Commerce chronicles: Mar 18, 2024

Meta’s new AI model may shift online commerce, Beyond acquires Zulily’s assets, Birkenstock preps for growth and UPS talks supply chain megatrends. Plus, welcome to Wayfair’s Wayborhood.

In this week’s news, learn how Meta’s new AI model might change digital commerce, hear what UPS’s Bill Seward has to say about supply chain trends and find out when Beyond plans to relaunch Zulily. Plus, Wayfair gears up for its first large-format store, Cap Hill Brands merges with Juvo+ and Birkenstock eyes global expansion. Visit our blog every Monday for a roundup of the latest commerce news.

Meta’s new AI model signals a potential shift in online commerce

Meta is heavily investing in artificial intelligence (AI) to enhance its platforms.¹ Tom Alison, head of Facebook, revealed that Meta's technology roadmap until 2026 includes developing an AI recommendation model to power video recommendations across all Meta platforms, including Reels and traditional longer videos. Previously, Meta used separate models for different products, but now aims to consolidate them into one powerful recommendation engine. This initiative involves substantial investments in Nvidia graphics processing units (GPUs) to improve the performance of AI models.

The company has already seen success with its new model architecture, resulting in an 8% to 10% increase in Reels watch time on the core Facebook app. Meta is now in phase 3 of re-architecting its system, aiming to validate the technology and implement it across multiple products. The ultimate goal is to create a single AI model to power the entire video ecosystem, leading to more engaging and relevant recommendations. Additionally, Meta is exploring the integration of generative AI into various aspects of its platforms, including digital assistants for personalized interactions within Groups and the core Feed. This ambitious AI strategy demonstrates Meta's commitment to leveraging advanced technology to enhance user experiences and engagement across its platforms.

The new model has the potential to change things for online commerce: Enhancing Meta's recommendation algorithm could relieve advertisers of having manually identifying their target audience.² This improvement would level the playing field, enabling smaller-budget companies to access the same highly targeted recommendations enjoyed by larger corporations. By automating the audience identification process, Meta's upgraded algorithm could democratize advertising, offering equal opportunities for businesses of all sizes to reach their desired audience effectively and efficiently.

Beyond acquires Zulily’s assets, planning a Q2 relaunch

Beyond, Inc., the parent company of Overstock and Bed Bath & Beyond, has acquired the intellectual property and brand assets of Zulily, an ecommerce pioneer known for its flash sales.³ This strategic move aims to bolster Beyond's presence in the off-price market, offering customers better value on desired products. The acquisition aligns with Beyond's commitment to the off-price sector, enhancing its margin profile and customer base.

Beyond acquired Zulily's intellectual property assets, including website, trademarks and customer database, for $4.5 million, funded with cash on hand. By integrating Zulily into its business model, Beyond anticipates reengaging Zulily's 18 million customers and leveraging synergies across product categories. The new Zulily site is expected to be operational by the end of Q2 2024, contributing to Beyond's revenue goals without additional fixed expenses.

“Bringing the trusted Zulily brand into our asset-light business model allows us to offer furniture and home furnishings, apparel and footwear, jewelry and watches, among other categories that are also core competencies of our off-price Overstock business with flash sale deal pricing,” said Dave Nielsen, CEO of Overstock. “The ramp with Zulily is simple, as the website and mobile app are already built and available in the Shopify environment. We will be able to integrate it seamlessly into our back-end systems for order fulfillment, logistics, and operations to be handled by our existing teams.” Beyond, Inc., headquartered in Midvale, Utah, focuses on ecommerce, connecting consumers with products and services to enhance their homes.

UPS’s Bill Seward pinpoints three supply chain megatrends

Bill Seward, President of UPS Supply Chain Solutions, highlighted three key megatrends during a keynote session at MHI’s Modex tradeshow: trade lane shifts, technology's potential to enhance customer outcomes and healthcare’s growing importance for UPS.⁴ He noted a shift in sourcing and manufacturing, with Mexico surpassing China as the largest US trading partner. Companies are adopting a “China Plus” strategy, expanding operations into Vietnam, Thailand, and India. Seward emphasized the need for businesses to reassess their supply chain approach due to significant changes in the last few years. He also emphasized the benefits of automation, citing reduced injuries and increased employee retention in UPS's most automated facilities. Additionally, UPS sees significant growth potential in the healthcare sector, aiming to become a prominent healthcare supply chain company over the next 50 years under CEO Carol Tomé's leadership.

Wayfair preps for first large-format store opening with new “Welcome to the Wayborhood” campaign

Wayfair Inc. has launched its new brand campaign, "Welcome to the Wayborhood," signaling a significant evolution for the company.⁵ The campaign features a refreshed logo, a revamped jingle, new celebrity partners, and more. It aims to celebrate individuality and self-expression in home decor, showcasing the diverse styles and personalities of Wayfair customers. The campaign will roll out across all consumer touchpoints, including TV spots, social media activations and giveaways totaling $250,000. Additionally, Wayfair will host its first-ever “Pinterest Creator Tour” to celebrate unique home living styles.

The company is also set to open its first large-format store in Wilmette, Illinois, inviting consumers to experience its brand evolution firsthand. Collaborating with Havas Chicago, Wayfair aims to establish itself as the ultimate destination for diverse home decor styles, emphasizing inclusivity and self-expression in the “Wayborhood.”

Ecommerce company buyer, Cap Hill Brands, merges with product developer Juvo+

Seattle-based Cap Hill Brands, a company that raised over $250 million to acquire and expand ecommerce businesses, has merged with Juvo+, a firm specializing in developing and selling its own online products.⁶ The merged entity, now known as Infinite Commerce, will be led by Steve Neufer, the founder of Juvo+. Kevin Saliba and Jason LeeKeenan, co-founders of Cap Hill Brands, assume roles as executive co-chairmen. This merger comes amidst a slowdown in ecommerce growth post-pandemic and increased seller fees on platforms like Amazon. Similar roll-up firms have faced challenges recently, with Amazon aggregator Thrasio filing for bankruptcy. Cap Hill Brands aimed to create a next-generation consumer packaged goods company by acquiring existing brands and enhancing them with centralized operations and technology. The combined company, with over $250 million in annual revenue and 50 brands, is profitable and employs around 400 people globally. The merger is expected to bolster product development capabilities, leveraging Juvo+'s expertise in identifying market gaps and developing solutions.

Birkenstock looks to double production capacity as it eyes global growth

Birkenstock, the renowned footwear brand, is embarking on an ambitious plan to double its production capacity within the next three years, investing heavily in capital spending towards this endeavor.⁷ Most of the company's 80 million euros in capital expenditure during the period ending Dec. 31 were allocated to this capacity expansion. CEO Oliver Reichert highlighted the recent refitting of factories in Portugal and Görlitz, Germany, which bolstered the company's supply capabilities to meet growing demand.

Despite a temporary reduction in margins due to these investments, Birkenstock anticipates long-term gains through qualitative growth across regions and channels. The added production capacity has already contributed to a notable revenue increase of 26% year over year, supported by expanded product categories. With plans for further production growth, including doubling its current capacity, Birkenstock underscores the benefits of in-house production, enabling greater control over quality and operational efficiency. The company's reliance on European-sourced raw materials ensures supply chain reliability and adherence to rigorous quality and environmental standards. This strategic approach, coupled with efficient inventory management practices, positions Birkenstock to swiftly respond to market demands, capitalize on sales opportunities and maintain a competitive edge in the footwear industry.