Are subscription services the future of fintech?

Subscription services are on the rise. During the pandemic, Americans have been spending more time at home and more money on the digital products that make navigating our new normal easier.

More than ever, Americans’ lives are aided by companies like Netflix, Instacart and, of course, Amazon, which reported record-setting earnings from its 2020 Prime Day savings event.

A recent survey even found that spending on subscription services had more than tripled since March, with one in three respondents saying they’d purchased a new online subscription while quarantining.

Now, a new concern lingers: Is the market getting oversaturated? The question doesn’t just apply to streaming services and food delivery companies — it’s an issue financial technology businesses can’t afford to ignore.

As subscriptions become an increasingly alluring business model, fintechs will be forced to consider whether this proven strategy is worth the risk.

Fintechs should take note of subscription services

In the CompareCards survey, two-thirds of respondents said they purchased a new streaming service mainly for entertainment. Still, that doesn’t mean there isn’t room for fintechs to carve out their own space.

Bradley Leimer, co-founder of the financial consulting firm Unconventional Ventures, said he’s certainly seen more fintechs exploring subscription models. As Leimer explained, the financial services industry may have not fully embraced the idea, but it’s “starting to take notice.” Leimer, who has more than 25 years of experience in the industry, believes fintechs can learn a lot from subscription services — provided they’re willing to look in the right place.

One major lesson? Transparency. Subscription services give companies an opportunity to be upfront about their fees, as well as their benefits.

“When we talk about subscriptions, the more clear and more transparent we are, the better,” Leimer said.

Acorns is an easy case study. The microinvesting app offers three subscription levels — lite, personal and family — each with a clearly explained list of features. For what it’s worth, the company added more than 2 million users between March 2019 and March 2020, according to Forbes.

Leimer said fintechs should also take note of the way subscription services collaborate. For example, he pointed out how Amazon users can add an HBO subscription to their Prime Video account, essentially “bundling” two subscriptions into one. Fintechs, Leimer said, could stand to take a page out of that playbook.

“There are a lot of ways to sort of skin that cat — for a fintech company to generate income and for a customer to get value on top of that,” Leimer said.

Amazon sues online influencers engaged in a counterfeit scheme

Amazon on Thursday announced a lawsuit against over a dozen bad actors, including online influencers and other businesses, who attempted to evade Amazon’s anti-counterfeiting measures by promoting luxury counterfeit products on social media sites, like TikTok and Instagram, as well as on personal websites, then using Amazon seller accounts to fulfill those orders.

The suit alleges that defendants, Kelly Fitzpatrick and Sabrina Kelly-Krejci, conspired with sellers to run a scheme that involved posting side-by-side photos of a generic, non-branded product which could be found on Amazon, and a luxury counterfeit product. The text on the posting would read “Order this/Get this.”

The “Order this” pointed to a generic product being falsely advertised on Amazon. “Get this,” meanwhile, was referencing the luxury counterfeit products the consumer would receive instead.

Image Credits: Amazon court filing

By only posting generic product photos on Amazon.com directly, the defendants and the sellers they worked with, were aiming to bypass Amazon’s anti-counterfeiting measures while making claims about the counterfeit goods elsewhere across social media and the web. They also promoted the high quality of their luxury counterfeit goods using videos on Instagram, TikTok, and personal websites, and sent users to Amazon and other e-commerce websites, like DHgate, to transact.

Of note in this case is the fact that Fitzpatrick had been a member of Amazon’s Influencer Program while the counterfeiting scheme was underway. From Nov. 23, 2019 through March 6, 2020, she participated in the program under the username Kellyfitz02-20. When Amazon detected her activities, she was banned from the program and it closed her Associates account.

She then attempted to open new Associate accounts and continued to advertise the counterfeit items on social media, where she directed her followers to her own website for purchases, as well as to other e-commerce sites.

Instagram had shut down Fitzpatrick’s prior accounts, but she would create new ones when that occurred.

Though Fitzpatrick made her current Instagram account private, her website is still online where it shows her promoting the so-called “hidden links” on Amazon where consumers could buy the counterfeits.

Image Credits: styleeandgrace.com

Similarly, Kelly-Krejci used her website to direct users to “hidden links” on Amazon where they could buy counterfeit products, saying in one video, she “know[s] some people feel weird ordering from hidden links but in this case you will get something fabulous.”

Image Credits: budgetstylefiles.com

The lawsuit alleges the defendants ran their schemes from around November 2019 through the filing of the complaint.

Investigators working on Amazon’s behalf were able to confirm the scheme by placing orders through the links and receiving the advertised counterfeit goods. The court filing shows several examples of these items, which included wallets, purses, belts, and sunglasses, which were designer dupes of brands like Gucci and Dior.

Among the other defendants in the case are businesses and sellers in China who helped source the dupes. In some cases, the sellers took steps to hide their identities and whereabouts from Amazon by using fake names and contact information and unregistered businesses, Amazon says..

Amazon has been working over the past several years to take a harder stance on counterfeiting, having acknowledging the practice harms consumer trust in its online store. In 2017, it launched the Amazon Brand Registry, which gives a rights owner tools to proactively locate and report infringing items. The following year, it launch a product serialization service, Transparency, that helps to eliminate counterfeits for enrolled products.

And last year, Amazon launched Project Zero, a self-service counterfeit removal tool for brands to remove counterfeit product listings on Amazon in minutes. Over 10,000 brands are now enrolled.

The retailer has increasingly engaged in lawsuits against counterfeiters as well, to dissuade others from participating in counterfeiting schemes.

The current lawsuit asks the court to ensure the defendants are barred from ever advertising, promoting and selling on Amazon, opening Amazon Vendor, Selling, and Associate accounts, aiding or abetting counterfeiters, and pay damages, attorneys’ fees, and other relief.

Europe urges e-commerce platforms to share data in fight against coronavirus scams

European lawmakers are pressing major e-commerce and media platforms to share more data with each other as a tool to fight rogue traders who are targeting consumers with coronavirus scams.

After the pandemic spread to the West, internet platforms were flooded with local ads for PPE of unknown and/or dubious quality and other dubious coronavirus offers — even after some of the firms banned such advertising.

The concern here is not only consumers being ripped off but the real risk of harm if people buy a product that does not offer the protection claimed against exposure to the virus or even get sold a bogus coronavirus “cure” when none in fact exists.

In a statement today, Didier Reynders, the EU commissioner for justice, said: “We know from our earlier experience that fraudsters see this pandemic as an opportunity to trick European consumers. We also know that working with the major online platforms is vital to protect consumers from their illegal practices. Today I encouraged the platforms to join forces and engage in a peer-to-peer exchange to further strengthen their response. We need to be even more agile during the second wave currently hitting Europe.”

The Commission said Reynders met with 11 online platforms today — including Amazon, Alibaba/AliExpress, eBay, Facebook, Google, Microsoft/Bing, Rakuten and (TechCrunch’s parent entity) Verizon Media/Yahoo — to discuss new trends and business practices linked to the pandemic and push the tech companies to do more to head off a new wave of COVID-19 scams.

In March this year EU Member States’ consumer protection authorities adopted a common position on the issue. The Commission and a pan-EU network of consumer protection enforcers has been in regular contact with the 11 platforms since then to push for a coordinated response to the threat posed by coronavirus scams.

The Commission claims the action has resulted in the platforms reporting the removal of “hundreds of millions” of illegal offers and ads. It also says they have confirmed what it describes as “a steady decline” in new coronavirus-related listings, without offering more detailed data.

In Europe, tighter regulations over what e-commerce platforms sell are coming down the pipe.

Next month regional lawmakers are set to unveil a package of legislation that will propose updates to existing e-commerce rules and aim to increase their legal responsibilities, including around illegal content and dangerous products.

In a speech last week, Commission EVP Margrethe Vestager, who heads up the bloc’s digital policy, said the Digital Services Act (DSA) will require platforms to take more responsibility for dealing with illegal content and dangerous products, including by standardizing processes for reporting illegal content and dealing with reports and complaints related to content.

A second legislative package that’s also due next month — the Digital Markets Act — will introduce additional rules for a sub-set of platforms considered to hold a dominant market position. This could include requirements that they make data available to rivals, with the aim of fostering competition in digital markets.

MEPs have also pushed for a “know your business customer” principle to be included in the DSA.

Simultaneously, the Commission has been pressing for social media platforms to open up about what it described in June as a coronavirus “infodemic” — in a bid to crack down on COVID-19-related disinformation.

Today the Commission gave an update on actions taken in the month of September by Facebook, Google, Microsoft, Twitter and TikTok to combat coronavirus disinformation — publishing its third set of monitoring reports. Thierry Breton, commissioner for the internal market, said more needs to be done there too.

“Viral spreading of disinformation related to the pandemic puts our citizens’ health and safety at risk. We need even stronger collaboration with online platforms in the coming weeks to fight disinformation effectively,” he said in a statement. 

The platforms are signatories of the EU’s (non-legally binding) Code of Practice on disinformation.

Legally binding transparency rules for platforms on tackling content such as illegal hate speech look set to be part of the DSA package. Though it remains to be seen how the fuzzier issue of “harmful content” (such as disinformation attached to a public health crisis) will be tackled.

A European Democracy Action Plan to address the disinformation issue is also slated before the end of the year.

In a pointed remark accompanying the Commission’s latest monitoring reports today, Vera Jourová, VP for values and transparency, said: “Platforms must step up their efforts to become more transparent and accountable. We need a better framework to help them do the right thing.”

Netflix tests a programmed linear TV and movie channel in France

Netflix is testing out a programmed linear content channel, similar to what you get with standard broadcast and cable TV, for the first time (via Variety). The streaming company will still be streaming said channel – it’ll be accessed via Netflix’s browser-based website – and it will be initially available in France only, having rolled out to select areas in November 5, with plans to expand to more of France through December.

The channel is called Netflix Direct, and is exclusively available to subscribers of the regular Netflix streaming service. It will show TV shows and movies from France, the U.S. and other regions, selected from Netflix’s existing content library. The reasoning behind the launch in France in particular, according to the streaming giant, is that a lot of viewers in the country tend to like watching programming without having to select what it is specifically they’re going to watch next.

Netflix previously launched a test of a tool that provided that – a ‘Shuffle’ button that would play stuff it thinks you’d like at random from its recommendation trove. That was individual per users, however – while the new Netflix Direct approach is a fixed slate of programming that’s the same for everyone who tunes in, much more like traditional TV.

For all its strengths, Netflix definitely doesn’t have the same ability to channel surf or essentially veg out and let the TV take away any decision fatigue, so this could be the answer to that. It’s definitely an interesting experiment for Netflix, but we’ll see if it catches on or expands to more geographies with different viewing preferences.

B2B marketplaces will be the next billion-dollar e-commerce startups

Startups involved in B2B e-commerce such as Faire and Mirakl have burst out of the gates in 2020. Almost overnight, these startups transformed into consequential platforms, earning billion-dollar valuations along the way. The B2B e-commerce industry has broad reach, encompassing everything from commerce infrastructure and payments technology to procurement and supply-chain solutions. But one area of the B2B e-commerce sector holds outsized promise: marketplaces.

These venues for buyers and sellers of business-related products are exploding in popularity, fueled by better infrastructure, payments and security on the back-end and companies’ increased need to conduct business online during the pandemic.

Even before the pandemic, B2B marketplaces were expected to generate $3.6 trillion in sales by 2024, up from an estimated $680 billion in 2018, according to payments research firm iBe TSD. They were already growing more quickly than most B2C marketplaces that predated them, and when COVID shutdowns hit, many companies scrambled to shift all purchasing online. A survey of business buyers conducted by Digital Commerce 360 found that 20% of purchasing managers spent more on marketplaces, and 22% spent significantly more, during the pandemic.

For many entrepreneurs running B2B marketplaces, the pandemic created new demand for their platforms. Yet to convince businesses to make a permanent shift to online purchasing, B2B marketplaces cannot simply remain stagnant, serving as simple transactional platforms. Those that innovate now to introduce adjacent services will emerge as winners in the next few years, with some inevitably becoming billion-dollar companies.

As a venture capital investor in B2B e-commerce companies, I’m carefully watching the industry and have seen several forward-thinking business models emerge for B2B marketplaces. The predominant revenue model of B2C marketplaces, the gross merchandise value (GMV) take rate, or percentage of each transaction, doesn’t always translate well in the B2B world. Instead, B2B marketplaces are discovering creative new ways to monetize their networks, ensuring their approach is tailored to the complex and nuanced world of B2B e-commerce. I’ll delve into each of these models below, providing examples of marketplaces that have successfully begun implementing them.

What makes B2B transactions unique? Before discussing how B2B marketplaces can deploy new business models, it’s important to think about how B2B transactions typically work.

Payment methods: There are four main ways to make a B2B payment: paper check, ACH transfer, electronic fund transfer (wires), and credit/debit cards. Nearly half of B2B payments are still made by paper check, but digital payment solutions are quickly gaining.

Financing: It is customary in B2B transactions to pay “with terms,” such as net 30 or net 60, effectively giving a line of credit to the business buyer that enables them to send payment after delivery of the good or service. Supply-chain financing and dynamic discounting are two mechanisms business buyers use to settle invoices with suppliers on preferred timelines.

Bulk discounts: Business buyers often expect and receive discounts in return for placing high-volume orders. While not a concept unique to B2B, negotiated or custom volume discounts can complicate the checkout process.

Contractual pricing: Businesses often enter into enterprise-level pricing agreements with their suppliers. In some B2B verticals, such as the veterinary supplies market, there is little consistency and transparency regarding the market price of any given item; instead, each buyer pays a bespoke price tied to contractual agreements. This dynamic typically benefits suppliers, which can price discriminate based on buyers’ ability and willingness to pay.

Delivery method and timing: Unlike consumers, businesses may place orders for goods but delay delivery for weeks or months. This is particularly common in the commodities market, where futures contracts specify a commodity to be delivered on a certain date in the future. B2B transactions typically include a negotiation on delivery method and timing.

Insurance: Business buyers frequently purchase insurance as part of their transactions, particularly in high-value verticals such as jewelry. Insurance is designed to protect against damage to the goods in transit or theft.

Compliance: In some verticals, particularly those related to healthcare and chemicals, there is a heavy compliance burden to ensure goods are properly sourced and transported. Is the seller legally registered to sell and transport sensitive goods such as medical equipment or pharmaceuticals?

With all of these considerations, it’s no wonder B2B e-commerce has been slower to digitize than B2C. From product discovery through the checkout process, a consumer buying a bag of licorice looks nothing like a retailer buying 100,000 bags of licorice from a distributor. The good news for B2B marketplace founders is that, based on the parameters above, there are many creative ways to extract value from transactions that go beyond the GMV take rate. Let’s explore some of the creative ways to monetize a B2B marketplace.

PayPal details its digital wallet plans for 2021, including crypto, Honey integration and more

PayPal this week laid out its vision for the future of its digital wallet platform and its PayPal and Venmo apps. During its third-quarter earnings on Monday, the company said it plans to roll out substantial changes to its mobile apps over the next year to integrate a range of new features including enhanced direct deposit, check cashing, budgeting tools, bill pay, crypto support, subscription management, buy now/pay later functionality, and all of Honey’s shopping tools.

While PayPal had spoken in the past about bringing Honey’s capabilities into PayPal, CEO Dan Schulman detailed the integrations PayPal has in store for the deal-finding platform it bought last year for $4 billion, as well as a time table for both this and the other app updates it has in store.

The Honey acquisition had brought 17 million monthly active users to PayPal. These users turned to Honey’s browser extension and mobile app to find the best savings on items they want to buy, track prices and more.

But today, the Honey experience still remains separate from PayPal itself. That’s something the company wants to change next year.

According to Schulman, the company’s apps will be updated to include Honey’s shopping tools like its Wish List feature that allows you to track items you want to buy, price monitoring tools that alert you to savings and price drops, plus its deals, coupons and rewards. These tools will become part of PayPal’s checkout solution itself.

That means the company will be able to track the customer from the initial deal-hunting phase where they’re indicating their interest in a certain product, target them with savings and offers, then guide them through its checkout experience all in one place.

PayPal will also provide “anonymous demand data” to merchants based on consumer engagement with Honey’s tools to help them drive sales, the company said.

What’s more, PayPal put timeline on the Honey integrations and the other updates it plans to roll out over the course of the next year.

Bill Pay will start to roll out this month, PayPal said, with a large redesign of the digital wallet experience expected for the first half of 2021. Much of the new functionality will be arriving in the second quarter and the second half of the year, with a goal of having the majority of the changes rolled out by the end of next year.

This also includes PayPal’s plans for cryptocurrencies, announced at the end of October. The company aims to support Bitcoin, Ethereum, Bitcoin Cash and Litecoin at first, initially in the U.S.

Speaking to investors during the earnings call, Schulman also noted when PayPal plans to bring crypto to more users and geographies. He said the ability to buy, sell and hold cryptocurrencies will first arrive in the U.S., then will roll out to international markets and the Venmo app in the first half of next year. (Currently, PayPal is offering U.S. users to join a waitlist for the new crypto features in-app).

Image Credits: PayPal

This change will allow PayPal’s users to shop using cryptocurrencies across the company’s 28 million merchants without requiring additional integrations on merchants’ part. The company explained this is due to how it will handle the settlement process, where users will be able to instantaneously transfer crypto into fiat currency at a set rate when checking out with PayPal merchants.

PayPal also recently joined the “buy now, pay later” race with its new “Pay in 4” installment program that lets consumers split purchases into 4 payments. This debuted in France ahead of its late August U.S. launch and has since rolled out to the U.K. (as Pay in 3). This too, will become more integrated into the company’s apps in the months ahead.

Venmo — which the company expects to reach $900 million in revenues next year — will see the expansion of business profiles, and will gain crypto capabilities, more basic financial tools and shopping tools, as well as a revamp of the “Pay with Venmo” checkout experience.

Schulman referred to the company’s plans to overhaul its Venmo and PayPal apps as a “fundamental transformation,” due to how much new functionality they will include as the changes roll out over the next year as well as the new user experience — basically, a redesign — that will allow people to move easily from one experience to the next instead of having to change apps or use a desktop browser, for example.

PayPal’s earnings hadn’t excited Wall St. investors this week, sending the stock down on its lack of 2021 guidance. But the year ahead for PayPal’s digital wallet apps looks to be an interesting one.

 

Apple One services subscription bundles start launching tomorrow

Apple is launching its Apple One services bundle tomorrow, though the company’s workout service Fitness+ isn’t quite ready yet.

On an earnings call today, CEO Tim Cook revealed tomorrow’s rollout and called the service the “easiest way for users to enjoy Apple services.” In a conversation with Bloomberg, Apple CFO Luca Maestri revealed the launch timing for Fitness+ as well. The company also detailed that it has 585 million total paid services subscriptions and expects to reach 600 million before the end of the 2020 calendar year.

The subscription bundle is designed around bringing more users into more Apple Services. It’s a big play to get subscribers to switch from Spotify to Apple Music as that is likely the crown jewel of the offering.

The company’s $14.99 per month individual plan includes Apple Music, Apple TV+, Apple Arcade and 50GB of iCloud storage. Apple also sells $19.99 family plans that bump up the storage to 200GB and is planning to debut a “premiere” plan for $29.99 that includes Fitness+ and Apple News+.

Apple’s Services division is growing in importance to the company’s bottom line, with the group reaching an all-time-high in revenue and reaching past half of the quarter’s iPhone revenues. You can read more on their earnings release below.

Sarah Perez also contributed to this report.

US online holiday sales to reach $189B this year, up 33% from 2019

The accelerated shift to e-commerce due to the pandemic will have a significant impact on U.S. online holiday sales, according to a new forecast from Adobe Analytics. Adobe Analytics predicts that U.S. online sales for the months of November and December 2020 will reach $189 billion, representing a 33% year-over-year increase and setting a new record.

The forecast is also equal to two years of growth in one season, Adobe says, noting that the increase in 2019 was just 13%.

Image Credits: Adobe Analytics

If consumers receive another round of stimulus checks and physical stores are again shut down in large parts of the country to address further coronavirus outbreaks, the figures could go even higher. In that case, consumers would then be expected to spend an additional $11 billion online, bringing total sales to more than $200 billion, or a 47% year-over-year increase.

Image Credits: Adobe Analytics

The way consumers shop this season may look different too.

Typically, the online shopping season began with Black Friday sales — a digital counterpart to the offline sales events taking place in physical stores. This would then bleed into Cyber Monday sales, as consumers looked online for the items they couldn’t find deals on when shopping in person.

Over the years, the lines between the individual sales events began to blur. Online shopping shifted to Thanksgiving Day, for example, and then stretched past Cyber Monday.

This year, Adobe Analytics expects the so-called “Cyber Week” (Thanksgiving through Cyber Monday) to turn into “Cyber Months.”

Image Credits: Adobe Analytics

This will be driven, in part, by significant holiday discounting that begins the first two weeks of November, building up to the deepest price cuts over the Black Friday holiday weekend and Cyber Monday.

Adobe Analytics also predicts online sales will surpass $2 billion every day from November 1 through November 21, and will then increase to $3 billion per day from November 22 through December 3.

Black Friday online sales are projected to climb 39% year-over-year, to $10 billion, while Cyber Monday becomes the biggest online shopping day of the year, with $12.7 billion in sales, a 35% year-over-year jump.

Image Credits: Adobe Analytics

The best deals for TVs and appliances will continue to be on Black Friday, while the best deals for toys and furniture will arrive on Sunday, November 29 — the day before Cyber Monday. Sporting goods will see their best deals on December 13 and electronics on December 18, Adobe says.

As in previous years, mobile will claim an ever-larger contributor chunk of e-commerce spending, with U.S. consumers spending $28.1 billion more on their smartphones in 2020 than in 2019, a 55% year-over-year increase.

Smaller retailers ($10 million-$50 million in annual online revenue) will also benefit from the increased online activity. They’ll see a larger (107% increase) boost to their online revenue than larger retailers with $1 billion-plus in revenue, which will see an 84% increase.

As some U.S. consumers may not be traveling to see family this year, compared with pre-pandemic years, Adobe Analytics predicts Americans will spend 18% more on gifts that are directly delivered from the retailer to people they would have otherwise seen in person. But consumers are not interested in paying more for expedited shipping — 64% said they won’t pay for a speedier service. That means retailers will need to continue to clearly communicate about their free shipping cut-off dates.

Image Credits: Adobe Analytics

The trend toward buying online and picking up in store (BOPIS) will surge, too. With the addition of curbside pickup options from many retailers, BOPIS will see 40% more orders than last year and will grow to represent 50% of all orders from retailers offering the option in the week before Christmas.

Due to the pandemic, Adobe Analytics expects 9% of all holiday customers to be net new online shoppers. Conversion rates will increase as well, at +13%, while revenue will increase +33%. Average order value, however, will remain flat.

One factor that could complicate these predictions is the U.S. election. In previous election years, online sales were impacted after the outcome was known. They dropped 14% the day after the 2016 election, and 6% the day after the 2018 midterms. According to Adobe Analytics, 26% of consumers said the election’s outcome would impact their holiday spending.

The data used to make these predictions is sourced from Adobe Analytics, which today analyzes one trillion visits to U.S. retail sites. This includes 100 million SKUs and 80 of the 100 largest retailers in the U.S., the company says.

Investors back Pacific Consolidated Holdings to merge leading LA-based liquor and weed delivery companies

There’s a new company that’s sitting on top of some of the fastest growing consumer-facing businesses in the world — liquor and marijuana delivery — and its name is Pacific Consolidated Holdings Group.

The investment firms and executive teams behind the Los Angeles-based delivery liquor delivery company, Saucey, along with Inception Companies, the backer of marijuana distribution company, Emjay, have formed Pacific Consolidated to merge their two companies and build what’s likely the largest “vice” company in the world.

(Although in a global pandemic and period of political tumult unseen since the 1960s, what even is vice anymore anyway?)

Financial terms of the transaction were not disclosed.

The merger is the first step of what’s a planned rollup strategy for PCH (also the nickname for the highway that runs along the California Coast), which aims to be the leading vertically integrated vice platform focusing on e-commerce, delivery logistics, and cross industry behavioral insights.

As the co-founder of Saucey and now chief executive of PCH, Chris Vaughn, said: “Everyone in the liquor industry is thinking about the marijuana business and everyone in marijuana is looking at liquor.”

Both Vaughn and his Saucey co-founder Daniel Leeb will take management positions at PCH, and Blumberg Capital and Bullpen will have a large equity stake in the newly formed holding company, Vaughn said.

“We’ve spent the past decade in bev-alc at the forefront of providing solutions to changing consumer shopping behaviors. What we’ve seen is a more exploratory customer than the industry recognizes, ready to try new form factors, products and categories. The one consistent theme is they want to be able to discover and shop these products conveniently, and to be able to trust their platform of choice,” said Vaughn in a statement. “The strength of PCH is that we’re able to provide unparalleled and personalized cross-industry shopping experiences to consumers, while also having the data to understand customer behaviors between cannabis, alcohol, tobacco and CPG. When you combine this with the diversified infrastructure of PCH and the incredible team we have working on these opportunities, it gives us the flexibility and the foundation for best serving the future of these industries.”

Saucey launched in 2014 and now operates across 22 markets including LA, San Francisco, San Diego, Sacramento, New York City, Chicago, Washington, Dallas, Orlando, Tampa and Miami.

Its sales growth has expanded 200% year-over-year even as the company maintains its profitability, according to a statement. The liquor side of the PCH business is indeed incredibly strong.

And of the 1 million users that the company surveyed (most in its largest market — California, which is perhaps one of the most mature consumer markets for cannabis consumption in the US) an overwhelming majority of 70% said they’d like to see integrated marijuana and liquor delivery services.

While Emjay was only formed a year ago, the company had built a groundwork of distribution, cultivation, and production licenses as it was getting off the ground. Formed by the Inception Companies, Emjay brought in Vaughn as an advisor to the company early on and as the company grew, so did the recognition among the investors and operators of the potential for a powerful merger, Vaughn said.

With Emjay, not only does PCH get a distribution company, but since it also acts a vertical operator the company can deliver marijuana products to consumers at a far lower cost than its competition.

Vaughn and Leeb have actually been operating the Emjay business since January and have grown the company’s revenues from less than $100,000 in transaction volume to the seven-figure sales that the company currently enjoys. And Emjay itself became a profitable business earlier this year, according to a statement. Now, the focus is on growing its footprint within Saucey’s massive California user base.

While there was a surge of interest and investment into the cannabis business in the industry’s early years following its legalization in certain states back in 2014, many of the market’s early leaders fell on hard times in 2019 as legal hurdles, grey market suppliers, a crisis in the vaping industry, and a lack of professionalization took their toll on the industry.

It’s a storm that Omar Mangalji, the former Goldman Sachs banker turned Los Angeles gadfly who co-founded the Inception Companies (and sometimes goes by the name Ronnie Bacardi).

“The broader cannabis market has largely struggled due to weak underlying fundamentals and poor management. But much like the dashed expectations that came with the rise and fall in the DotCom era, this industry is now evolving into Cannabis 2.0.”, Mangalji said in a statement.

With the merger of the two companies, Saucey users can create an Emjay account with their existing login and toggle between the two services simply by tapping on an icon.

FloorFound is bringing online return and resale to direct to consumer furniture businesses

Over the next five years consumers will return an estimated 40 million to 50 million pieces of furniture that more than likely will end up in landfills, creating tons of unnecessary waste, according to Chris Richter, the founder of a new Austin-based furniture startup, FloorFound.

To reduce that waste, and give retailers another option for their used goods, Richter has launched FloorFound. The company is designed to manage furniture returns and resale for online merchants. So far, companies like Floyd Home, Inside Weather, Outer and Feather (the furniture rental company) are using FloorFound’s services.

“We have a very large pipeline and we’ve been operating since April first,” said Richter. “We can pick up in any major metro locally and inspect it locally. We have a platform layer where we can run inspections against those items.”

As consumers look to reduce their environmental footprint, an easy place to start is by buying used items, Richter said, and he expects that most brands will start to incorporate used and new products in their virtual and real showrooms. “Every brand will commingle new items with resale items,” he said. “We are trying to put retailers in the resale business with their own return inventory.” To prove his point, Richter pointed to companies like REI and The Gap, which have partnered with ThredUp to sell used clothes.

To complement its returns business and give online sellers a way to work more seamlessly with local vendors, the company has logistics partnerships with providers including Pilot Freight Services, Metropolitan Warehouse and Delivery and J.B. Hunt Transport.

Working with co-founder Ryan Matthews, the former director of technology for the Austin-based high-end retailer Kendra Scott, Richter has set up a business that can tap into both the demand for better customer service for the return of large items and the growing call for greater sustainability in the furniture industry.

It was an attractive enough proposition to attract a pre-seed investment from Schematic Ventures, a venture fund focused exclusively on technological innovations for supply chain management.

“The broken experience of oversized e-commerce has kept a multi-billion-dollar category offline. It’s not a simple problem: oversized items require coordination of a hyper-fragmented micro carrier network, complex physical processing, and then re-injection into an e-commerce channel that aligns with the brand,” said Julian Counihan, a general partner at Schematic Ventures. “UPS and FedEx just aren’t going to cut it. FloorFound is tackling this challenge with a team tailor-made for the task: Chris Richter, Ryan Matthews and Shannon Hardt have backgrounds spanning supply chain, delivery, e-commerce and enterprise software. FloorFound will be the final push that moves the remaining offline categories, online.”