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Another big Amazon acquisition, a Peloton IPO — and other commerce predictions for 2018

If 2017 is any indication, 2018 will be a big year for e-commerce and retail.

Amazon CEO Jeff Bezos walking toward the camera.
Amazon CEO Jeff Bezos is coming for you.
Drew Angerer / Getty
Jason Del Rey has been a business journalist for 15 years and has covered Amazon, Walmart, and the e-commerce industry for the last decade. He was a senior correspondent at Vox.

A year ago, I had some success when I correctly forecasted Stitch Fix would be one of three hot e-commerce companies that could have surprise IPOs in 2017. My other two nominees — Chewy and Casper — didn’t go public, but the former sold for $3 billion and the latter engaged in serious sale talks with Target. I’ll call that a win.

This year, I’m going a bit broader with my look-ahead, in part because I don’t foresee many e-commerce public offerings for 2018. But I do predict a ton of action. Here are my thoughts:

Amazon makes a big move to move big products

Talk of Amazon acquiring Nordstrom or Target is fun — and you can make a rather strong case for the Nordstrom deal making sense — but I’ll focus on what I consider more realistic scenarios for 2018.

Amazon is an expert at selling and delivering items small enough to fit in traditional shipping boxes, but it’s not nearly as far along when it comes to being a destination for the sale of bigger goods like furniture and appliances or having the in-house logistics set up to get them to customer doors. This could be the year it makes a move or two to fix that.

On the logistics side, a source previously told Recode that Home Depot was considering a bid for the $11 billion freight transportation and warehousing company XPO, in part because its executives believed Amazon also had interest. XPO does everything from managing warehouses to owning its own fleet of freight trucks to setting up the last-mile delivery of big items like appliances and furniture to the homes of consumers.

If Amazon were willing to pay up for XPO — and that’s a big if — it could let XPO continue to offer most of its services to its existing customers but carve off the home-delivery business for itself so it controls more of what happens after a shopper hits “Buy.”

On the retail side, Amazon could strengthen a position that it currently doesn’t dominate by buying Wayfair, the fast-growing online furniture seller with about $4 billion in annual revenue and a market value of about $7 billion.

And since you’re here ... The most tantalizing — and crazy — Amazon M&A rumor I’ve heard in the last few months that’s very much still just a rumor to me? Potential interest in buying Costco, the $83 billion retailer that has largely continued to thrive even as Amazon has decimated others.

Facebook emerges as a real challenger to Craigslist

Facebook’s Marketplace had a rough start when it launched in late 2016. But a year later, the site has morphed into a thriving bazaar of used goods with a surprisingly healthy amount of both buyers and sellers — as well as a differentiating trust factor because Facebook profiles back up each party in a transaction.

Its rise is a big reason why one of its heavily funded rival startups in the space, Letgo, approached a competitor last year about a merger. I’d expect Facebook to invest more into this product in 2018 to try to steal some share from Craigslist and bigger marketplaces like eBay.

Most big e-commerce IPOs wait another year

There are a handful of e-commerce companies that carry multi-billion dollar valuations, but almost none of them appear likely to go public in 2018.

I’ve been told that Wish, the maker of the popular shopping app that may soon be worth $8 billion, is likely to wait at least another year before going public. And an IPO for Fanatics, the $4 billion online seller of licensed sports apparel, is several years away.

An IPO for Houzz, the online home improvement inspiration and e-commerce site worth $4 billion, seems more than a year off — as does one for Instacart, the grocery-delivery company valued at $3 billion.

Even if you want to count Airbnb in the e-commerce category, there’s a good chance that that company, too, will wait until 2019. And looking abroad, an IPO for India’s Amazon rival Flipkart isn’t happening soon.

But Peloton and Farfetch will IPO

Peloton isn’t an e-commerce company, but as a hardware-and-content-subscription business with a growing chain of retail showrooms, it’s one I pay attention to.

Whatever you want to call the in-home cycling company today, there’s a good chance we’ll be calling Peloton a public company by the end of 2018. The company registered revenue of $170 million in 2016 and planned to at least double that number in 2017.

Recode also recently reported that Peloton planned to soon unveil a high-tech treadmill, most likely at this month’s Consumer Electronics Show, giving it another path for future growth.

Farfetch, the $2 billion e-commerce marketplace for luxury goods, has been a rumored IPO candidate for some time. I think an offering happens in 2018 if it doesn’t get acquired first. This past summer, the Chinese giant pumped nearly $400 million into the London-based company.

Big M&A involving digital-native brands focused on millennials

This is the year that several digital-native consumer brands hit a scale that forces incumbents looking to attract younger customers to make a move. While an older startup like Warby Parker fits the mold, its valuation north of $1 billion means the pool of potential acquirers is small.

But there’s a crop of less expensive, popular, newer brands that come to mind as realistic M&A targets. They include Glossier, the ultra-cool beauty brand; GOAT, the app that lets sneakerheads and collectors buy hard-to-find kicks; Boxed, the grocery app that aims to compete with Costco and Sam’s Club by delivering similar consumer goods to customer doors without the membership fee; and Zola, the New York startup that makes a wedding registry product popular with the millennial generation.

More consolidation in the grocery and consumer packaged goods industries

2017 was a big year for M&A in grocery, with Amazon’s purchase of Whole Foods and, on a much smaller scale, Albertsons’ acquisition of the meal-kit company Plated.

If Blue Apron’s struggles continue well into the first half of 2018 — and its market cap drops back around $500 million — I’d expect them to attract interest, too. As mentioned above, Boxed is another player that could get a look, while Instacart’s $3 billion valuation makes an acquisition of it unlikely.

In the CPG industry, Unilever has been an aggressive acquirer, with its $1 billion acquisition of Dollar Shave Club being the most notable move for a digital-first consumer packaged goods company.

In 2018, I expect other CPG giants to get more aggressive in acquiring young brands with direct customer relationships, in part to control more of their destiny as e-commerce sales in the category grow and Amazon and Walmart amass more power.

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