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These are the 10 biggest retail media network updates of 2024 so far

Mary Meisenzahl — Wed, 01 May 2024 14:41:22 +0000

Retail media networks have become one of the hottest topics in retail in 2024. Interest at the highest levels can be seen in growing investment. In addition, retailers are increasingly leveraging retail media networks to monetize their customer bases and create advertising opportunities for brands that they sell.

The growth story this year shows no signs of slowing down. For evidence, look no further than major retailers — including Walmart, Home Depot, Saks and others — that have expanded, rebranded, created or otherwise shared new plans for their retail media networks.

More could be coming. In December 2023, Deloitte published a poll finding that 64% of retailers said they plan to implement a retail media network by the end of 2024.

What are retail media networks?

Retail media networks are a type of advertising platform where retailers can sell ad space on their own digital channels to third parties. Advertisers can target their ads using the retailer’s first-party data on customers, including information from loyalty programs. Ads can be placed on retailers’ websites, within mobile apps or in stores via screens and displays.

Retail media networks also open up a new revenue stream for retailers.

Here are the most important developments so far in 2024.

1. Albertsons works with Criteo

Albertsons Media Collective, the advertising piece of the grocery chain, is working with commerce media platform Criteo to expand in-store retail media offerings for advertisers. Criteo is helping Albertsons develop new ad formats, like sponsored video and commerce displays, it said.

Albertsons Media Collective can use a combination of first-party data, in-store sales and other shopper information to give advertisers better ad-targeting abilities.

Albertsons is No. 24 in the Top 1000, Digital Commerce 360’s ranking of North America’s leading retailers by online sales.

2. Instacart uses Google shopping data for CPG partners

Instacart announced in January that it would make Google Shopping accessible to Instacart advertisers.

“Instacart’s closed-loop platform and first-party retail media data are critical differentiators for CPG brands,” said Laura Jones, chief marketing officer of Instacart. “Today, our team works with more than 5,500 brand partners to help them grow their businesses and drive incremental sales. With our collaboration with Google, we’re now able to layer our valuable retail media data over Google Shopping ads’ capabilities to enhance audience signals for our CPG partners’ campaigns off of Instacart,” she said.

Instacart is one company experimenting with retail media networks.

The grocery delivery company also debuted ads on Caper Carts. Instacart described them as AI-powered smart carts that will make personalized recommendations through advertisements. Recommendations will be based on the time of year, ongoing promotions, and other products already in the customer’s cart, Instacart said.

3. Macy’s Media Network recruits VP from Walmart Connect

Macy’s hired Michael Krans as a vice president in March who is in charge of running the Macy’s Media Network. Krans spent the two years prior at Walmart Connect, Walmart’s retail media network.

The Macy’s ad network collaborates with advertisers across Macy’s and Bloomingdale’s, helping them target the retailer’s customers. The goal is to lead to discovery and brand awareness among Macy’s customers. It launched the network in 2020.

“Macy’s Media Network is one of retail’s premier platforms for advertisers helping them to connect with highly engaged customers across Macy’s and Bloomingdale’s, giving marketers a host of opportunities to more effectively leverage their media campaigns,” Max Magni, chief customer and digital officer, said in a statement.

Macy’s ranks No. 14 in the Top 1000.

4. Lowe’s and Google team up on a retail media solution

In March, Google announced a retail media solution in partnership with Lowe’s.

The beta uses Google’s Search Ads 360 product to facilitate retail media campaigns. The program extends advertisers’ reach to new third-party channels beyond the retail media network’s owner.

“With self-service, retailers will be able to selectively share first-party audiences with their brand partners in a privacy-centric way, without exposing user-level data,” Google project manager Ewan Fisher said at the time. “This lets brands reach high-intent shoppers with relevant ads, increasing performance while respecting consumer privacy.”

Google is also looking for future retail partners, he added.

Lowe’s is No. 11 in the Top 1000.

5. Home Depot rebrands its ad operation as Orange Apron Media

Home Depot relaunched its retail media network as Orange Apron Media four years after it first formed. The name is a reference to uniforms its employees wear, and an attempt to differentiate the network from the proliferation of other retail media networks across the industry, Orange Apron Media vice president Melanie Babcock told Digital Commerce 360.

Advertisers can purchase ad space on Home Depot’s website, including on banners and product carousels and in promotional emails. In select stores, they can also buy ads to display on in-store TVs and end caps.

Home Depot currently reports a few thousand supplier advertisers. It plans to double that number over the next few years, Babcock said.

Home Depot is No. 4 in the Top 1000.

6. Chase brings banking into the retail media network game

Chase ventured into the retail media network space with Chase Media Solutions in April. The digital media business will give brands a way to connect with Chase’s 80 million customers, it said. It said Chase Media Solutions is the only bank-led media platform of its type, with advantages over the more typical retail media networks.

“Like retailers, we have first-party data and a dedicated audience,” Rich Muhlstock, president of Chase Media Solutions, said in a statement. “But what sets us apart is the unrivaled scale and insights from our customers – having long-served as a trusted guide for their financial decisions. Chase reaches across brands, merchants and shopping verticals, providing a comprehensive view of purchase behavior; this strengthens the degree of personalization, helping brands deliver offers that stoke consumer interests.”

Initial partners include Air Canada, Solo Stove, Blue Bottle and Whataburger.

7. Walmart outlines growth plans for Walmart Connect

In early April, Walmart shared updates and goals for Walmart Connect, its advertising business.

A few of the many changes coming to Walmart Connect include:

Greater on-site display access
Advertising for complementary brands that don’t sell through Walmart
Media partnerships with Roku and TikTok
Self-service capabilities for in-store advertising
Better analysis tools

The retailer has made other moves to grow its advertising business, including with its proposed acquisition of Vizio. Walmart could use data from Vizio’s 18 million active users to improve ad targeting for Walmart Connect.

Most recently, it announced an integration with the advertising technology platform Infillion in Mexico. The partnership will allow Walmart to offer its advertisers in Latin America elevated media plans optimized with artificial intelligence (AI), it said.

Walmart Connect generated about $3 billion in sales last year and is growing quickly. In Walmart’s fiscal fourth quarter report, chief financial officer John David Rainey said sales increased 22% year over year.

Walmart is No. 2 in the Top 1000. It is also No. 9 in the Global Online Marketplaces Database, Digital Commerce 360’s ranking of top online marketplaces by third-party gross merchandise value (GMV).

8. Saks creates luxury retail media network

Saks announced the launch of Saks Media Network to connect customers with digital advertisers. The ecommerce retailer said it will be one of the first retail media networks in the luxury retail space.

Saks said it will use the company’s “iconic brand, rich first-party customer data and robust traffic of over 435 million annual site visits,” to increase the revenue of brands that sell on its website through sponsored product ads and display banners.

Several prominent brands that sell through Saks are already using the Saks Media Network, it said, including Stuart Weitzman and Rag & Bone.

Saks’ retail media network also strengthens its relationship with the brands it sells, the retailer said. Its in-house media team creates custom strategies for retailers to drive business to their brands.

SaksFifthAvenue.com and SaksOff5th.com are owned by Hudson’s Bay Co. The parent company is No. 26 in the Top 1000.

9. Best Buy partners with CNET

Best Buy announced a new agreement with tech news website CNET to integrate the publication’s recommendations and content across the Best Buy website, stores, and mobile app.

The consumer electronics retailer called it a “new retail media model between a media publication and retailer.” Advertisers can share ad spaces across the two companies, leveraging the audiences of both across the funnel. They have a combined 50 million unique visitors monthly, Best Buy said.

“This partnership sets a powerful precedent for how content and retail media brands can collaborate to bring more opportunities to both consumers and advertisers,” said Lauren Newman, executive vice president of revenue at CNET. “With a focus on data-driven insights, we’re introducing a new standard to help brands expand audience reach and measure the impact across what was previously a fragmented digital media ecosystem.”

Best Buy first launched its retail media network, Best Buy Ads, in 2022. It ranks No. 8 in the Top 1000.

10. T-Mobile announces a retail media network

T-Mobile Advertising Solutions, the company’s ad business, will add a retail media network to its portfolio, it said. The network will extend across 20,000 screens in more than 11,000 T-Mobile stores across the U.S., reaching 58 million consumers each month. Advertisers can reach an additional 7 million consumers each month through the company’s T Life loyalty app, it said.

Finally, T-Mobile also announced a partnership with streaming company Plex to expand its connected TV (CTV) reach. Advertisers can use Plex’s free, ad-supported video on demand to reach consumers with relevant ads, T-Mobile said.

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Ecommerce aggregator Thrasio sees a better life after bankruptcy

Paul Demery — Wed, 28 Feb 2024 21:57:04 +0000

Thrasio Holdings Inc., a startup in the business of buying and restructuring brands for online sales on Amazon and other marketplaces, is forging a new financial course for its own operations.

Launched in 2018, Thrasio since then has “paid over half-a-billion dollars to sellers of 200-plus brands,” the company says on its website.

We will be better equipped to support our brands, scale our infrastructure and enable future opportunities.

Greg Greeley, CEO

Thrasio

Greg Greeley, CEO, Thrasio

But to keep its aggregator strategy working under a severely weakened financial position, Thrasio said today it had filed for Chapter 11 bankruptcy protection and announced a restructuring support agreement with its creditors that “will eliminate approximately $495 million” of its debt and defer all interest payments in the first year after emerging from bankruptcy. The restructuring agreement covers about 81% of Thrasio’s revolving credit facility lenders and about 88% of its term loan lenders.

In addition, Thrasio said it has received commitments from lenders for up to $90 million in new financing to buoy its ongoing operations. “This infusion of new capital is expected to provide sufficient liquidity to support the company throughout this process and beyond,” Thrasio said in a statement.

Thrasio’s bankruptcy case is in the U.S. Bankruptcy Court for the District of New Jersey.

Thrasio CEO Greg Greeley said that, over the past year, the company had “made significant progress transforming the business and advancing our objectives to introduce hundreds of brands to millions of customers.”

Brand categories range from Kids to Culinary

Thrasio deals with merchants across several product categories, including Home, Cleaning, Kids Activities, Culinary, Outdoor and Fitness.

Thrasio’s brands include Beckham Hotel Collection and Veva in the Home category, Giggle ‘N Go and Chalkstatic in Kids Activities, and Willow & Everett and Thirteen Chefs in Culinary.

In a letter to Thrasio’s customers, Greeley said: “Over the past year, we have made significant progress to transform the business while focusing on sustainable profitability. The steps we are now taking will bolster our financial foundation so that we can further advance our objective to introduce hundreds of brands to millions of customers.”

Thrasio also said it expects to receive within days approval of several motions filed with the court seeking authorization to support ongoing operations, including paying without interruption employee wages, salaries and benefits.

The company’s bankruptcy proceedings came a few years after Josh Silberstein, one of Thrasio’s co-founders, said the aggregator made a profit of $100 million on 2020 revenue, according to TechCrunch. Silberstein is no longer with the company.

Promising a more positive course

In addition, TechCrunch notes that Thrasio said in 2021 that it had raised $1 billion at a company valuation of up to $10 billion, a valuation that secondary capital market firm Forge Global figured was $4.5 billion by 2022.

But Greeley promises that Thrasio is heading back to a more positive and steady course.

“Thrasio is one of the largest third-party sellers on the Amazon marketplace,” he said in the letter to customers. “With a strengthened balance sheet and new capital, we will be better equipped to support our brands, scale our infrastructure and enable future opportunities. Ultimately, these actions are designed to empower our brands to better serve customers.”

Thrasio has retained Kirkland & Ellis LLP as its legal counsel, Centerview Partners as financial advisor, and AlixPartners LLP as restructuring advisor. Court filings and other information related to the bankruptcy proceedings are available through a website administered by Thrasio’s claims agent, KCC LLC.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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PIM vendor Pimberly raises $5 million in funding

Paul Demery — Tue, 27 Feb 2024 20:41:18 +0000

Eyeing increased demand among B2B and retail companies for technology that manages their product data and digital marketing assets across ecommerce channels, United Kingdom-based Pimberly doubled its customers in the past two years while expanding its workforce and entering the U.S. market with a New York office.

Now it’s ready to push further ahead with 4 million British pounds (US$5 million) in new funding, bringing its funding-to-date to over £14 million (US$17.8), Pimberly said yesterday. It plans to upgrade its PIM and digital asset management (DAM) technology platform and expand in its already growing presence in the U.S. and European markets.

Pimberly says its client base includes such companies and brands as Cotton Traders, Dover Saddlery, Footasylum, Havey Nichols and JD Sports.

Martin Balaam, CEO, Pimberly

“The leading ecommerce businesses now sell on multiple marketplaces around the world, which means they have to list their products on numerous different sites and in different languages,” Pimberly founder and CEO Martin Balaam says. “Our product helps them to enrich their product information with more relevant data, images, videos and 3D visuals, and improve the customer’s shopping experience.”

The funding is from NPIF—Mercia Equity Finance, which Mercia manages as part of the Northern Powerhouse Investment Fund. Mercia also contributed its own funds.

Will Clark, a managing director at Mercia Ventures, says “The North West of England has built a strong track record for ecommerce, which stems from its role as a center for the mail-order catalogue industry. Pimberly builds on that tradition and … has been expanding steadily and has created a strong foundation in the U.S. market. This latest investment will help [Pimberly] accelerate its growth and take the business to the next level.”

The Northern Powerhouse Investment Fund project is supported financially by the European Union, using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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A new digital product suite spans the B2B transaction lifecycle

Paul Demery — Tue, 30 Jan 2024 18:19:02 +0000

Balance Payments Inc. has introduced an integrated software suite designed to help B2B sellers manage their sales process from customers’ order placement to settled payment.

“While working with brands and marketplaces over the past year, it became clear that the inefficiencies and costs of business payments were impacting their profit margins,” Balance CEO Bar Geron says. “Tackling this problem required going beyond the point of purchase. This is why our solutions now optimize across the transaction lifecycle, from order placement to payment settlement.”

Bay Fastening Systems, an industrial products distributor, is using Balance technology to help grow its digital marketplace, BaySupply.com, Michael Eichinger, Bay’s chief operating officer, says in a press release announcing the new Balance suite.

“We were able to grow our digital channel in ways we didn’t know were possible,” he says. He adds that the Balance suite offers “product flexibility and ability to work with our existing business processes.”

The Balance product suite includes:

Digital Trade Credit – Includes AI-enhanced credit reviews for payment terms, with an integrated checkout application and invoice payments.
B2B Payments – Supports a variety of payment methods, including payment cards and bank ACH transfers, for omnichannel and global transactions. Includes products such as buyer accounts payable tools, automated reconciliation and dashboard reporting.
Marketplace OS – Provides online marketplaces with products that provide multiple payment and financing options for buyers and payouts to third-party vendors.

Balance’s new product suite follows other payments technology applications it launched last year. These other applications include international digital financing and payment services developed with Europe-based Hokodo Services Ltd. and a buyer portal and dunning management tool for managing receivables and collecting late payments.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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The learned lessons of B2B marketplace funding

Patrick McGovern — Tue, 19 Dec 2023 15:58:13 +0000

Patrick McGovern

At Bowery Capital, we have spent years studying industry-focused B2B marketplaces and have been actively investing in these businesses for the last decade. Like all early-stage investors, we look towards public comparables to get a sense of how the companies we are evaluating will be valued at scale.

If you want to raise VC dollars to supercharge growth, you need to go after a really big end-market to have a shot at a successful ‘venture scale’ exit.

Reviewing public outcomes helps us to better underwrite which marketplaces we should back when evaluating seed-stage investment opportunities. Looking across the landscape of publicly traded marketplaces, there are three that tend to be viewed as comparables for today’s startup B2B marketplaces looking to raise venture dollars: ACV Auctions, Xometry, and Freightos.

ACV Auctions is a marketplace for automotive transactions that matches wholesale buyers and sellers of used automobiles (think of them as a modern alternative to in-person auto auctions).
Xometry is a marketplace for on-demand specialty manufacturing; they connect companies that need certain items manufactured on short notice — typically prototypes — with a vast network of SMB manufacturing shops with which Xometry has vetted and established relationships.
Freightos is a marketplace for air cargo that matches shippers (typically freight forwarders) with airlines selling cargo capacity. These airlines are a mix of specialized cargo carriers and well-known passenger airlines with a side business focused on cargo.

Marketplaces are typically valued on a multiple of net revenue — this is because it is very difficult to value them on gross merchandise volume systematically, as take rates (the amount of money a marketplace makes for enabling online sales transactions) can vary wildly from marketplace to marketplace, which means the same GMV figure may result in wildly different net revenue outcomes.

PUBIC VERTICAL B2B MARKETPLACES

The current generation of vertical B2B marketplaces trade at an average EV/Net Revenue (enterprise value divided by net revenue) of ~6.5x. I would caution this multiple was closer to ~5.2x when I ran this same exercise a few weeks ago for internal purposes, so we may be taking a snapshot at a particularly generous point in time in terms of valuation.

But assuming this 6.5x EV/Net Revenue multiple holds, what does this mean for founders who want to go the venture route to scale their B2B marketplace? My biggest takeaway is that if you want to raise VC dollars to supercharge growth, you need to go after a really, really big end-market to have a shot at a successful ‘venture scale’ exit — let’s call this something in the $500 million – $750 million EV range for argument’s sake.

As an investor, I have seen B2B marketplaces with take rates ranging from less than 1% to just south of 30%. These take rates tend to vary based on how managed a marketplace is and what that particular industry will tolerate giving up to a middleman. Most startups we see raising venture dollars claim that they will be able to command a take rate around the 8-12% range at a steady state. For simplicity, let’s just say 10%.

10% Take Rate B2B Marketplace Outcomes

Assuming a 10% take rate and today’s EV/Net Revenue multiple of 6.5x:

At $500 million in GMV and $50 million in net revenue, your marketplace would be valued at $325 million EV.
At $1 billion in GMV — no small feat — and $100 million in net revenue, your marketplace would be valued at $650 million. Given the amount of paid-in capital that is likely required to reach this $1 billion GMV mark, this valuation is on the low end for a venture-backed outcome.
To achieve a $1 billion EV at exit, a B2B marketplace with a 10% take rate would need $1.5 billion in annualized GMV at today’s multiples.

However, let’s also note that 10% is a higher take rate than two of the three public marketplace comparables put forward in this piece. ACV and Freightos have an implied take rate of approximately 5% and 3%, respectively. Xometry’s implied take rate is much higher largely due to how much more managed it is than either ACV or Freightos.

So, let’s re-run these same calculations, assuming a 4% take rate at scale.

4% Take Rate B2B Marketplace Outcomes

Assuming a 4% take rate and today’s EV/Net Revenue multiple of 6.5x:

At $500 million in GMV and $20 million in net revenue, your marketplace would be valued at $130 million EV.
At $1 billion in GMV and $40 million in net revenue, your marketplace would be valued at $260 million EV.
And to reach a unicorn exit, your marketplace would need a whopping $3.85 billion in GMV.

These different scenarios illustrate the importance of commanding a healthy take rate; otherwise, the GMV required for a big outcome can be almost prohibitive in some sectors.

So what are some lessons for founders from this valuation exercise?

Make sure the vertical you target is large enough to reach a few billion dollars in GMV. At Bowery, we have recently been gravitating towards marketplaces in large global markets, investing in a chemicals marketplace (SourceForce), a heavy equipment marketplace (Spectinga), and a steel marketplace (Reibus). There are many valid reasons B2B buyers/sellers will avoid a marketplace model, so you will never capture all of the transaction activity in a given segment. Given this reality, you need to build your marketplace in a large category where you can be doing billions of dollars in GMV even if you are not the primary way industry participants transact. If you are building a marketplace for a sector like chemicals or steel, this growth strategy is doable, but if you are too verticalized you will never get to the kind of GMV numbers required to reach a venture-scale outcome.
B2B marketplaces that serve categories responsible for several percent of GDP are ideal for a venture-backed approach. This is why so many trucking marketplaces have been able to scale up; freight is a huge part of the U.S. economy, and you can get to a GMV figure north of $500 million while still being a relatively small player in the overall category. The most common reason we pass on marketplaces is the size of the sector they serve — many founders make the mistake of going after too narrow a vertical, where GMV will never be large enough to get to a >$100 million net revenue figure.
You want to build in a category with average order values (AOVs) are on the high side. There is why we see so many B2B marketplaces in sectors like automotive and heavy equipment — it is much easier to reach $500 million or $1 billion in GMV selling $20,000 tractors or $30,000 cars than it is by cobbling together tens of thousands of $500 transactions.

About the author:

Patrick McGovern is a senior associate at Bowery Capital, a venture capital firm that specializes in business software. Prior to Bowery, McGovern worked as an independent consultant advising early-stage B2B SaaS and marketplace businesses. He can be reached at patrick.mcgovern@bowerycap.com.

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Choosing payment cards or net terms in B2B checkout

Paul Demery — Fri, 08 Dec 2023 21:45:58 +0000

Nearly three-quarters, or 72%, of B2B buyers prefer sellers that offer their preferred payment method, and more than half say net terms is their leading way to pay, payments technology company TreviPay Inc. found in a survey of 300 global B2B buyers.

Murphy Research conducted the survey for TreviPay between May 17 and June 2.

To address such B2B buyers’ preferences and help merchants attract and engage a broad range of customers, TreviPay launched this week a payments system that combines multiple payment options. The options include making payments upfront with payment cards, ACH bank transfers, and mobile wallet services or deferring payments through net terms and invoicing.

Dan Zimmerman, chief technology officer, TreviPay Inc.

“As enterprises continue to evaluate their digital transformation efforts, there is still an opportunity to innovate the online B2B payments experience to eliminate checkout friction and increase conversions,” Dan Zimmerman, chief technology officer, said when TreviPay announced its new payments offering. “Through one comprehensive checkout solution, merchants can rely on a single payments vendor to accept multiple payments modalities and consolidate reporting across payment types.”

He adds that by offering multiple payment types through a single vendor, TreviPay expects to simplify payments management for companies that want to grow among customers with small as well as large average order values, including smaller companies that may not qualify for net terms extended over 30, 60 or 90 days and rely more on payment cards and bank transfers to process payments.

TreviPay has also introduced technological capabilities designed to increase customer loyalty, including:

Billing groups and sub-tiered accounts, or “parent-child” account hierarchy, with customized billing and payment options and individual credit limits for each account.
Contract price verification: Sellers can define customer pricing tiers, including SKU-level pricing details that TreviPay cross-references against contract pricing.
Customized customer support: Sellers can offer customers such perks as more attractive net terms based on their sales volume or expectation of entering more valuable contracts.
Customer portal upgrade: Along with improved navigation, TreviPay is making current and historical invoice and payment data available for both sellers and buyers to manage and analyze transactions. It makes this data available either through API connections or downloads from the cloud-based Snowflake data storage service.

Zimmerman says the typical deployment time for the “all-in-one” payment platform takes two to four months, though sometimes longer, depending on a company’s technology team. For credit card transactions, TreviPay charges fees of about 2% to 2.5% of the value of each transaction. Net terms fees can range more widely, from about 1% to 3.5%, depending on such factors as term length.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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Price cuts coming for accepting online debit?

Jim Daly — Thu, 30 Nov 2023 16:23:31 +0000

Much to the delight of merchants that accept debit cards for purchases and the dismay of banks that issue them, the Federal Reserve Board in late October proposed to cut regulated interchange for the first time since 2011.

Any merchants with regulated debit volume are going to see some benefit if the proposal is finalized in its current state.

Christian Johnson, senior global advocacy manager

CMSPI

There’s big money involved. Interchange is a fee set by card networks— Visa Inc. and Mastercard Inc. dominate the U.S. debit market, but there are 13 in all — charged to the merchant acquirer and paid to the issuer of a card used in a particular transaction. The acquirer—a bank or processor that provides card-acceptance services to merchants — typically passes the cost on to its merchant clients, and it’s a major source of expense. Interchange fees from debit and general-use prepaid cards totaled $31.59 billion in 2021, up 19.1% from 2020, spurred partly by the Covid-19 pandemic that powered an ecommerce boom from millions of newly shut-in consumers.

“Any merchants with regulated debit volume are going to see some benefit if the proposal is finalized in its current state,” Christian Johnson, senior global advocacy manager at CMSPI, an Atlanta-based consulting firm specializing in payment card cost issues, tells Digital Commerce 360.

The public comment period ends in February

The Fed reports payment card networks in the United States processed 92.11 billion debit and general-use prepaid card transactions valued at $4.26 trillion in 2021. Card-not-present transactions, now dominated by Internet purchases but also including phone and mail orders, totaled 29.54 billion to account for nearly a third — 32.1% — of debit volume. CNP debit transactions averaged $64.50 in 2021, well above the average $37.64 card-present debit sale, according to the Fed.

The changes will take effect sometime, possibly months, after a 90-day comment period ends on Feb. 12, 2024. The comment period started on Nov. 14 when the Fed published its official proposal in the Federal Register, the journal of the executive branch.

The so-called Durbin Amendment to 2010’s Dodd-Frank Act, the sweeping law Congress passed in the wake of the 2008 financial crisis, empowered the Fed to regulate interchange received by debit card issuers with more than $10 billion in assets. The ranks of what the Fed calls “covered issuers” include such familiar names as Bank of America, Wells Fargo, U.S. Bank, Chase, and Citi, and dozens of others. Transactions from covered issuers totaled 56.19 billion in 2021, some 61% of all debit purchases. (All of the Federal Reserve data cited in these two stories come from the Fed’s 2021 surveys of payment networks and 163 covered issuers, the most recent available.)

The Fed’s Regulation II, which implements the Durbin Amendment, currently sets a per-transaction interchange cap of 21 cents and 0.05% (five basis points) of the sale, plus another 1 cent for debit issuers that meet certain fraud-prevention standards. That cap, which hasn’t changed since Reg II took effect in late 2011, applies to both card-present and CNP transactions.

Now, the Fed is proposes lowering the interchange cap to 14.4 cents plus four basis points of the sale while increasing the fraud-prevention adjustment to 1.3 cents. On a $50 debit sale, the cap would decline from 24.5 cents to 17.7 cents, a 27.8% reduction.

Next: Will merchants actually benefit from the Fed’s proposed price reduction?

Jim Daly is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy.

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A new option emerges in cross-border B2B payments

Jim Daly — Tue, 21 Nov 2023 00:05:07 +0000

For many B2B merchants — especially small and mid-sized ecommerce sellers eyeing potentially lucrative markets outside their home countries — accepting payments and the inability to offer credit options are just some of the many hassles that make international business daunting.

I expect partnerships like Balance and Hokodo to become more common in the future, as the B2B financing market has long been neglected and is in need of innovation.

Meng Liu, senior analyst

Forrester Research Inc.

But a new service from U.S.-based Balance Payments Inc. and Europe-based Hokodo Services Ltd. could make international commerce easier for merchants by supporting net term financing, a business equivalent of buy-now, pay-later (BNPL) options that have become popular in business-to-consumer payments in recent years.

“This collaboration establishes a one-stop shop for payment terms, so that global B2B companies can now effortlessly offer flexible payment terms to customers across Europe and North America,” the companies said in a joint statement. “As merchants prioritize growth and attract more customers, offering favorable payment terms is a strategic approach to achieving this goal.”

Replacing paper invoices with a digital system

Sean Last, director of partnerships, Balance

Balance and Hokodo are replacing paper-based invoicing with digital systems that can offer so-called net term financing with various options, such as payments due in 30 or 60 days after the sale. “Eighty percent of payments are on net payments,” Sean Last, Balance’s director of partnerships, tells Digital Commerce 360. But while widely available domestically, net term payments are less common in cross-border transactions.

Founded in 2020, New York City-based Balance set out to streamline B2B payments, including cross-border transactions. The company, which offers a range of payment services, developed application programming interfaces to make invoicing and related tasks easy to carry out digitally, and it lined up financial partners enabling it to extend credit to merchant customers.

Balance went shopping for a partner to help it offer international services, and it found one in London-based Hokodo, which bills itself as a provider of BNPL solutions for B2B payments. “Being able to work with them … felt very natural,” Last says.

The first company to use the joint Balance-Hokodo service is France’s FoodoMarket, a food marketplace for restaurants and caterers that is expanding into the U.S.

A ‘real challenge’ to offer payment terms to foreign buyers

“As we scale internationally, it’s been a real challenge to offer payment terms to buyers in new regions,” FoodoMarket CEO Eric Nivoix said in a statement. “The unique relationship between Hokodo and Balance means that global marketplaces like ours can take our operations across the world without impacting the customer experience.” A FoodoMarket spokesperson could not be reached for further comment.

Hokodo will service the European merchants while Balance will do the same for the U.S. ones, according to Last. In a typical financing transaction, a merchant could select a 60-day payment option, with Balance or Hokodo providing the full amount to the seller immediately and taking over collection responsibilities.

“By de-risking the merchants, they’re able to serve new clients,” Last says. “It allows them to focus on other parts of the business.”

Balance has developed an API-based risk-assessment system that uses in-house and public data to determine how much credit to make available for each buyer, according to Last. “We can usually approve up to $50,000 automatically,” he says.

Credit decisions on larger transactions usually can be made within 24 hours, he adds. Besides term financing, Balance provides revolving credit options. Last didn’t disclose specific costs for sellers and buyers, but says merchants pay “competitive” fees.

Courting a ripe B2B market

A recent survey of 200 merchants and marketplaces in the U.S., United Kingdom, Germany and France for Balance and Hokodo found that 65% of respondents consider offering payment terms vital for influencing business growth. The research also found that only 16% of B2B sellers find it “very easy” to offer payment terms to buyers in new countries.

Thus, Balance and Hokodo may have found a ripe market. “Their core offering of offering net terms to buyers is a valuable one in B2B,” says Scott Reynolds, senior associate at TSG (also known as The Strawhecker Group), an Omaha, Neb.-based payments consulting and research firm. “It has the potential to be one plus one equals three.”

Meng Liu, senior analyst, Forrester Research

Senior analyst Meng Liu at Cambridge, Mass.-based Forrester Research Inc. adds in an email message that “I expect partnerships like Balance and Hokodo to become more common in the future, as the B2B financing market has long been neglected and is in need of innovation…B2B buyers are happier with flexible payment terms and the ability to access credit; B2B sellers are more satisfied when they can get paid at the very beginning of a transaction at a low cost.”

With their partnership just beginning, Last says Balance and Hokodo are concentrating on trans-Atlantic markets for now before any potential expansion to other areas.

Jim Daly is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy.

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Digital trucking firm Convoy blames ‘perfect storm’ for shutdown

Paul Demery — Fri, 20 Oct 2023 18:48:23 +0000

Convoy Inc., a startup valued last year at $3.8 billion after raising $260 million in funding, is shuttering its core business operations after running into a “perfect storm” of freight industry challenges, founder and CEO Dan Lewis said yesterday.

Dan Lewis, CEO, Convoy Inc.

“We are in the middle of a massive freight recession and a contraction in the capital markets,” Lewis said in a memo to employees, whose ranks had been slashed to about 500 from a peak of 1,500 a year ago.

Launched in 2015 under the leadership of Lewis, a former Amazon.com Inc. executive — and operating with financial backing from such investor as Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates — Convoy racked up a client base including such companies as The Home Depot, Unilever, Procter & Gamble and Anheuser-Busch.

But largely because of post-pandemic drop in demand and a challenging investment market, Lewis said Convoy had spent the last several months exploring alternatives, including possible acquirers to maintain its operations.

“Alongside this unprecedent freight market collapse, the dramatic monetary tightening we’ve seen over the past 18 months has dramatically dampened investment appetite,” he said, adding: “M&A activity has shrunk substantially, and most logical strategic acquirers of Convoy are also suffering from the freight market collapse, making the deal that much harder. The perfect storm.”

Mike Brown, general partner of investment firm Bowery Capital, commented in an email to DC360 that Bowery’s tracking of fundraising data for B2B marketplaces, in general, shows the quantity and monetary value of financings is down significantly.

He suggested that “a macro takeaway” regarding investments in B2B marketplaces “is the cyclicity of the business and difficulty of the business model (including low take rates, high servicing costs, and tough multiples) which we think will scare a lot of venture dollars away.”

Bloomberg News reported yesterday that Convoy is one of many logistics startups hurt by falling prices and demand for shipping along with a downturn in venture capital fundraising. Bloomberg noted that Flexport Inc. and Seattle-based warehousing startup Flexe Inc. have had to lay off workers as demand fell from pandemic highs.

Paul Demery is a Digital Commerce 360 contributing editor covering B2B digital commerce technology and strategy. paul@digitalcommerce360.com.

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Tradeshift and HSBC team up for global commerce services

Paul Demery — Mon, 14 Aug 2023 20:04:01 +0000

Tradeshift has lined up $70 million in funding and announced plans for a joint venture with banking and financial services giant HSBC. Together, they will expand financial services applications to B2B companies.

The internet supply chain and platform that fosters global commerce says it connects about 1 million companies across 190 countries. In doing so, it supports over $260 billion annually in the value of gross merchandise volume transacted on its platform. Its customers include such international players as:

Food products company Danone S.A.
Consumer brand manufacturer Unilever PLC.
Logistics services providers DHL and Kuehne + Nagel.

Tradeshift’s customers also include The NHS, the UK’s National Health Service.

Tradeshift and HSBC funding plans

Tradeshift says it expects to use the funding and joint venture to focus “on expanding the range of value-added services we can offer to businesses — whether that’s B2B marketplaces, accounts payable automation, or embedded finance,” a Tradeshift spokesman says.

He adds that Tradeshift may also consider merger and acquisition activity “as we look to expand the value proposition for buyers and sellers.”

Christian Lanng, CEO, Tradeshift

“HSBC’s reputation and global infrastructure bring instant credibility and broad appeal to any financial solutions brought to market through the Tradeshift platform,” says Christian Lanng, Tradeshift CEO and co-founder.

Gert Syvlest, Tradeshift co-founder and general manager of small business and fintech, says the joint venture with HSBC will support global commerce with “a new generation of financial services that doesn’t just address the need of the individual businesses.”

“We think digitally connecting global trade is going to be the enabler for a new generation of financial services that doesn’t just address the need of the individual business,” he adds, “but helps enable the trade relationship by making it more efficient, predictable and profitable for either party.”

The joint venture is due to launch early next year. Syvlest says it will seek to offer new financial services to other commerce platforms and venues in addition to Tradeshift.

As part of the the joint venture agreement, HSBC will provide Tradeshift with $35 million in funding and join Tradeshift’s board. The agreement is also expected to raise another $35 million to reach “a minimum of $70 million” from HSBC and other investors. Founded in 2009, Tradeshift has now raised a total funding of $1.1 billion, according to Crunchbase.

Paul Demery is a freelance writer specializing in ecommerce trends. He is based in Savannah, Georgia. Follow him on Twitter @pdemery.

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