Retail Channels
30 March
Ecommerce aggregator Upexi sees 'amazing opportunities' to grow
CEO Allan Marshall breaks down the company's shared services for brands, and the importance of the human element in M&A.
×
The Current, delivered daily.
Ecommerce news, right to your inbox.
Sign up for our email newsletter.
Subscribe.sticky-cta-wrapper {
width: 100%;
position: fixed;
bottom: 0;
left: 0;
background-color: var(--black);
}
Subscribe to The Current newsletter
During a long ride as the CEO of the company now known as XPO Logistics, Allan Marshall built a business from the founding stage that became the third-largest freight company in the U.S.
Now, the serial entrepreneur is providing the platform for multiple brands to reach new heights.
Marshall is the CEO of Upexi, which acquires profitable brands selling on Amazon and direct-to-consumer channels. With an eye toward achieving the high-growth and attractive margins that the digital economy makes possible, Upexi provides shared services such as advertising and logistics to help brands scale.
It is producing results: In its most recent earnings report, the company reported a 444% year-over-year increase in revenue to $27.1 million. Gross profit was $10.3 million.
What became an aggregator started with a single brand. When Marshall initially came onboard as an investor, Upexi was a CBD brand. In the operational capacity that the brand possessed, Marshall saw the potential to build a business around not just one brand, but the making and distribution of products from multiple brands.
“In the end, it’s still a service business,” Marshall said. “How do you make the best product? How do you get it to the customer? How do you back up your product after you sell it?”
Seeing this promise, Marshall became CEO in 2019. Now, Upexi has six brands under its umbrella in verticals including health, wellness, pets, toys and beauty. In turn, it divested CBD assets. Upexi also has a liquidation business focused on wholesale, DTC and Amazon.
Upexi's brands each have access to a range of services that move products across the process of development and production to selling and ultimately shipping.
“When I decided to take over the business, we wanted to be totally vertically integrated throughout our business,” Marshall said. “So for our core products, we have our own R&D, we have our own manufacturing. We have our own ad network. We have our own dev teams.”
To power demand generation for its brands, the company also acquired a programmatic adtech platform called Interactive Offers.
“That allowed us to advertise more freely on smaller networks, and build data with more efficiency and less cost for us,” Marshall said.
When it comes time to move the product from the brand to the customer, Upexi offers pick, pack and ship logistics services. The company is opening a new facility in Florida to consolidate operations.
Looking ahead, Marshall sees ecommerce continue to expand to more channels, even as Amazon remains a massive opportunity for sellers. Upexi is building a presence on Walmart, Etsy, eBay and other channels. As more digitally native brands embrace wholesale, Upexi also sees opportunity to expand on in-store sales.
There have also been shifts in the ecommerce aggregator market. With the boom in rollups during the pandemic, Marshall said aggregators funded by massive levels of investment capital were acquiring businesses for outsize valuations. Upexi chose to put its acquisitions on hold during this time. Now, it has fuel to continue to acquire, even after the levels of available capital for acquisitions dipped. It shows how M&A among Amazon-based businesses is continuing, even if the market isn't as frothy as it was in 2020-21.
“We're seeing amazing opportunities at reasonable valuations to grow this business,” Marshall said.
When it seeks to acquire a business, Upexi pays close attention to metrics such as COGS and margins, as well as valuation. The company is also interested in the potential to launch new products, and can benefit from the services and scale that Upexi offers.
Yet it’s most important that the brands are a fit with Upexi as humans. The first thing Marshall does is meet with the business’ owners and team to understand how the business works.
“There have to be synergies between the seller and me, and the seller and our team. So the human element is the number one element we look at,” Marshall said. “No matter what the numbers say, if we can't kind of bring you on board for our journey, then we're not that interested in buying your company.”
Subscribe to The Current Newsletter
SubscribeTrending in Retail Channels
Operations
01 June
Record Autoship results drive loyalty at Chewy
The no-fee subscription program is adding customers, and they are spending more over time.
When it comes to pets, loyalty is a valued trait. Chewy is showing how the same is true for online sales of pet products.
At a time when recurring revenue is more important than ever for brands and retailers, the pet ecommerce marketplace is growing uptake of its program that automatically replenishes goods.
Chewy said sales from Autoship customers totaled roughly 75% of net sales in the first quarter of 2023, ticking up from 73% in Q4. That’s a new record for the program’s penetration. Autoship sales, which reached $2.08 billion, grew 18% over the first quarter of 2022.
Crucially, the program is also driving loyalty, as Chewy eyes bigger baskets and long-term relationships. With consumers pulling back on discretionary purchases, many retailers are eying ways to ramp up engagement with their best customers. Autoship is a long-running example that is seeing gains now.
The Autoship service allows customers to subscribe to regular orders of pet products, with no membership fee attached. It’s a particularly strong fit for pet food and other consumables, which tend to be bought and used in regular intervals.
“Our Autoship subscription service is a powerful tool for us, driving recurring and predictable revenue and long-term customer loyalty,” Chewy CEO Sumit Singh told analysts.
Responding to a question from analysts, Singh recalled a period soon after its 2019 IPO where 60% penetration for Autoship was seen as a positive. Singh said the growth since was a result of improvements to reduce friction in the customer experience, as well as the business model behind it.
The fact that it’s a free subscription is particularly attractive to consumers.
“In fact, it leads to a discount for the customers who sign up for that program, and that discount is funded by our vendors, so we don't have to fund it ourselves,” Chewy CFO Mario Marte said.
A “symbiotic relationship” between the marketplace and brands is at the heart of the program, Singh said.
“It's one of the more effective mechanisms to fuel brand loyalty for our supplier brands,” Singh said. "Their participation greatly showcases the value that both of us find in it.”
Overall consumer trends are also benefiting the program. In recent months, sales have shifted more toward consumables and healthcare as discretionary spending on hard goods softened. The essentials tend to be the products that are sent in the Autoship program, since they are in need of refilling.
At the same time, Chewy has expanded selection within the program. The number of SKUs available for Autoship has increased significantly in recent years. Chewy has also grown the categories of products available through the program. Healthcare was a newer addition to Autoship since its debut at Chewy four years ago.
“When you think about the proposition of a health customer, humans are bad at feeding humans medication. We forget to feed our pets,” Singh said. "So if you have the option of putting that on recurring delivery, combined with an ongoing engaged program and the notification engine put behind it, etc., etc., it fuels even stronger compliance rates.”
The shopper experience through Chewy’s site has also encouraged customers to build bigger baskets.
It all results in a reliable customer pool that is made up on not only repeat visitors to the marketplace, but signed up to a program that keeps them locked in with Chewy.
Ultimately, this is a base from which Chewy can continue to build.
When it comes to defining success of Autoship, Chewy doesn’t only measure the active customers it has in the program, though those are growing. The marketplace is also keying in on net sales per active customer, which grew 15% to more than $512 in the first quarter. Like Autoship penetration, this was a record high for the company. Both the number of subscribers and the amount that they spend are driving growth in the program.
Autoship also helps to drive increased customer lifetime value (LTV), which serves as a measure of loyalty. These customers tend to spend more with Chewy over time, so they are a crucial driver of long-term sustainability.
In the end, Autoship sales are good for the top line, as well as the bottom line. Repeat orders allow the company to better plan for shipping, so it can optimize its fulfillment network accordingly. This is especially important as Chewy expands automated fulfillment capacity through four new centers.
“Seventy-five percent of our sales going through the Autoship program allows a predictable, repeatable base of volume that allows us to fulfill that demand in a manner that optimizes asset utilization across the company and allows us to kind of flow that revenue, you know, into the bottom line,” Singh said.
A reliable revenue stream that drives growth over time is good for a business during any economic period, but it’s especially important at a time when many retailers have shifted from a mentality of growth to meet surging demand to profitability when consumers pull back. It’s also a bulwark against potential competitors who may try to replicate Chewy’s service. They may open a pet marketplace, but they won’t have all of Chewy’s Autoship customers.
Keep reading...Show less
Loading...
Subscribe to The Current Newsletter
SubscribeLatest from Retail Channels
.sticky-cta-wrapper {
width: 100%;
position: fixed;
bottom: 0;
left: 0;
background-color: var(--black);
}
Subscribe to The Current newsletter