Top e-commerce mergers and acquisitions news and analysis

Shopify slashes jobs again, sells most of logistics business to Flexport

Bloomberg News — Thu, 04 May 2023 15:42:55 +0000

Shopify Inc. will cut jobs for the second time in 10 months and has agreed to sell the majority of its logistics business to Flexport Inc. as it faces a challenging climb back from last year’s slump.

“I don’t want to bury the lede: after today, Shopify will be smaller by about 20% and Flexport will buy Shopify Logistics; this means some of you will leave Shopify today,” CEO Tobi Lütke said in a memo to staff. “I recognize the crushing impact this decision has on some of you, and did not make this decision lightly.”

The company expects to incur severance charges of $140 million to $150 million.

“Our numbers were unhealthy, just like it is in much of the tech industry,” Lütke said. “With the right numbers, we’ll fully focus on outcomes and impact.”

Shopify earnings

The ecommerce platform provider also announced its fiscal first-quarter earnings on May 4. It said revenue increased 25% to $1.5 billion compared to the prior year.

Gross merchandise volume, the total value of merchant sales across Shopify’s platforms, was $49.6 billion. That’s above Wall Street projections of $47.68 billion, and some $6.4 billion higher than comparable quarter of 2022.

The Ottawa-based company also gave an outlook for the second quarter, saying it expects revenue to grow at a similar rate to the first quarter growth rate on a year-over-year basis. It also expects to achieve free cash flow profitability for each quarter of 2023.

Shopify bet early in the pandemic that a rapid rise in online shopping, fueled by customers staying home, would become permanent. As that wager soured, Lütke has attempted to turn the company around. It cut about 1,000 jobs last summer, raised prices and focused on building out client offerings and its in-house fulfillment network. Shopify had 11,600 employees at the end of 2022.

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Albertsons digital sales rise in both Q4, fiscal 2022 overall

Abbas Haleem — Tue, 11 Apr 2023 21:51:26 +0000

Albertsons Inc. reported a 16% digital sales increase in its fiscal 2022 fourth quarter ended Feb. 25, 2023.

Net sales for the quarter were $18.27 billion. That’s up from $17.39 billion in the retailer’s Q4 in fiscal 2021. Although cost of sales increased as well — to $13.18 billion in Q4 from $12.40 billion in the previous Q4 — gross margin did, too. Gross margin in Q4 2022 increased to $5.08 billion from $4.98 billion the year before.

As a percentage, though, Albertsons gross margin went down. It decreased to 27.8% of net sales and other revenue in Q4 2022. Gross margin in the year-ago quarter was 28.7%. Albertsons attributed some of that change in margin to fuel. It said selling and administrative expenses as a percentage of net sales and other revenue was essentially flat.

The grocery conglomerate reported identical sales increased 5.6% in the quarter. Direct-to-consumer digital sales are included in identical sales. Moreover, loyalty members increased 15% to more than 34 million.

CEO Vivek Sankaran said in a statement that Albertsons is “well-positioned to drive top-line growth by deepening relationships with our customers even as inflation continues.”

“However, we also believe that the economic backdrop is uncertain and is likely to be more challenging later in the year,” Sankaran said. “We have prepared our business for a more difficult consumer environment, and are expecting significant labor investments and inflationary cost increases.”

Albertsons digital sales in fiscal 2022

The Boise, Idaho-based retailer’s net sales in fiscal 2022 increased to $77.65 billion. That’s up from $71.89 billion in fiscal 2021.

Cost of sales for the fiscal year totaled $55.89 billion. That’s up from $51.16 billion the year before. And gross margin increased to $21.76 billion in 2022 (28.0% of net sales) from $20.72 billion in 2021 (28.8% of net sales).

Meanwhile, Albertsons digital sales increased 28% year over year in fiscal 2022. Identical sales increased 6.9%.

Kroger deal could change Albertsons forecast

Albertsons and The Kroger Co. are working to win regulatory approval that would have Kroger acquire Albertsons for $24.6 billion. Citing the pending deal, Albertsons didn’t provide a profit and sales forecast for the fiscal year, which ends in early 2024.

The $24.6 billion Kroger and Albertsons deal would remake the online grocery industry. If Kroger were to acquire Albertsons, it would create a 48-state grocery giant that could seriously challenge Walmart’s leadership that market.

Albertsons is No. 26 in the Top 1000, Digital Commerce 360’s database ranking the largest North American online retailers. The Kroger Co. is No. 8.

Albertsons earnings summary

For the fiscal fourth quarter ended Feb. 25, 2023, Albertsons reported:

Net sales increased to $18.27 billion from $17.38 billion in the year-ago quarter.
Cost of sales increased to $13.18 billion from $12.40 billion in the year-ago period.
Albertsons digital sales increased 16% year over year.
Loyalty members increased 15% to over 34 million.

For the fiscal year 2022 ended Feb. 25, 2023, Albertsons reported:

Net sales increased to $77.65 billion from $71.89 billion in the previous fiscal year.
Cost of sales increased to $55.89 billion from $51.16 billion in 2021.
Albertsons digital sales increased 28% year over year.

Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.

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What online retailers can learn from Evite’s business model pivot

April Berthene — Mon, 13 Mar 2023 21:13:36 +0000

When the COVID-19 pandemic swept across the U.S., consumers postponed, delayed and canceled their events. This was a tough time for Evite, which provides digital event invitations and made most of its revenue from selling ads around those digital invites.

Evite’s user activity plummeted roughly 95%, says Evite’s current CEO David Yeom, down to consumers sending about 1,000 invites a day. This is compared to normal pre-pandemic activity, with consumers sending 20,000 invites every day to 30-plus people, he says.

When the pandemic began, publicly traded media conglomerate Liberty Media Corp. owned Evite. As 2020 wore on and the COVID-19 pandemic raged, Yeom decided to buy out Evite with business partner George Ruan for an undisclosed sum in September 2020. As the new CEO and without public investors to please on a quarterly basis, Yeom used the lull in events as an opportunity to do a major rehaul of Evite’s customer experience and change its business model.

“What’s there to risk? User activity is down in the dumps,” Yeom says. “When you don’t have much to lose, in many ways, that gave us the opportunity to finally make the changes we’ve always wanted to make and get the business back on the path to greatness that it should be on.”

Evite pivots to revenue from premium upgrades from advertisements

Instead of relying on revenue from ads, Evite’s primary revenue stream now is from users upgrading to a premium invitation, which costs $15.99-$89.99. With premium, users have access to enhanced features, like hiding the guest list for an event, no ads on the invitation and access to premium designs, such as ones with a Disney character, premium fonts, animation, envelopes and a design-your-own feature. About 10% of its users pay for premium invitations and this accounts for roughly half of Evite’s revenue, Yeom says.

A third of its revenue is now from affiliate marketing. Evite showcases products that would be relevant to a party, such as paper plates or balloons for the host, or gift ideas for an attendee, from other retailers including Amazon.com Inc., Target Corp., Walmart Inc. and Etsy Inc.

That leaves the remaining roughly 17% of the revenue from advertising, which is now an automated program. Advertising used to be the primary source of its revenue. But the ads were getting in the way of the user experience, Yeom says. Typically, users saw an advertisement at each step in creating the invitation or RSVPing to an event.

“It was too much and everywhere,” Yeom says. “Basically 90% of all those ads are gone now.”

Evite’s move to generate revenue from premium features instead of ads is smart, says Paula Rosenblum, co-founder and managing partner at retail consulting firm RSR Research.

“Websites that are so filled with ads — mostly re-targeted, to boot — are incredibly annoying,” she says. “I’d gladly pay a little to stop the endless parade so I could take my time and peruse the products and/or services.”

But, Evite has to tread lightly with how it showcases its affiliate products, as those can appear just like an ad to a consumer. For example, in an email about a party, Evite will have a link to buy the host a gift from one of its affiliated retailers.

Or, after an invitee RSVPs to an event, Evite shows a pop-up to send the person a gift from one of its affiliates. Yeom says party-throwers have the option to turn this off and about a quarter of consumers elect to do so, he says.

Evite prompts party-goers to buy a gift from one of its affiliate retailers.

“We want to have good balance, and not fall back in the traps of what we used to be as a business,” Yeom says.

Yeom says the affiliate product links are meant to be helpful to planning or attending an event, whereas a banner ad may not be. RSR’s Rosenblum says many affiliates have successfully provided links to other merchants without annoying users.

This overhaul in revenue, however, was a tough change, as half of Evite’s employees were either on the sales team or supported the sales team. At the end of 2020, Evite eliminated its sales team and those employees were let go or received a new role.

Many employees had an “if it’s not broke don’t fix it” mentality about the ads, Yeom says. But that attitude had to go, he says.

“There’s a better way, and you don’t have to compromise the experience for guest or host,” Yeom says.

The new Evite launches

The rebranded Evite launched in April 2022, when many U.S. consumers had already resumed their normal pre-pandemic activities. And that includes going to events, celebrating milestones and going to parties. Meaning, Evite has regained its 100,000 annual active users, who send and receive Evites.

A year after this pivot, Evite turned a profit for the first time in a decade, the company says. Plus, in the birthday category specifically, user activity “has never been higher,” with users sending 25,000 birthday invites every hour, Yeom says without sharing more.

User feedback has been “phenomenal,” Yeom says, and Evite plans to continue adding upgrades to its premium service.

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PetSmart and Chewy’s boards are under scrutiny

Bloomberg News — Fri, 10 Mar 2023 21:39:07 +0000

A worker advocacy group asked the Justice Department to investigate BC Partners Holding Ltd.’s PetSmart LLC and Chewy Inc. over concerns the pet supply retailers’ overlapping directors violate U.S. antitrust law.

In a complaint filed with the Justice Department this week, United for Respect urged a probe into three directors who sit on the boards of both PetSmart and Chewy even though the two companies split years ago.

PetSmart is No. 132 and Chewy is No. 14 in the 2022 Digital Commerce 360 Top 1000 database ranking North American web merchants by sales.

Pet products are big business

PetSmart is the biggest pet retailer with about 1,660 stores in North America and controls about 29% of the market, according to Statista. BC Partners bought PetSmart for $8.7 billion in March 2015 in what was then the largest leveraged buyout in retail.

Two years later, PetSmart acquired ecommerce pet products company Chewy, which went public in 2019. BC Partners later split PetSmart and Chewy, though it remains among Chewy’s biggest shareholders.

About one-fifth of all household and pet care products in 2020 were sold online, an amount that is expected to grow to about 30% by 2025, according to Statista. The three largest online retailers U.S. consumers use for pet products are Amazon.com Inc., Walmart Inc. and Chewy. Amazon is No. 1 and Walmart is No. 2 in the Digital Commerce 360 Top 1000 database.

Chewy’s ties to PetSmart

Chewy board chair Raymond Svider — the chairman of private equity firm BC Partners — simultaneously serves on the board of PetSmart along with two other Chewy directors, Michael Chang and Fahim Ahmed. Chang and Ahmed are also partners at the UK private equity firm.

BC Partners wholly owns and controls PetSmart, and owns about 80% of Chewy’s common stock representing 98% of the voting control, an attorney for the companies said, pointing to public filings. That makes the two companies affiliates rather than competitors and likely exempts them from the antitrust law’s prohibition on overlapping directors, an attorney for BC Partners and the companies said.

Corporate boards under scrutiny

Nonprofit United for Respect focuses its labor advocacy efforts on companies backed by private equity. The group helped workers at Toys R Us and Art Van Furniture negotiate with private equity owners KKR & Co. and Thomas H. Lee Partners. More recently, it has set its sights on BC Partners and PetSmart, prodding the company’s public investors about worker conditions.

More than a dozen board directors have stepped down since the Justice Department began an initiative last year focused on so-called interlocking directorates. Federal antitrust law forbids individuals or entities from sitting on the board of directors for two companies that directly compete with one another.

The Justice Department’s first foray saw directors associated with private equity firm Thoma Bravo LLC step down from the boards of two public companies. On March 9, the agency said directors associated with Apollo Global Management Inc. resigned from the board of Sun Country Airlines Holdings Inc. after the Justice Department raised concerns about the private equity firm also holding board seats on rival Atlas Air Worldwide Holdings Inc.

Brookfield Asset Management Inc. also agreed to forgo a board seat with insurer American Equity Investment Life Holding Co. after the agency cited a potential antitrust issue since Brookfield also owns American National Insurance Service Co.

At a conference in Brussels last week, Assistant Attorney General Jonathan Kanter said the Justice Department has 17 active investigations into illegal board overlaps.

Brookfield Asset Management didn’t respond to a request for comment. Apollo declined comment on the Sun Country board resignations.

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The most popular online retail stories of 2022

April Berthene — Fri, 30 Dec 2022 19:02:09 +0000

As online retailers forge ahead into 2023, let’s take one last look back at online retail in 2022.

After three years of COVID-19, consumers continue to shop online with no signs of stopping. For the full year 2022, Digital Commerce 360 projects U.S. online retail sales will top $1 trillion for the first time, reaching $1.03 trillion. That would be a 7.7% increase over $960.44 billion in 2021.

But it was a tough year for online retail. Many retailers struggled to post year-over-year online sales gains, inflation hit record highs, surplus inventory levels soared and supply chain woes persisted.

But despite these challenging macroeconomic factors, online retailers continue to innovate and provide a top online shopping experience. Brands like L’Oreal used artificial intelligence to spot trends. A number of merchants committed to greater representation and continued support of the Black community. And retailers worked to make fulfillment more sustainable.

What’s more, online holiday sales may have been strong enough that merchants can put 2022 down in the win column. Over the Cyber 5 period (Thanksgiving through Cyber Monday) online sales reached $35.27 billion, a 4% year-over-year gain.

Below are more 2022 headlines, both news and in-depth features, that were the most popular on DigitalCommerce360.com.

Thank you for your readership in 2022. We look forward to another exciting year of online retail in 2023.

Most-read news stories in online retail

Amazon plans Prime Day-like sales event in October
The ecommerce giant will hold an October sales event similar to its annual Prime Day event, sources tell Digital Commerce 360.
Lowe’s, Home Depot earnings show ecommerce growth, similar omnichannel paths
Home Depot reported sales through its digital platforms grew approximately 6% for Q4 and approximately 9% for the year. That’s well below the 11.5% in Q4 and 18.4% for the fiscal year that Lowe’s reported.
Coronavirus pandemic adds $219 billion to US ecommerce sales in 2020-2021
The COVID-19 pandemic accelerated ecommerce growth years into the future. Other pandemic-caused shifts also have boosted ecommerce sales, such as inflation. Consumers paid $32 billion more online for the same amount of goods during the past two years, new data from Adobe finds.
Inside the battle against ecommerce fraud
Ecommerce fraud has gotten hard to detect and stop. More than half of fraud attempts against ecommerce retailers are now deemed “sophisticated.” That means professional criminals used state-of-the-art methods to circumvent anti-fraud systems.
Toys R Us is opening shops in all Macy’s stores
The in-store shops will range from as small as 1,000 square feet to 10,000 square feet for “flagship” locations in several cities. Since buying the Toys R Us brand in early 2021, WHP has worked to re-establish the brand’s physical and online presence.
Amazon locates its warehouses near big cities
Amazon has dramatically expanded its distribution network in the past decade, placing many new warehouses near population centers so it can deliver online orders quickly. Such major retail competitors as Walmart, Home Depot and Wayfair also have opened new distribution centers as they seek to match Amazon’s fast delivery options.
Will Crocs Inc.’s acquisition of Hey Dude Shoes help it reach its $5 billion goal?
A complementary union, Crocs looks to widen its reach beyond a loyal U.S. base by continuing to grow its ecommerce business worldwide with Hey Dude.

Most-read in-depth stories in 2022

The seven feature-length stories below received the most page views in 2022 on DigitalCommerce360.com. These articles, free to Digital Commerce 360 Strategy members, detail the topics our readers found most relevant this year. They include an in-depth piece on returns, how consumer brand manufactures need to remake their ecommerce playbook, True Religion’s path to profitability, how retailers can improve their marketing strategy on Amazon, how to manage customer data across platforms, the advantages of advertising on connected TV and how online retailers cater to their young, mobile shoppers.

Retailers look for answers as returns grow more complex and costly
Returns have become a major headache in ecommerce, cutting into profit and straining resources. The sheer volume of returns also puts additional pressure on an already overloaded supply chain pushing prices higher for shipping, warehousing and labor. Retailers are working hard to reduce the number of returns they receive. And they’re taking multiple approaches to doing so.
What’s the state of the ecommerce market for consumer brand manufacturers?
Brands were the fastest-growing merchant type in the Top 1000 last year. But the old playbook for digital natives isn’t producing the same explosive results as it has previously. With funding drying up as profitability takes center stage, digital natives will have to reassess their roadmap to compete.
A peek inside True Religion’s plan to reach $250 million in ecommerce sales by 2025
The iconic denim brand’s CEO and executive vice president of digital sit down with Digital Commerce 360 to discuss how it cut technology costs and overhauled its supply chain to get on the path to profitability. Now, it’s investing in digital tools to attract younger shoppers, such as a mobile app and buy now, pay later.
Marketing on Amazon is all about keywords and presentation
Retailers find different ways to stand out among competitors when selling on marketplaces.
There is more than one way to manage customer data
In an increasingly competitive ecommerce landscape, DTC retailers are figuring out how to reach new customers by linking up with larger merchants like Walmart or selling on marketplaces like Amazon — without losing too much control. The key is to take a step back and assess before diving into new ventures or technologies.
The cord cutters: Retailers move to appeal to consumers on streaming devices
As consumers cut the cord and stream entertainment, retailers are taking advantage of lower costs to reach an ever-expanding audience through CTV.
How online retailers cater to their young, mobile shoppers
Younger shoppers are on their phones and want to check out fast, with their preferred payment provider on-site or an app designed for their small screens. MVMT, Azazie and True Religion share how they fine tune their mobile shopping experience for young shoppers.

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One of the oldest ecommerce distribution firms will keep on trucking with Ryder

Mark Brohan — Fri, 04 Nov 2022 20:24:08 +0000

One of the best-known names in truck rentals and logistics has acquired one of the oldest and most prominent names in U.S. ecommerce distribution.

Ryder System Inc. — which manages nearly 239,000 commercial vehicles and operates more than 330 warehouses, encompassing more than 80 million square feet — has acquired Dotcom Distribution.

Maria Haggerty, CEO, Dotcom Distribution

Based in Edison, New Jersey, Dotcom Distribution was an early pioneer in U.S. B2B and B2C ecommerce. The company has been in business for 22 years and currently operates 12.8 million square feet of warehouse space. It also ships about 5.3 million ecommerce orders annually and manages more than 100,000 SKUs, the company says.

Terms of the deal were not announced. But Dotcom Distribution founder and CEO Maria Haggerty and the company’s operations team, totaling approximately 100 full-time employees, will join Ryder. Dotcom Distribution’s ecommerce and retail customers include FAO Schwarz, Bliss, and others.

Ryder gains Dotcom’s ecommerce experience

Steve Sensing, president, Supply Chain Solutions and Dedicated Transportation Solutions, Ryder System Inc.

“Dotcom Distribution has been doing e-fulfillment since ecommerce was still in its infancy,” says Ryder president of supply chain solutions Steve Sensing. “Maria and her team bring 22 years of knowledge, expertise, and experience in helping customers weather market fluctuations — that’s a big benefit for Ryder.”

Ryder, an 89-year-old Miami company, provides:

Full-service truck and vehicle leasing, rental, and maintenance
Used vehicle sales
Transportation management
Professional drivers
Ecommerce fulfillment
Last-mile delivery services

The company, which generated 2021 revenue about of about $9.66 billion, is making ecommerce logistics and last-mile delivery a key strategic initiative and growth opportunity. And it’s doing so primarily through acquisition and start-up financing.

In January, to grow and diversify its range of logistics services to ecommerce companies, Ryder acquired Whiplash for approximately $480 million in cash. Whiplash is a national fulfillment and logistics services provider.

Whiplash brings access to ports and gateway markets

Based in City of Industry, California, Whiplash provides ecommerce and fulfillment services to more than 250 brands. Whiplash operates 19 warehouses totaling 7 million square feet. It also provides access to “key port operations and gateway markets,” the company says.

In November 2021, Ryder also acquired Midwest Warehouse and Distribution, a warehousing, distribution, and transportation company based in Woodbridge, Illinois, for $284 million.

“Our two recent supply chain acquisitions, Whiplash and Midwest Warehouse and Distribution System, continue to perform well and were accretive to earnings. These acquisitions support our strategy to accelerate growth in our asset-light supply chain business,” says Ryder CEO Robert Sanchez. “Whiplash significantly grows our fulfillment network with scalable ecommerce and omnichannel fulfillment solutions, and Midwest expands our multi-client warehousing offering.”

The company’s investment arm corporate venture capital fund, Ryder Ventures, is investing $50 million over five years in companies creating solutions in ecommerce fulfillment, asset sharing, next generation vehicles, supply chain automation, and data analytics.

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Six ways to maximize the value of an Amazon brand in a tough market

Don Davis — Tue, 18 Oct 2022 19:08:09 +0000

The value of small brands that sell on Amazon soared in 2020 and 2021 as a slew of new companies, flush with $15 billion in investor cash, set off a bidding war for successful sellers. But the situation has changed dramatically in 2022 as a variety of factors forced many of these so-called Amazon aggregators […]

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The $24.6 billion Kroger and Albertsons deal would remake the online grocery industry

James Melton — Fri, 14 Oct 2022 19:50:01 +0000

Pending regulatory approval, the U.S. grocery business is about to get a player able to compete head-to-head with Walmart Inc. – online and offline. Today The Kroger Co. agreed to buy Albertsons Cos. Inc. for $24.6 billion.

Building ecommerce prowess is a crucial motivation for the deal. The proposed merger of The Kroger Co. and Albertsons Cos. Inc. would create a giant to become a “premier omnichannel food retailer,” according to the Kroger statement.

“By bringing together Kroger and Albertsons Cos.’ technology, infrastructure and digital and delivery service providers into a single seamless ecosystem, the combined company will be able to offer customers a more personalized and convenient omnichannel experience including in-store shopping, enhanced pickup capabilities, faster delivery times, and more capabilities to serve the customer anything, anytime, anywhere with zero compromise on quality, selection and affordability,” the Kroger statement said.

Melissa Burdick, co-founder and president of Pacvue, an online marketing consulting firm called the deal “undeniably a flag planted in the ground of the grocery wars.”

“The consolidation of Kroger and Albertsons’ store footprint will give them, not only in-store market coverage, but also one of the largest pickup and delivery networks in the country,” Burdick said. “This will keep them competitive with other big box retailers leaning into curbside pickup and alternative fulfillment.”

Online and overall market shares

Walmart.com had 27.4% of the online grocery market in 2021, followed by Amazon. (No. 1 in the 2021 Digital Commerce 360 Top 1000) with 23.1% market share. Combined, Kroger (No. 8 in the 2021 Digital Commerce 360 Top 1000) and Albertsons (No. 26) online market share was 19.6%, according to our estimates, with Kroger at an 15.9% market share in 2021 and Albertsons at 3.7%. But in the overall grocery market, Kroger and Albertsons had a combined 15.5% share. Walmart, the leader had a 19.7% share while Amazon’s share was just 2.5%.

Kroger’s online operation

Kroger, which offers online ordering for pickup and home delivery, has been building a series of automated warehouses using technology from United Kingdom-based Ocado Group. The goal is to make online ordering and fulfillment more efficient – and enable Kroger to move into new markets more easily.

As an example of what the automation can do, Kroger entered the Florida market for the first time in May 2021. But it didn’t open stores there and has no plans to. Instead, Kroger launched in the state as an online, delivery-only retailer under its Kroger Delivery banner. Kroger Delivery operates from a 375,000-square-foot automated customer fulfillment center (CFC) “hub” in Groveland, Florida. There are also smaller “spoke” locations in Tampa Bay and Jacksonville. A Miami-area site opened in June.

Kroger opened its first Ocado-powered CFC in Monroe, Ohio, in April 2021, followed by the Groveland, Florida, center and another in Forest Park, Georgia.

As of May 2022, Kroger anticipated opening 17 new robotic facilities in the U.S., including hubs and spokes, within 24 months. In April 2022, Kroger announced plans to hire 200 workers to bring web-only Kroger Delivery service to South Florida over the summer of 2022.

At Kroger’s hub sites, more than 1,000 robots move across a giant, three-dimensional grid, controlled by a technology that Kroger compares to air-traffic control systems. The grid, which Kroger calls The Hive, contains totes with products the bots fill with customer orders packed for delivery. The spoke sites, which measure from 50,000 to 70,000 square feet, extend the range of Kroger’s same-day and next-day grocery delivery operations.

Digital Commerce 360 estimates Kroger’s online grocery sales decreased 3.2% in 2021 but grew 109% since 2019.

Albertsons’ online operation

In June 2022, grocery chain operator Albertsons Cos., which also offers online ordering for pickup and home delivery, added ratings and reviews to its websites. The new capability allows the retailer’s online customers to weigh in on products like breakfast cereal, bread and cheese.

At the time, Jill Pavlovich, senior vice president of digital customer experience at Albertsons, said adding product reviews will help customers. They’ll be able to make better buying decisions, and it will encourage them to try unfamiliar products. It also will provide the retailer with valuable consumer data.

“Industry research tells us shoppers are more likely to purchase a new grocery item online if it has been reviewed by other customers,” Pavlovich said.

She adds that the online feedback helps Albertsons understand better “what delights our customers and where we can improve.” Pavlovich said. Customer feedback helps inform decisions, including which kinds of private-label products to offer customers.

Digital Commerce 360 estimates Albertsons’ online grocery sales grew 5% in 2021 and 276% since 2019.

Geographic reach

Walmart (No. 2) is currently the only U.S. grocery retailer operating in 50 states. Kroger currently operates stores in 35 states, while Albertsons has stores in 34 states and the District of Columbia. Combined, the merged company would operate in 48 states and the District of Columbia.

Kroger operates grocery stores under banner names including Kroger, Ralphs, Dillons, Smith’s, King Soopers, Fry’s, QFC, City Market, Owen’s, Jay C, Pay Less, Baker’s, Gerbes, Harris Teeter, Pick ‘n Save, Metro Market and Mariano’s. Albertsons operates grocery stores under banner names including Albertsons, Safeway, Vons, Jewel-Osco, Shaw’s, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci’s Food Lovers Market.

That increased geographic reach of the merged companies would make Kroger a more potent competitor with Walmart, said Ken Fenyo, president of research and advisory at Coresight Research, which specializes in retail and technology.

“This deal can make a lot of sense for Kroger. It creates a national footprint and scale — they currently haven’t got locations in Northern California, the Northeast and several other markets. Merging with Albertsons will better position Kroger to compete with Walmart and even [Amazon.com Inc.] on a national scale,” Fenyo said.

A merger could also generate cost savings, Fenyo said. He said the merger would eliminate overlaps in stores, tech investments, marketing spending and more.

“Perhaps the most important benefit would be the data. Kroger’s has a huge data set of national consumer behavior data, to which they apply analytics, personalization, and expertise to drive retail media, personalized marketing, and better internal decision-making. Data is the real gold in the deal,” Fenyo said.

From March 2006 to July 2008, Fenyo was corporate vice president of loyalty and digital at Kroger.

Deal details

This acquisition would create a U.S. grocery giant with almost 5,000 stores and annual revenue of about $200 billion.

The combination ranks among the retail industry’s biggest transactions in years. It evokes such deals as Amazon’s purchase of Whole Foods Market in 2017 for $13.7 billion and the $9.8 billion acquisition of Albertsons itself in 2006 by CVS Health Corp., Supervalu and an investment group led by Cerberus Capital Management. The New York-based private equity firm still owns almost 30% of Albertsons, according to data compiled by Bloomberg News.

Investors would receive $34.10 for each share in Albertsons, which includes a special dividend. That reflects a premium of about 33% to the closing price on Oct. 12, the day before Bloomberg first reported on the deal talks. The companies plan to sell as many as 375 stores through a spinoff.

The combined company would face a competitor of comparable size in terms of grocery sales: Walmart. During their most recent fiscal years, Kroger and Albertsons brought in a combined $209.8 billion in sales. Walmart’s U.S. stores generated $218.9 billion in groceries. That excludes sales at Sam’s Club, Walmart’s chain of warehouse stores.

“Kroger and Albertsons may be banking that this fact allows the proposed merger to proceed more smoothly than it otherwise would,” Bob Hoyler, senior consultant at Euromonitor International, said in an email to Bloomberg.

Cost savings

The companies said they would squeeze about $1 billion in “annual run-rate” cost savings within the first four years after the deal closes, net of divestitures. That would be thanks to improved purchasing, technology investment and optimized manufacturing and distribution networks. They will use $500 million of the savings to cut prices.

Excluding one-time costs, Kroger said the combination would boost earnings in the first year after closing and be “double-digit accretive to earnings by year four.” The transaction will generate total shareholder returns “well above” Kroger’s standalone model of 8% to 11%, according to the statement.

The retailer said it would plow $1.3 billion into improving Albertsons stores and invest $1 billion to continue raising employee wages and benefits. On a combined basis, the two companies currently have about 710,000 employees.

Kroger said it has $17.4 billion in fully committed bridge financing from Citigroup Inc. and Wells Fargo & Co. The companies said the deal includes the assumption of $4.7 billion in net debt. They expect the deal to close in early 2024. Kroger CEO Rodney McMullen would lead the combined company.

Bloomberg News contributed to this report.

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Kroger is said to be in talks to combine with rival Albertsons

Bloomberg News — Thu, 13 Oct 2022 16:33:41 +0000

Kroger Co. is in talks about a tie-up with rival Albertsons Cos. in a deal that would create a U.S. grocery giant, people familiar with the matter said.

The retailers could reach an agreement as soon as this week, the people said. They asked not to be identified discussing confidential information. No final decisions have been made and talks could still be delayed or falter, according to the people.

The exact structure and price of the deal was not immediately available. Any potential transaction, if agreed, may face antitrust scrutiny.

Representatives for Albertsons (No. 26 in the 2021 Digital Commerce 360 Top 1000) and Kroger (No. 8) couldn’t immediately be reached for comment.

Albertsons studying options

Boise, Idaho-based Albertsons has been studying options to boost growth. It has seen sales gains during the COVID-19 pandemic cool. At the same time, labor and logistics expenses have been rising.

Albertsons announced in February it would conduct a strategic review of its businesses. Albertsons includes the Acme, Tom Thumb and Shaw’s chains as well as its eponymous stores, that raised the prospect of potential disposals to help create value for shareholders.

Cerberus Capital Management still owns almost 30%of Albertsons. The New York private equity firm first invested in the retailer in 2006. Albertsons emerged from Cerberus’s portfolio when it held an initial public offering in 2020.

Cincinnati, Ohio-based Kroger, meanwhile, grew less sharply than Albertsons through the coronavirus pandemic. But Kroger held on to more of its gains.

A Kroger and Albertsons tie-up would face scrutiny

A potential tie-up would give the combined entity increased purchasing power, a sprawling shopper-loyalty program and greater heft in technology investments as online grocery sales increase. The resulting giant would be of comparable size in groceries to Walmart Inc. (No. 2), the U.S. market leader.

But any deal would face tough scrutiny from U.S. antitrust authorities, said Jennifer Bartashus, an analyst at Bloomberg Intelligence. The U.S. Federal Trade Commission is already subjecting mergers to close examination. And a Kroger-Albertsons deal would join two large players that directly compete in much of the country.

“This is the type of transaction that really looks good on paper, but the actual practicality of achieving regulatory approval by the FTC could be difficult,” Bartashus said. “If you think about the store bases of the two respective entities, there is a lot of overlap in very competitive markets.”

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PostEx buys rival to become Pakistan’s top ecommerce courier

Bloomberg News — Tue, 30 Aug 2022 16:05:57 +0000

Pakistani startup PostEx acquired logistics company Call Courier in a deal that makes PostEx the nation’s largest ecommerce delivery firm, according to its founder. PostEx provides courier and financing services to online merchants.

The combined entity will be handling about 50,000 orders a day, a scale that makes it profitable, founder Muhammad Omer Khan said without disclosing a value for the deal. The acquisition gives PostEx delivery operations in 500 Pakistani cities, compared with its previous base that consisted of just the three main ones.

“While others are going on the backfoot and slowing down, we plan to become even more aggressive,” Khan, who is PostEx’s CEO, said in an interview in the southern city of Karachi.

Pakistan has a population of about 230 million, making it the world’s fifth-largest nation. The majority of the population still hasn’t switched to online shopping. That provides room for the sector to grow and transactions to reach $10 billion before 2025 from about $6 billion now, Khan estimates.

More than 90% of Pakistan’s ecommerce deliveries are paid with cash. That results in long delays before the merchants receive the proceeds for the sale. PostEx offers these businesses upfront payments before deliveries, giving them liquidity. The financing services help PostEx stand out from the region’s other delivery companies, Khan said.

Khan started PostEx in 2019 with a friend. They went door-to-door to small shops to convince them to allow the company to handle their deliveries. The acquisition more than triples its number of employees to 2,400.

PostEx funding

The country’s startups raised more than $350 million in 2021, a record, with several global venture funds investing for the first time. PostEx raised $8.6 million last year in one of Pakistan’s largest early-stage funding rounds.

Pakistan’s ecommerce industry has lured the most investment in the recent funding rush. The majority of the population still hasn’t switched to online shopping, providing room for the sector to grow and transactions to reach $10 billion before 2025 from about $6 billion now, Khan estimates.

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