could be backlash against a system like this, given how it favors a wealthier customer at a time when food and other critical supplies have run short. During the pandemic, store shelves have often been bare as consumers hoarded things like toilet paper, hand sanitizer, and Lysol cleaners. Now, consumers are being warned that meat shortages are expected soon.
In addition, the pandemic has already exposed the income divide between those who can afford to shop online and low-income customers, who can only use their SNAP benefits (food stamps) in physical stores — except in a handful of states where a USDA pilot has been running. And now those with the means will be able to gain another advantage: paying to get to the limited supplies first.
Walmart says it’s doing things to mitigate these types of concerns, however.
For items where the inventory is so limited it can’t guarantee delivery, it’s removing their availability from the online grocery service. Plus, the retailer says it’s not pushing back standard delivery orders to accommodate the high-paying Express customers. Instead, the Express service is being made available on top of Walmart’s existing grocery pickup and delivery capacity.
The Express service wasn’t dreamed up because of the pandemic, Walmart says, but it did play a role in terms of the timing of the launch.
“The demand that we’ve seen during the coronavirus pandemic is making us push forward and expedite the development of some services that we may have been thinking about,” a Walmart spokesperson explained. “But demand has pushed us to innovate more quickly,” they added.
Walmart is not alone in experiencing a crush of online grocery orders due to the COVID-19 pandemic.
In Walmart’s case, its ability to launch Express isn’t solely due to its new hires, we’re told.
The company already employs a workforce of 74,000 “personal shoppers” who dedicate themselves to pulling for online grocery orders. Walmart says Express is powered by these personal shoppers, only some of which may be the newly hired store associates.
“We have an opportunity to serve our customers no matter what life calls for,” said Tom Ward, Walmart senior vice president, Customer Product. “Whether it be a last-minute ingredient, medicine when a fever hits, or the item you didn’t know you needed when checking off your chore list, time matters. Express is a solve for that,” he said.
Updated 4/30/20, 6:35 PM ET with additional expansion details and exec quote.
Amazon is piloting a new system aimed at validating the identify of third-party sellers over video conferencing, the company announced on Sunday. The technology is a part of a series of seller verification processes that Amazon uses to combat fraud on its platform, which the company claims stopped 2.5 million suspected bad actors from publishing their products to Amazon in 2019.
Earlier this year, Amazon began testing a process where seller verifications were handled in person. But due to the coronavirus outbreak and social distancing requirements, the company says it pivoted to live video conferencing in February.
The pilot program is now running in a number of markets, including the U.S., U.K., China and Japan. To date, over 1,000 sellers have attempted to register an account through the pilot experience, Amazon says.
To vet the sellers, Amazon’s team sets up a video call then checks that the individual’s ID matches the person and the documents they shared with their application. The Amazon associates also lean on third-party data sources for additional verification. In addition, the call may be used to provide the seller with information about problems with their registration and how to resolve them.
“Amazon is always innovating to improve the seller experience so honest entrepreneurs can seamlessly open a selling account and start a business, while also proactively blocking bad actors,” an Amazon spokesperson said about the new initiative. “As we practice social distancing, we are testing a process that allows us to validate prospective sellers’ identification via video conferencing. This pilot allows us to connect one-on-one with prospective sellers while making it even more difficult for fraudsters to hide,” they said.
In addition to video conferencing, Amazon also uses a proprietary machine learning system to vet sellers before they’re allowed online, it says. This system analyzes hundreds of different data point to identify potential risk, including verifying whether the account is related to another account that was previously removed from the marketplace, for example. The sellers’ applications are also reviewed by trained investigators before being approved.
Seller verification is only one way Amazon has taken on fraud, however.
The issue continues to be a serious problem across online marketplaces, where sellers hawk counterfeit items and scam consumers. Some retailers, including Nike and Birkenstock, have found the the hassles aren’t worth the risk of dealing with Amazon, as a result.
While the retailer has long been accused of avoiding issues around fraud, it’s more recently pledged to spend billions to address the problem and has inserted itself into legal battles with fraudulent sellers and counterfeiters in recent years.
Last year, Amazon announced an initiative called Project Zero, which introduced a range of tools for brands to use to help Amazon fight fraud. The brands can opt to provide Amazon with their logos, trademarks and other key data, allowing the retailer to scan its billions of product listings to find suspected counterfeits more proactively.
Another tool, serialization, allows brands to include a unique code on their products during manufacturing, which can later be scanned to verify that a purchase is authentic. This tool, now known as Transparency, expanded to other markets last summer, including Europe, Canada and India.
But unlike these earlier efforts, seller verification aims to cut down on products being listed in the first place –not just removed once listings go live or stopping fraudulent products from being shipped to customers.