When asked about their experiences with marketplaces over the past year, online shoppers remain passionate about purchasing via Amazon’s marketplace. That was in play for 76% of survey respondents. As there is a lot of clutter on marketplaces from advertising and sponsorship, we wondered if shoppers understood the complexity of marketplaces. As it turns out, close to half (46%) admitted they didn’t know if a product was being offered by Amazon or another marketplace seller.

Who’s selling what? And where?

An array of U.S. marketplaces beyond Amazon, eBay and Walmart, including specialty marketplaces, are also capturing shopper attention. Some 35% purchased from Walmart’s marketplace and 39% ventured out, also buying from marketplaces beyond eBay, Amazon and Walmart. 31% of participants bought from specialty marketplaces. Chinese marketplaces saw 18% penetration, and 6% of respondents purchased from other non-listed marketplaces.

Shoppers are active in the community, leaving product reviews at Amazon and other marketplaces. Amazon was the biggest recipient (46%), while 31% took the time to leave reviews beyond Amazon.

Interest in same-day delivery is seen and will likely grow in the coming year as 20% of those surveyed make those “need it now” purchases. Though marketplace sellers strive for in-stock status, 18% encountered out-of-stocks, which seems somewhat reasonable coming off post-COVID supply chain woes.

A topic we wanted to cover in-depth this year was counterfeit products. Just 9% of respondents felt they received such merchandise.

With assortments on marketplaces perceived to be greater, shoppers may find marketplaces more attractive. Half of marketplace visitors believe they are finding larger assortments with 43% about the same and just 7% less.

Higher prices, longer delivery lead times and out-of-stock products were the biggest marketplace challenges shoppers faced

Marketplaces need to monitor everything from product pricing to shipping fees as customers are savvy and shop around. This is especially true as 39% felt that marketplace prices were higher than they remembered. Additionally, 26% believed shipping fees were higher as well.

Logistics can be challenging for online shoppers with heightened interest in fast delivery. Yet, longer delivery lead times were found among 26% of survey respondents.

Out-of-stocks were sometimes a factor for shoppers (22%) and may have driven them to explore alternative marketplaces. Customer service-wise, just 15% said that limited or longer wait times were seen as problematic.

For 24%, it was difficult to distinguish between going to sellers versus the main marketplace, which was seen as challenging. Marketplaces should assess awareness of where products are made and their authenticity, though. Only 18% discerned if products were made in the USA, and just 17% if products were counterfeit.

Shopper buying frequency: Social marketplaces get increased attention

Social marketplaces like Facebook or Instagram are attractive to online shoppers. Sellers should test them to see if audience fit makes sense. One in four online buyers shops these social marketplaces. It’s also a positive that 19% of survey respondents indicate being more comfortable with the online marketplace model. And 18% are conducting more online purchases via marketplaces.

Sellers must be aware of the clutter factor. Some 20% of survey respondents suggested they dislike it when retailers such as  Target and Walmart add marketplaces because the retailers’ sites become cluttered.

More online behavior changes include shopping directly on sellers’ websites instead of marketplaces (19%), increased purchasing on marketplaces (18%), trying new online marketplaces (17%), and shopping exclusively on marketplaces (6%).

The same number of respondents (20%) find the broader marketplace assortment appealing and believe marketplaces tend to have more inventory.

From a dollars and cents point of view, perceptions from 23% were that prices were often lower than other retailer sites. Meanwhile, 16% felt fees were often less than other retailer sites. Yet 14% found prices including shipping fees in line with other retailer sites.

And when it came to customer service, 13% suggested marketplace customer service is on par with the retail sites they shop (13%).

Marketplace adoption expands

Marketplace purchasing will likely be steady in the coming year as two in three online shoppers plan to purchase about the same from marketplaces. Comfort with the model sees one in four shoppers indicating they will be buying more or exclusively from marketplaces. Positively, only 10% will buy less, and 5% said they don’t buy on marketplaces.

Many shoppers will experiment when smartly tempted by marketplace sellers. The majority of shoppers (52%) are willing to buy from unfamiliar marketplace brands or sellers. The biggest opportunity is convincing those that are on the fence that a site or brand is a viable option and to gain their comfort among the 29% of participants on the fence.

Online marketplace exposure and purchasing often leads to direct purchasing, which is likely to be more profitable for the merchant. Over half of online shoppers surveyed indicate that they have ultimately purchased directly with that merchant. This added product visibility via marketplaces can serve as a strong customer acquisition vehicle, making it one of the reasons retailers are participating more on marketplaces.

The role of ratings/reviews in helping shoppers make smart selections has bottom-line impact for sellers. 96% of online shoppers read and make purchases based on ratings and reviews. Reviews always influence the majority (55%) when making purchases. Meanwhile, 41% occasionally see such an impact.

Thus, online marketplaces must make sure reviews are robust. Smartly positioning reviews within the shopping experience ensure strong viewership.

Marketplace shopping starts with better prices and free shipping, along with in-stock products that can be delivered fast

Online shoppers seek the fundamentals when choosing to shop at marketplaces over going directly to retail sites. Price is the driving factor, selection appreciated, and convenience a given. Topping the list of influences in driving online shoppers to marketplaces is better prices (52%) and free and discounted shipping (51%).

Delivery speed is also an important influence in selecting marketplaces. 41% of survey respondents refer to it in choosing a marketplace. Shipping efficiencies, at 25%, also were a factor.

34% of survey respondents see marketplaces, at their core, as more convenient ways to shop. For 25%, it may be the broader selection in a category and for 20% the influencing factor in a wider range of categories in one location. Meanwhile, 17% found they were ideal for repeat purchasing (17%). But more interesting to me is that they have a unique opportunity to help online shoppers find very specific items (34%) while also trying unique products (24%) that sways shoppers toward marketplaces.

Past experience is an important indicator of future purchasing. It served as an influence for 20% of those surveyed as well.

From a tactical perspective, ratings and reviews — and more comprehensive product information (14%) — power purchasing. Higher seller feedback and ratings were influencers for 25% of participants.

Shoppers have a preference for in-stock products, and 34% found it influenced their behavior.

Other marketplace tactics that came into play from an influence point of view included loyalty programs (19%) and mobile apps (18%). I’m surprised only 13% cited superior service. It should go without saying.

Top concerns related to online marketplace purchasing are logistics, fees, product authenticity and return limitations

Online shoppers want the products they purchase to be of top quality and as represented on the site. Encountering counterfeit products was top of mind for 35% of participants. At the same time, 30% cited issues around subpar product quality.

Because long shipping times can cause buyers to worry (39%), inventory and delivery transparency are welcome. 22% of these online shoppers expressed concerns that an online order would never ship.

Shoppers expect marketplace goods to come from trusted sellers. Some 30% had trepidation about non-U.S. sellers. Simultaneously, 29% worried about whether the seller was not reputable or certified.

Shoppers like to have flexibility in their return choices. Some 33% of surveyed online shoppers found a lack of return options a challenge. Having customer service and support available is a given. 28% of respondents cited it.

A lack of product or seller reviews concerned 27%. The validity and authenticity of product reviews also was an issue for 29%.

From the money and savings vantage point, 38% found shipping costs too high, while fraudulent business practices including counterfeit goods were on the concern list at 35%. Unexpected additional expenses such as sales tax (22%), finding U.S. products at lower prices (16%) and financing options not available (11%) also were on the minds of these shoppers.

Online marketplaces continue to have an opportunity to grow. Broad assortments and attention to the fundamentals — from price to selection — set the tone for success. I advise vigilance when it comes to them. Sellers must monitor the quality and authenticity of their products. Product reviews and information will continue to drive confidence, along with an uncluttered, search-friendly and efficient experience. Monitoring consumer behavior will ensure marketplaces are on track for success in 2023 and beyond.

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Namely, small businesses. More than 60% of the businesses that sell on Amazon are small and independent, Amazon says in a new report. Collectively, those businesses in 2022 sold more than 4.1 billion products — or an average of 7,800 products every minute — Amazon says.

Sales per small business store on Amazon averaged about $230,000 per store, according to Amazon’s new report, 2022 Small Business Empowerment.

Dharmesh Mehta, vice president, worldwide selling partner services, Amazon.com Inc.

“Selling in Amazon’s store has enabled independent sellers to employ an estimated 1.5 million people in the U.S.,” says Dharmesh Mehta, vice president of Amazon’s worldwide selling partner services. “And during the 2022 holiday season alone, Amazon customers purchased nearly half a billion products from small businesses in the U.S., leveraging Amazon’s significant investments in customer traffic, a trusted shopping experience and fulfillment and logistics capabilities that enable fast and convenient delivery.”

Amazon small business metrics

• In 2022, Amazon and its third-party lending partners lent $2.1 billion to independent sellers.
• The top small business categories include health and personal care, home, beauty, grocery, and apparel,
• The states with the most independent sellers are California, Florida, New York, Texas, and New Jersey.
• The fastest growing are Alaska, Washington, D.C., Mississippi, Maine, and Wyoming.

“While small businesses continue to thrive by selling in Amazon’s store, running a small business has never been straightforward,” Amazon says. “And this past year brought new challenges that businesses of all sizes had to navigate. The economy saw rising interest rates and inflation not seen in nearly 40 years. And many businesses continued to face supply chain issues because of the global pandemic and its aftereffects.”

Amazon.com Inc. is No. 1 in the Top 1000. The database is Digital Commerce 360’s ranking of North American web merchants by sales. It is No. 3 in the Online Marketplaces database, which ranks the 100 largest global marketplaces.

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In 2019, Black Wolf Skincare invested in fulfillment software from ecommerce fulfillment services vendor ShipHero. At the time, Black Wolf processed about 1,000 orders per month.

Alex Lewkowict, co-founder, Black Wolf Skincare

“By my calculation, even at our volume of 1,000 orders a month, we saved more than $2 in shipping costs [per order] using their ecommerce tool,” he says. The tool helped Black Wolf Skincare find the cheapest available shipping carrier, he says.

“The plan started around $1,800 a month,” he says.

Using ShipHero’s software tool “was a no-brainer for us that paid for itself right away,” he says.

Shipping price fluctuations

Another pain point was price fluctuations, Lewkowict says. The men’s skincare brand could no longer ship from its one warehouse. Transit times were too slow or too expensive to ship to anywhere in the U.S., he says.

By the end of 2020, demand grew to more than 17,000 orders a month, Lewkowict says. And by the end of 2021, orders averaged about 25,000 a month. This prompted the retailer to outsource its entire shipping and fulfillment processes to ShipHero, he says.

By December 2022, Black Wolf Skincare averaged more than 40,000 orders a month.

With ShipHero, Black Wolf Skincare could inbound ship directly into any of its warehouses. Black Wolf Skincare manufactures its products in Florida.

Black Wolf sends its products to ShipHero’s West Palm Beach, Florida, facility. ShipHero then distributes shipments across its network of warehouses and carriers to ensure the fastest delivery times. As a result, Black Wolf was able to reduce the time it takes to ship orders to customers.

“Our average shipping time to customers went from five plus days to under three days for the same cost,” Lewkowict says.

That includes next-day shipping to anywhere in Texas, Florida, Georgia, New York and New Jersey, he says.

ShipHero ships Black Wolf’s orders using local carriers, Lewkowict says. “Customer satisfaction goes up as wait times decrease,” he says.

“I think a lot of brands are relying on 3PLs to bring in expertise that isn’t their expertise,” says Maggie Barnett, chief operating officer at ShipHero.

“It’s really tough to run a 3PL,” she adds. Third-party logistics services (3PLs) are the outsourcing of ecommerce logistics processes to a third-party company like ShipHero. 3PLs handle inventory management, warehousing and fulfillment operations.

“Companies want to concentrate on making the best product possible, not know what a routing guide is or worry about just-in-time delivery or that UPS is limiting your pickups, et cetera,” Barnett says.

Selling on Amazon makes a difference

Black Wolf Skincare began as a direct-to-consumer brand. But in mid-2020, Lewkowict says it realized that the brand was losing sales by not selling on Amazon.com Inc.

“We were very against going on Amazon because we wanted to have value in owning the customer relationship,” Lewkowict says.

That viewpoint changed. A consultant told Black Wolf Skincare that consumers were searching for the brand on Amazon directly or clicking on Google ads and Facebook ads and then going to search for the brand on Amazon.com. But since Black Wolf wasn’t selling on Amazon, consumers opted for products by other Amazon sellers/competitors.

“Instead of finding our product on Amazon, they’d see competitor options that were also advertising using the same keywords,” Lewkowict says.

Black Wolf Skincare launched on Amazon in 2020. Amazon sales accounted for about 10% of Black Wolf Skincare’s overall sales, he says. Since then, that percentage has grown. Selling on Amazon has “added a tremendous amount of volume and revenue,” he says, without revealing more. The average order value for Black Wolf Skincare’s DTC website and Amazon store is about $65, he says.

Lewkowict says the men’s skin care brand has capitalized off Amazon traffic. Some customers only want to buy off Amazon, he says.

“So, whether they’re seeing our TV ads or a Facebook ad, they’ll always go to Amazon to comparison shop,” Lewkowict says. “Our strategy here is to encourage those Amazon shoppers to go and buy on Amazon. Traffic that comes off of Amazon helps our ranking [on the marketplace search results]. The more shoppers search for our products, the better our ranking.”

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The EU Court of Justice, the bloc’s top tribunal, dismissed Amazon’s challenge. Amazon cannot appeal the final ruling.

Amazon had objected to a European Commission decision allowing Italy to continue running its own probe into the “buy box.” That’s where Amazon highlights sellers of a particular product. Amazon objected after the EU’s antitrust arm started to examine the same issue.

The mass merchant last year settled the EU probe by offering a number of remedies, including a pledge to address concerns about the way its Buy Box for showcasing specific offers and Prime unduly favored its own retail business, including a promise to display a second Buy Box immediately underneath the first one.

Amazon is No. 1 in the 2022 Digital Commerce 360 Top 1000 database. The Top 1000 ranks North American web merchants by sales. It is No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

Stateside Amazon antitrust probes

The Federal Trade Commission has been looking at Amazon since 2019 over antitrust concerns with its retail business and cloud computing services.

The U.S. Federal Trade Commission revamped in June its Amazon antitrust probe. It shook up the investigative team, re-interviewing potential witnesses and asking questions about the company’s recent acquisition of MGM Studios, three people familiar with the probe said.

Other recent Amazon trouble

In March, an Amazon consultant pleaded guilty in giving sellers a competitive advantage.

Ephraim “Ed” Rosenberg was the final holdout among five U.S.-based defendants accused of paying off Amazon employees in exchange for confidential company data. Among other things, the data helped them steer business to some merchants and shut out their competitors.

Four other people have already pleaded guilty to the Amazon bribery scheme. Two of them have been sentenced to prison. One former Amazon employee who lives in India and allegedly accepted bribes was indicted but never arraigned.

The Amazon bribery scheme which began as early as 2017. It seemed plucked from a Hollywood script, with payments criss-crossing the globe via MoneyGram, PayPal and suitcases stuffed with cash sent via Uber.

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Amazon ranks No. 1 in the Top 1000 list of ecommerce retailers in North America, and No. 3 in the Online Marketplaces database. 

Amazon returns at UPS will no longer be free

Customers who drop returns off at UPS locations could be charged $1 per order going forward, The Information first reported. The fee will only apply if there is a Whole Foods, Kohl’s, or Amazon Fresh location closer to the order’s address than the UPS store. 

“We offer convenient, easy returns to Amazon customers, with one or more options for label-free, box-free returns at no cost,” a spokesperson told USA Today. “We always offer a free option for customers to return their item. If a customer would prefer to return their item at a UPS Store when there is a free option closer to their delivery address, a very small amount of customers may incur a $1 fee.”

Amazon will list some products as “frequently returned”

The online retailer also added a badge to some items warning customers that they are “frequently returned.” The Information first noticed the label on a record player and two dresses.

“We’re currently showing return rate information on some product detail pages to help our customers make more informed purchase decisions,” a spokesperson told The Information.

Amazon did not return Digital Commerce 360’s request for comment. 

Returns matter to customers, but they’re not the most important factor

A Digital Commerce 360 survey of over 1,000 consumers in August 2022 found shoppers regularly consider a potential return before they purchase. 54% take free returns into consideration, and 39% also look at the cost of a return. One-quarter of consumers said the timeframe is important.

It’s too soon to tell if Amazon customers will react negatively to the new policy, according to Michael Levin, co-founder and partner at research firm Consumer Intelligence Research Partners. 

“We expect it’s not a huge deal, though, and a very small percentage of marginal customers would react negatively,” he said. “Consumers decide first on cost and convenience of buying something, and think later, if at all, about how easy (or not) it is to return that thing.”

Some customers have already taken to social media to complain about the change, Business Insider reported.

The new policy keeps Amazon on par with the competition, Levin said.

“Many, many retailers charge customers for return shipping, although as far as we know, the major ones (Walmart, Target, etc.) don’t do it aggressively,” he said.

These changes around returns are a more transparent way for Amazon to be upfront about costs with customers, Josh Lowitz, also of Consumer Intelligence Research Partners, said.

“This move is similar to Amazon offering a dollar or two for accepting slightly slower shipping, or combining deliveries into a single delivery day. Amazon is letting shoppers know that they will share the savings, if a customer allows Amazon to operate more efficiently,” he said, by keeping prices lower for less expensive types of returns. Lowitz also pointed to Amazon’s policy of offering returned items for sale at reduced prices.

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Everybody’s doing it

On a positive note, all of those surveyed indicated they buy beauty products online. A look at the numbers suggests 70% of online shoppers buy beauty products online at least monthly (some going as far as buying daily). Furthermore, 31% of that group is buying online at least weekly. The remaining 30% purchase on an annual basis, so everyone has embraced the online channel.

Retailer segments play into online beauty product sales

Online beauty shoppers search for particular products and brands, taking advantage of a range of retailers to meet those needs. Each retailer segment has a role to play, though competing with Amazon and other mass merchants is challenging. Amazon tops the list of merchants shopped online at 59%. Meanwhile, mass merchants like Target and Walmart come in at 52%, and drug stores follow at 36%.

Amazon also tops the list of Top 1000 retailers. The Top 1000 is Digital Commerce 360’s database ranking the largest online retailers in North America by web sales. Walmart ranks No. 2, and Target is No. 5.

Amazon is also No. 3 in the Digital Commerce 360 Online Marketplaces database, which ranks the 100 largest global marketplaces.

Specialty beauty retailers are strong, as shoppers cited buying from both standalone choices at 29% and their partnerships with larger retailers (27%). With Ulta and Sephora partnering with major retailers like Target and Kohl’s, access to these products has certainly grown, and shoppers have taken notice.

Department stores have lost market share to other retailer sectors as shoppers change how they buy. One in four survey respondents reported shopping at them.

Direct-to-consumer brand shopping at 21% is meaningful, with 12% penetration among digitally native, vertically integrated brands (DNVBs), sounding a positive note for brands going direct.

New to our survey this year were marketplaces beyond Amazon, at 18%, and social media ads at 15%. Both should see gains among their respective audiences in years to come.

Dimensionality is the differentiator

Beauty buying online is multi-dimensional, from replenishment to experimentation and education, where execution can be a differentiator. The web is perfect for comparison shopping, and 36% felt it was easier to do that online. Shoppers also spend time learning about products and experimenting, helping to make new product sales viable with purchases taking place online and offline.

From an education and experimentation point of view, online shoppers were learners at their core in the following ways:

• Learn about new brands and products, and buy online: 30%
• Learn about new brands but buy in physical stores: 22%
• Experiment online when looking for new products: 22%

Given the nature of the beauty category, 34% report that most of their purchases are for replenishment. The significant loyalty to brands is critical for retention, as their loyalty to brands and products in the beauty category leads to frequent buying for 34% of participants. Another online driver is finding out-of-stock products in the stores. That was a reality for 31% of those surveyed.

Product detail pages are critical to buying beauty products online

Beauty is a feature-rich category, and online shoppers are hungry for product information.

Information of interest includes product details (56%) and the all-important product availability coming in No. 2 (55%). A list of ingredients is desirable for 48%, and 23% call out the ever-growing interest in vegan and cruelty-free products. Of course, imagery is not to be slighted, as 25% believe ample product images have a role to play.

Online shoppers appreciate saving money, embracing promotions and samples (27%) and gift with purchase promotions, a beauty mainstay at 19%.

Selection tools are playing an increasing role in profiling shoppers and assisting them to make smart selections. That includes the ability to profile beauty needs (22%), how-to guides or video tutorials (12%) and virtual try-on tools (11%)

Logistics will be top-of-mind, making in-store pickup (BOPIS, 17%) and curbside pickup (13%) options desirable. Mobile apps, which 12% noted, will undoubtedly play a role, as does the retailer’s social media presence at 9%.

Shoppers find value in using tools to assist in beauty purchasing

• Color-match tools: 35%
• Virtual try-on tools: 21%
• Augmented/virtual reality: 10%

Customer service sees online shoppers embracing chats with beauty experts along with other outreach. Chatting with a beauty expert (23%) topped the list. Others of interest among beauty buyers were sending a question to a retailer (17%), sending an image to a retailer (15%) and booking an in-store beauty appointment (13%).

Beauty subscription boxes see adoption and this bodes well for future purchasing as 20% tried this model. Lastly, 15% watched a livestreaming beauty event while 17% downloaded a retailer’s mobile app (17%).

Shopping perks and experiences

Saving money and perks matter most to price-conscious online shoppers and that meant rewards program perks for 36%. 26% gravitate to brands believing they would be more likely to offer free shipping. And speaking of shipping, 21% of respondents felt they would get their products quicker.

A strong beauty shopper experience starts with trust, broad assortments and comprehensive content all serving to inspire the shopper. Our results revealed that 23% had greater trust in brands, while 22% enjoyed the broader product assortments seen among these companies. Along with the trust factor, 22% had less concern for counterfeit goods among brands.

The experience also came into play, with 19% choosing brands for their more comprehensive content and the complete brand experience. They cited a more authentic experience (16%) and the fact that brands were more transparent about both the values and products they sell (14%). That same 14% cited they enjoyed being part of the brand community, with 12% finding the sites more inspiring.

The biggest influence

There are a broad array of influencers when it comes to selecting beauty products, but friends come first, where just under half (46%) acknowledge their role. That compares with just 15% who pointed to celebrity influencers.

Beyond influencers, video is a strong factor in beauty selection. That starts with YouTube (32%) and continues to how-to videos/tutorials (23%) and livestreaming events (11%).

Retailers must have strong content across social media to optimize the impact of influencers. The numbers here came in for Facebook (31%), Instagram (29%) and TikTok (26%), respectively.

Beauty subscription services can play an influential role as well among the 16% who had signed up for them.

Reasons to walk into a store

Store visits persist.

When asked about when they choose to go to a physical store, almost half of online beauty buyers said they need their products quickly (47%) or want to see the products in person (46%). Other tactile reasons include in-person testing (36%) and simply getting a full sense of the brand experience (16%). Some 20% also enjoy getting advice from in-store experts.

Shoppers also will seek out the store channel when they want to save money. That includes in-store sales or promotions for 39% and not wanting to pay for shipping for 37%. Omnichannel needs, from pickups to returns, prompt visits. They included an option to do both of these for 18% of survey respondents.

20% want to support local retailers post-COVID, along with attending an event at 10%.

There is a trust factor as well for 14% who are more confident buying in person. 12% expressed a concern that online shopping will mean receipt of counterfeit goods.

Does it look good?

Next we dove into how a site presented itself. First and foremost, the site look and feel is most important to online beauty buyers. 41% of survey respondents cited that element. Other important presentation factors were accurate swatches that aren’t photoshopped (35%) and model diversity (22%).

Thus, branding from sustainability to one’s story and stances including diversity, trade, social and charitable elements continue to see interest among shoppers. It is nice to see sustainability rise to the top of this group, and therefore it deserves a mention.

Online shopper sentiment was as follows:

• Sustainability practices: 25%
• Brand’s story: 24%
• Diversity stance: 21%
• Fair trade views: 18%
• Social and political views: 18%
• Charitable giving: 15%

Long-term value

It’s powerful to see that more and more shoppers care about sustainable beauty brands.

78% of these online shoppers factored in sustainability when purchasing beauty brands. Some 19% already buy these products (19%), and some are even willing to pay extra (18%). The largest segment (28%) is those who care about sustainability but do not yet put their pocketbooks on the line to seek out such products. 13% don’t want to pay more. The opportunity is to convert those who care and haven’t yet converted to becoming customers.

In many ways, beauty is one of the easiest categories for online consumption. Shoppers can get comprehensive information to guide their decision-making on first-time purchases. Then, replenishment kicks in and buying is almost on autopilot. Online shoppers have many choices, so the brands retailers put forth, the features, and tools they employ to guide their customers will ultimately determine their market share.

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The payments company was valued at $50 billion in a fundraising round just last month. It said volume climbed 26% to $817 billion in 2022, according to the firm’s annual user letter published on April 5. That compares with 60% in 2021, when Stripe and many of its rivals saw rapid growth as consumers did more shopping online during the pandemic.

“We feel like, given the climate that it was, we’re very happy,” John Collison, who along with his brother Patrick founded the company, said in an interview. “2020 and 2021 were such fun years with ecommerce in particular. You had such a maelstrom of activity, and there was no way that would continue.”

The letter confirms parts of earlier reporting in the run-up to Stripe’s moves last month to raise $6.5 billion to cover a looming tax bill for veteran employees with expiring stock options.

The $50 billion valuation it received was well below the $95 billion it was last valued at when it raised $600 million from investors in 2021. The company’s results — and its accompanying drop in valuation — mirror many of its peers in online payments, including PayPal Holdings Inc. and Adyen NV.

Stripe focuses on enterprises

While Stripe helped startups take payments over the internet during its earliest days, it’s been targeting larger firms in recent years and now counts Amazon.com Inc. and Zoom Video Communications Inc. as customers.

Amazon is No. 1 in the Top 1000 database. The Top 1000 is Digital Commerce 360’s ranking of North American web merchants by sales. Amazon is also No. 3 in the Online Marketplaces database, which ranks the 100 largest global marketplaces.

More than 100 companies now handle more than $1 billion in payments with Stripe every year and that set of customers has grown by 50% annually since 2018, Stripe said in the letter.

For years, large retailers have viewed the technology they need to take payments as a cost. Now, Collison said, they are considering how that technology can boost revenue.

That’s because ecommerce players increasingly struggle with conversion rates, which measure the percentage of visitors to a website that actually make a purchase. On average, that rate hovers around 3% for most ecommerce sites, according to McKinsey.

“Checkout pages across the internet are riddled with needless friction. 10% of payments still fail for no good reason when transacting online,” the brothers said in their letter. “At Stripe, we obsess over fixing this.”

In its letter, Stripe analyzed what it called “breakout startups” or new companies with unusually high revenue growth.

The company’s data show Silicon Valley may be losing its allure for startups: In the three years leading up to the pandemic, more than 60% of these so-called new breakout startups were based in San Francisco. Since 2020, just 46% were.

“San Francisco remains the clear leader,” John Collison said in the interview. “But what we’re seeing is that there is a less San Francisco or Bay Area centrality in tech.”

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Walmart Inc.’s job cuts at five U.S. ecommerce fulfillment centers will affect more than 2,000 positions, according to regulatory filings, though impacted employees may find other roles at the company.

The losses include more than 1,000 positions at a warehouse in Fort Worth, Texas, the state’s workforce commission said April 3. The retail giant is also anticipating a reduction of almost 600 jobs at a Pennsylvania fulfillment center, 400 in Florida and about 200 in New Jersey. It plans for more reductions in California.

The regulatory filings add precision to the staffing cuts at the Walmart warehouses, which the company confirmed in March without quantifying. Walmart is also growing in some areas as it adjusts its stores and fulfillment centers to handle more online orders, a spokesman said in an email. That may enable the retailer to reshuffle some workers to other jobs rather than cut them.

As a result, the net impact on total employment at Walmart, the largest private-sector employer in the U.S., remains uncertain. The company has avoided the kind of mass layoffs underway at rival Amazon.com Inc., which said in March it would eliminate another 9,000 jobs in addition to 18,000 recent cuts.

Amazon is No. 1 in the Digital Commerce 360 Top 1000 database. Walmart is America’s largest overall retailer and is No. 2 in the Digital Commerce 360 Top 1000.

California’s fulfillment warehouses show signs of slowdown

All across Southern California’s Inland Empire, the warehousing mecca that hosts Amazon and Walmart facilities, there are signs of trouble.

Just last year, the region was hiring workers faster than California and the rest of the U.S. It emerged as a top beneficiary from the supply-chain turmoil that clogged warehouses and led to record imports through North America’s largest port complex near Los Angeles.

Now, the gush of cargo that once flowed through the 27,000-square-mile area, stretching from east Los Angeles to the Nevada and Arizona borders, has dwindled to almost three-year lows and jobs are harder to come by.

It’s an ominous sign for California, already reeling from the tech collapse and a banking crisis. And it’s a glimpse into what may lie ahead for the rest of the U.S. as it stares down a potential recession.

California is the world’s fifth-largest economy. It projects a mild recession is possible, giving way to concerns that the pain would hit the Inland Empire’s blue-collar workforce especially hard.

“When the party ends, then you know the drop will be even faster,” said Johannes Moenius, an economist at the local University of Redlands. “The more warehouses we have today or tomorrow, the steeper the fall.”

Supply chain data

Data released April 4 showed U.S. supply-chain activity fell to the lowest in at least 6.5 years in March, with low transport prices for goods driving the decline in the Logistics Managers’ Index.

The Inland Empire, an epicenter of California’s 2008 housing crisis, occupies a strategic location just east of the twin hubs of Los Angeles and Long Beach. It collectively handles about $500 billion in goods annually.

With a population of almost 5 million, it delivered a remarkable increase in transportation and warehousing jobs during the pandemic, peaking at 215,000 last year and marking a 40% surge from February 2020.

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