GigaOM » e-commerce

GrubHub, Seamless merge, creating one giant online delivery service

Kevin Fitchard — Mon, 20 May 2013 14:28:45 +0000

Chances are you’ve contemplated late-night pizza or Thai food delivery, you’ve run into GrubHub or Seamless (or both, depending on your city). Chicago-based GrubHub is the largest of the e-commerce engines that power independent restaurants’ delivery and takeout orders, and New York’s Seamless is among GrubHub’s biggest challengers.

Now the two have decided to merge and build the mother of all delivery and takeout portals. The companies said combined GrubHub and Seamless will have a presence in more than 500 cities and more than 20,000 restaurant clients. In 2012, the companies said they processed a combined $875 million in gross food sales, bringing in $100 million in revenue (though neither has taken the unusual step of accepting Bitcoin as payment like competitor Foodler.)

The companies didn’t reveal any financial terms of the deal, nor did they unveil a name for the combined the company. GrubHub co-founder and CEO Matt Maloney will become CEO of the merged entity, while Seamless CEO Jonathan Zabusky will become President.

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Head of Groupon Goods Faisal Masud is leaving to take a new job

Eliza Kern — Sun, 05 May 2013 01:01:56 +0000

Two months after firing its CEO, Groupon is facing another setback: The executive in charge of Groupon Goods, the part of the company that has provided a bright spot in an otherwise struggling daily deals business, has resigned, sources close to the situation have told us.

Faisal Masud, the vice president of Groupon Goods, will be leaving the company later this month, the sources said. One of the sources said he has taken a top position at Staples.

Groupon Goods, which was started in 2011, is one of Groupon’s newer businesses and is its first push into more traditional e-commerce. It sells discounted goods from companies like Dell, and is separate from Groupon’s traditional local coupon business. Masud was hired away from eBay in 2012 to help build Goods, which Groupon announced in April had reached an annual run rate of $2 billion in global billings. Groupon as a whole had $5.38 billion in gross billings for 2012, the company reported in February.

“As we’ve discussed before, growth of Goods … has impacted our overall margins as it has grown materially over the last few quarters, reaching an impressive $2 billion annual billings run rate in Q4,” then-CEO Mason said in the company’s fourth quarter earnings call in February.

The company’s stock has been pounded since it went public in late 2011 — at one point it was trading in the 20s, but more recently has fallen into the mid single digits. Part of the issue for investors has been questions about the reliability of the company’s accounting — last March, for example, Groupon had to restate its earnings after a higher-than-expected number of customers demanded refunds.

But also driving the downward pressure on the stock price is investor skepticism about whether the company can become more than a simply a daily deals site. Many analysts think that model has limited potential, because users can easily tire of the daily email blasts, and for merchants, the deals don’t necessarily translate into a greater number of loyal customers.

Masud’s job has been to help the company become a much broader e-commerce company, a “searchable marketplace,” as Groupon executives referred to it on a recent earnings call. Our sources said Masud’s departure was prompted by tensions between the emerging e-commerce side of the company and Groupon’s local-coupon roots. Before joining Groupon, Masud was head of global shipping and fulfillment for eBay, and before that spent five years at Amazon.

Groupon told us it had no comment. We also reached out to Staples, and will update the story if we hear back from them.

Groupon has been in the spotlight most recently with the high-profile departure of CEO Andrew Mason. Cofounder Eric Lefkofsky and fellow board member Ted Leosis have been named interim co-CEOs while the company searches for his replacement. The company will report its first quarter earnings on Wednesday. The stock closed at $5.84 on Friday.

Update: On Tuesday Staples announced that Masud had joined the company as executive vice president for global e-ecommerce. The full press release from Staples can be found here.

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Belly lands big national chains as loyalty platform customers, including McDonalds

Kevin Fitchard — Thu, 25 Apr 2013 17:01:21 +0000

Belly started out empowering local businesses to create loyalty programs of their own, allowing them to compete with the sophisticated customer retention campaigns of the big nationwide chains. But it turns out that those big chains are interested in Belly’s loyalty platform as well.

The Lightbank and Andreessen Horowitz-backed startup on Thursday revealed it is expanding its scope from small and medium-sized business to large enterprises. The company said it’s currently working with 40 national chains, which have installed its loyalty card scanning system in 500 locations. Belly said those chains collectively represent 40,000 restaurants and stores nationwide, though it didn’t reveal the names of the names of specific companies.

But a quick glance on Belly’s merchant map in Chicago reveals plenty of big names: McDonalds, Chick-fil-A, 7-Eleven and Domino’s Pizza among them. For instance, McDonalds is offering up rewards like a free regular fries or free cookie after accruing a specified number of Belly loyalty points.

Belly’s system is pretty simple. Belly members either order a universal loyalty card with a QR code or download the Belly app to their smartphone, which displays the QR code on screen. All merchants have an iPad set up at the register or other convenient location, and customers scan their card or app into the tablet to accrue points for every visit. Get enough points and you can pick prizes. Those can come in the form of free goods, discounts or sometimes more off-the-wall rewards, such as a personal serenade from the store’s owner.

Belly has attracted interest from businesses nationwide, but its hometown of Chicago remains its biggest market with more than a thousand locations using the Belly system. As a Chicagoan, I’ve seen Belly pop up everywhere. My wife and I use it to get free booze at our local liquor store, and we’re saving up our points so we can get a free cooking lesson from the chef of our favorite local restaurant Bistro Dre.

While I love the idea of unique tailored rewards programs for local businesses, it’s easy to see the appeal for Belly to go after the national chains. Chicago has many e-commerce companies that were founded on the principle of targeting small, local merchants, but they’ve been shifting their focus to the national retailers and brands.

For instance, fellow Lightbank startup Boomerang has abandoned its original local-business focus and to turn its peer-to-peer gifting service into a viral marketing platform for big brands like Ghirardelli and Starbucks. Even suffering e-commerce giant Groupon(grpn) (see disclosure) has strayed from its local business focus to offer an increasing number of daily deals for national chains.

Disclosure: The author’s spouse is employed by Groupon.

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Social shopping pioneer Modcloth plots mobile strategy for digital fashion

Eliza Kern — Sat, 20 Apr 2013 20:00:40 +0000

I’ve talked with a lot of companies recently about the challenges in making traditional shopping and e-commerce more social, and there’s one name that everyone mentions as the de-facto success in social shopping: Modcloth.

What started as a hobby around vintage clothing turned into a business led by husband and wife team Susan Gregg Koger and Eric Koger in 2006, and it has now become a dominant online fashion retailer known for its distinct style and vintage appeal. But what makes Modcloth unique is the way it’s continually married technology with fashion to build a strong social community around the brand, experimenting with everything from crowdsourced fashion to video hangouts with stylists to build the kind of user passion you see with companies like Lululemon or Nastygal.

Modcloth just launched its first native iPhone app on Thursday, and I sat down with CEO Eric Koger to talk about the company’s strategy when it comes to building a mobile audience and using social platforms to build its notoriously passionate audience. The company had just finished recording a Google Hangout in the office with Lumineers singer Neyla Pekarek, who wears Modcloth onstage, and Koger sat at the conference table with the company pug Winston on his lap.

“We’re very experimental in basically all that we do,” he said. “We put our customer first in the merchandise we’re bringing from the very beginning of the site, placing small bets on a wide assortment of things, and then figuring out what she really loved, and wherever possible bringing those items back in production.”

Modcloth CEO Eric Koger with the company’s mascot Winston the pug on his lap.

And the experimental approach applies to how the company uses technology as well. Modcloth started out with a website that was optimized for mobile, and said that still makes a lot of sense since the site sees so much referral traffic from Facebook (its top referring site) and Pinterest (its second-highest referrer). When a user finds an item through Pinterest, re-directing them to a native app was tough. So the company started on HTML, and just launched an iPad app in February. Now, the company is finally going native on iPhone.

Koger said it’s always a challenge to figure out how to serve up high-quality images of the different products on mobile while taking into account a user’s connection speed. But figuring out mobile is obviously important: the company has seen a 129 percent increase in mobile traffic over last year, and 178 percent growth in mobile revenue.

And one of the tricks to keeping sales strong? Modcloth is famous for its “Be The Buyer” program, which takes a sample from a designer and puts the photos online, then allowing users to vote on whether the company should produce the item — sort of like the original Kickstarter, but for dresses. And despite concerns from the fashion industry about putting samples out for the world to see (and potentially be copied), Modcloth has turned the program into a success. The company said sales are twice as high on the crowdsourced items as the regular ones.

“It’s a variety of things,” Koger said. “The invested community that helps to get it produced becomes sort of an advocate for the product, having that logo on the dress serves as a form of social proof, and it’s usually just a really cute product.”

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Bitcoins burning a hole in your pocket? Try ordering some takeout

Kevin Fitchard — Wed, 17 Apr 2013 22:04:11 +0000

You can already spend Bitcoins on hand-crafted goods on Etsy, and you can keep romance alive on OKCupid using the crypto-currency. Now, thanks to Foodler, you can order food with Bitcoin from more than 17,000 restaurants nationwide.

Paying for food online with Bitcoins isn’t new. Pizzaforcoins has famously set up a site that takes Bitcoins in exchange for ordering a pie from your local Domino’s. Some entrepreneurial food purveyors online, such as Bitcoin Coffee, also deal in the digital currency. (For a detailed explanation of how the Bitcoin economy works, check out my colleague David Meyer’s comprehensive post.) But what’s interesting about Foodler is its scope.

Foodler is an online delivery and takeout portal a similar to GrubHub that hosts menus and handles orders for restaurants in 48 states, and it has made Bitcoin another option for payment alongside credit cards, debit cards and cash on delivery. You can’t pay for a pizza or your mu shu pork order with Bitcoin directly to the delivery guy, but Foodler has set up an account portal that generates a unique deposit address and QR code, which customers can use to deposit their Bitcoins. Using the current USD exchange rate, Foodler turns them into FoodlerBucks, which can then be used to pay for orders and even tip through its online portal or mobile app.

It might sound like a marketing gimmick, but Foodler CEO Christian Dumontet said the company is firm believer in innovation, whether it’s technological, economic or, in the case of Bitcoin, both.

“We understand that Bitcoin users are a small, but influential, group of early adopters and Bitcoin orders will likely be a small percentage of all Foodler payments this year, but as early adopters ourselves, we are excited to support the community and help it grow,” Dumontet said in an email. “We were surprised to receive our first Bitcoin payment from a customer in San Francisco just hours after making it available in our system – prior to any kind of public announcement.”

Of course, given the recent nosedive in Bitcoin value, some people may be reluctant to part with their Bitcoins just yet – it would take four times the amount of Bitcoin to buy an $8 burrito today than it did last week. Still, Dumontet isn’t letting the volatility of the crypto-currency phase him. He said would Foodler would hold on to the some of the Bitcoins it does receive, instead of immediately cashing them in for U.S. dollars, and it plans to participate in the Bitcoin economy by seeking out vendors that accept the currency.

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Sector RoadMap: Content personalization in 2013

Mark Mulligan — Wed, 17 Apr 2013 14:54:59 +0000

Content owners, whether they are publishers, retailers, or marketers, are always looking for new ways to deliver a unique experience to their customers. We call this content personalization. Key trends in this area are led by a collection of technologies that we call post-programming curation. These technologies use the best of behavioral tracking, collaborative filtering, audience targeting, and dynamic content presentation.

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eBay’s PayPal and Magento join hands to offer a mobile payment service

Kevin Fitchard — Wed, 10 Apr 2013 16:00:01 +0000

When eBay bought Magento in 2011 it gained an e-commerce platform that merchants could use to create custom online stores, but eBay has largely kept Magento separate from its most famous e-commerce acquisition, PayPal. That’s now changing, though, as the two are announcing a partnership to integrate PayPal’s m-commerce and mobile payments technology with Magento’s service.

In an upcoming blog post Wednesday, PayPal CTO James Barrese said his company is creating two new extensions for Magento’s 150,000 merchants. The first, called In-Aisle Selling, hooks PayPal’s point-of-sale mobile payments service Here directly to a merchant’s store. Here lets a salesman to take a credit or debit card payment anywhere in the store with PayPal’s triangular magnetic reader, while Magento’s ordering and inventory system pulls down all purchase and customer details.

The second extension is called Order Ahead, which lets merchants set up shop in PayPal’s mobile app. In January, PayPal launched a pilot project with one of its key mobile payments customers, Jamba Juice. Customers could access Jamba Juice’s menu from the app, place an order while waiting in line or before they arrived — even make special substitution requests — and of course pay for their drink.

Barrese said the pilot was a success and now it’s expanding Order Ahead, starting with Magento merchants. Stores can use specialized templates to create their menus or catalogs and synchronize their opening hours and locations with PayPal’s ordering system. Merchants can then manage the pre-orders through a simple console available in the extension or directly integrate Order Ahead into their existing point-of-sale systems using Magento’s APIs. Customers can pick up their orders either by presenting their names, order numbers or the QR code on their e-receipts.

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What next for The Week? The content curator’s plans for the digital domain

Jeff John Roberts — Mon, 08 Apr 2013 12:30:16 +0000

When The Week launched in 2001, the Wall Street Journal asked if its owner was “mad” to take on famous weeklies like Time and Newsweek. Over a decade later, those publications are on the ropes, while the The Week has defied the odds to become profitable both online and in print.

In a recent interview, CEO Steven Kotok explained how The Week has bucked the fate of the troubled magazine industry, and how the publication plans to stay relevant in the future.

An American Aggregator

The idea of a “weekly” news magazine seems quaint in the age of the internet, but The Week has carved out a niche by distilling current events into a smart bundle of excerpts and opinions. It aspires to provide tight writing and snappy headlines that let readers feel in-the-know about news, culture and policy.

According to Kotok, this style of curation was considered a “weird thing” when The Week launched and the site had to persuade advertisers it was viable. Now, nearly publication does it one form or another – a situation that would seem to erode The Week’s strategic advantage. But Kotok says the publication is still growing its subscription base by catering to a distinct “psychographic” (read: affluent, educated folks) and by promoting a left-right political discourse.

“Kids buy it for their parents and vice versa. You might buy it for your conservative uncle or your liberal nice – it’s a way to get the other side in.”

The pitch appears to be working. The company says it has a rate base of 550,000 readers and annual revenues of about $50 million. It says it has had annual profits of between $4 million and $5 million in each of the last three years.

Most of that profit is coming from home subscription sales (fewer than 1% of its readers come by way of a newsstand) but, increasingly, The Week is looking to the web to make money.

Building the digital domain

With a few exceptions, like the Atlantic, legacy print titles have fared badly online – slow starting and caught between two worlds, they lose to digital natives.

In the case of The Week, Kotok admits it was late to develop a web strategy, but says its site is now profitable. Citing February comScore numbers of 2.3 million unique visitors, he says The Week has surpassed the Economist in two of the last three months.

The Week’s website doesn’t reproduce the magazine’s content but instead offers a stream of smart, snackable news bites along with “Guilty Clicks” from around the web (“Do we really need a drone hoodie”, Ke$ha, etc). The online fare is produced by a separate group of writers that represent about half of The Week‘s 29-person editorial team.

The site earns its keep by selling advertising to major companies like IBM, Xerox and Zurich Insurance but also serves as a vehicle to heavily promote its print cousin. Kotok credits the site with bringing in $1 million a year worth of magazine subscriptions.

On the tablet front, Kotok says iPad advertising and subscriptions (access is free for print subscribers) are producing almost $1 million in sales but that the Apple relationship is difficult. “It’s hard because we’re used to having a reader relationship but Apple controls that. Sometimes they promote you and sometimes they don’t.”

The future: commerce not a tin cup

Having discovered that readers are not put off by price increases — The Week‘s average annual price has risen from $30 to $50 in the last six years — Kotok says he is now focused on revenue rather than subscriber growth. Gift subscriptions, which are a big part of The Week’s business, will be an ongoing source of income but, in the long run, the company still confronts a magazine business that is in wide and permanent decline.

The Week also faces a more immediate challenge in the Post Office’s plan to end delivery on Saturday (the day the magazine arrives in readers’ mailboxes). Kotok says he can meet the Saturday challenge by shifting production schedules, but that the publication is also focusing on developing other revenue streams – a tactic that is becoming necessary to media outlets of all kinds.

For now, he says, that will not include a paywall or donations experiment of the sort being conducted by Andrew Sullivan. Instead, The Week is betting on ecommerce to compliment its editorial strategy. “We won’t put out a tin cup. Many of our subscriptions are gifts so our ecommerce will be too,” Kotok says, suggesting that The Week fans will buy each other t-shirts, books and more.

The Week’s ecommerce experiment will be helped by its 2011 acquisition of Mental Floss magazine, which has an online store that brings in 30% of its $10 million. Items for sale include smart people t-shirts (“Pi Hard,” “Spell Czech”) and quiz books. In its push into retail, the company will be joining the likes of Gawker Media and Thrillist, which are likewise trying to leverage content into ecommerce.

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Braintree opens up Venmo in-app payments to all iOS developers

Kevin Fitchard — Thu, 04 Apr 2013 14:00:53 +0000

When Braintree bought Venmo for $26.2 million in August what it got was a peer-to-peer payments provider that replicated the ease of a PayPal money transfer within its mobile apps. But two months ago, Braintree started tweaking Venmo’s technology as a payment identity tool on iOS, called Venmo Touch.

A beta project with three of its customers — TaskRabbit, HotelTonight and Wrapp – Venmo Touch allowed you to transfer credit card info from iPhone app to iPhone app, preventing customers from having to re-enter their credit card info every time they did business with a new brand or downloaded a new app. Instead, a customer could just hit the Venmo payment button and enter his or her credit card security code.

Now Braintree is taking Venmo Touch out of beta and offering it to all of its customers (though still only in iOS), and it’s using it as recruitment tool to get new ones. Traditionally Braintree has been the payments processor for e-commerce startups like Airbnb, Uber and Rovio, but now it wants to move into brick-and-mortar retail – or at least power the m-commerce transactions for traditional brick-and-mortar brands. Through a new partnership with Branding Brand — which builds mobile apps for the likes of American Eagle Outfitters, Costco and Crate & Barrel – it hopes to embed Venmo Touch in some pretty high-volume retail apps.

Chicago-based Braintree is already starting to see a big uptick in mobile transactions: $2 billion of its $8 billion in annual transactions are now coming from mobile apps and mobile websites.

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Braintree’s recent move overseas helps double its payments volume to $8B

Kevin Fitchard — Thu, 14 Mar 2013 15:21:54 +0000

E-commerce payments company Braintree kicked off its international expansion only in October, but overseas transactions now account for one-quarter of its business and are largely responsible for a doubling of its payments volume. Braintree is now processing $8 billion in transactions annually, CEO Bill Ready said, putting the Chicago startup at the same level as payments darling Square.

Of course, Square and Braintree have fundamentally different business models, but as they both evolve they find themselves competing head to head. While Square has focused on the small business owner looking to accept credit card payments, Braintree is strictly an e-commerce and m-commerce company handling payments for some of the best-known startups in the business, including AirBnB, Uber, OpenTable, LivingSocial, GitHub and Fab.com.

The model is much more similar to PayPal or Chase Paymentech, which dominate the low-volume and the high-volume end of the e-commerce business respectively. Braintree, however, is trying to bridge the gap between the two. By providing advanced features such as m-commerce, foreign currency processing and high-volume scaling, Ready said Braintree is able to support companies from their birth as tiny startups to their emergence as huge international e-tailers.

Braintree CEO Bill Ready

Braintree began processing foreign currency payments shortly after its launch in 2008, and that’s been one of the key drivers of its growth. AirBnB, which signed up with Braintree shortly after it launched, was able to expand quickly overseas. That allowed AirBnB to head off potential competition from foreign companies emulating its business model, Ready said.

“That’s one of the big reasons startups want to work with us,” Ready told GigaOM. “Startups need to go international much more quickly than they used to. But in order to accept international payments you used to have to go to [a provider] that required you to have hundreds of millions in accounts.”

Until last year, though, Braintree only processed transactions for U.S.-based merchants. In October, after raising a $35 million Series B round, it went overseas, extending payment support to online merchants in Canada and most European countries. It expanded to Australia in November, and Ready said it plans to launch in Switzerland, Norway and Turkey this week, completing its European footprint.

Ready said that international push as allowed it land key overseas customers like Finland’s Rovio, the creator of Angry Birds. In just six months, Braintree has grown that business to the point its processing $2 billion in annualized transactions on foreign shores, Ready said.

Braintree has raised a total of $70 million and is primarily backed by NEA and Accel Partners. Ready said it has 150 employees, most of which are in its Chicago HQ and in two satellite offices in San Francisco and New York City.

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