The Watson Weekly: eCommerce Strategy & News

Amazon’s ad business grew 11% to $19.6 billion last quarter. Media reports called it Amazon’s first ad miss in seven quarters. Amazon says moving Prime Day into June took 8.5 points off third-quarter ad growth. Rick compared that claim with the six-month numbers and mostly accepts it. He is less comfortable with the fourth-quarter guide of high-teens ad growth, which is still below the 22% to 23% Amazon posted a year ago. AWS grew 39% to $46 billion, and by Rick’s math it produced 63% of Amazon’s operating income.

FedEx raised its 2026 profit outlook on 2% domestic volume growth and 7% higher revenue per pack...

Andy Jassy told investors and analysts that Amazon may have two trillion-dollar revenue businesses within five to 10 years, though it doesn’t have one yet. Rick Watson and Jessica Lesesky run the numbers on both.

AWS grew 39% to $46 billion in Q3 2026, and Jassy says it can grow more than 40% in each of 2027 and 2028. If that holds, AWS gets close to a trillion around 2031. The retail side takes more work to get there. Jess walks through the Watson Weekly napkin Math to a trillion-dollar stores business by 2036, where Amazon’s existing businesses cover most of the distance and groc...

Shopware co-founder Stefan Hamann thinks about 30% of buying will be in the hands of agents by 2030, and probably more in B2B than B2C.

Rick opens with a state of the union drawn from six months on the road, including an NRF combined councils meeting of CIOs and chief digital officers. Today agentic commerce mostly means discovery: whether an agent finds your product in the first place. Rick sorts retailers into four buckets (watchers, foundation fixers, pilots and deployed) and explains why about three in four of the NRF council members won’t let AI generate cr...

DoorDash agreed on October 29 to buy Instacart for $65 a share, about $17 billion in equity value. It promised grocers they can keep using any delivery platform. Rick thinks grocers should still worry. Instacart built their websites and apps, and it’s going to a company that runs its own DashMart stores. The promise doesn’t say who gets the shopper data.

PayPal processed 6% more payment volume in the third quarter and grew revenue 2%. Rick sees Venmo as the business with momentum and PayPal as the drag on it, and he names Stripe, Shopify, Amazon and Google as owners that...

Anthropic has filed its S-1, and Rick Watson and Jessica Lesesky use the filing to ask whether software companies are in real trouble. Reported targets put the raise at $100 billion or more at a valuation of up to $2 trillion, which would top SpaceX. OpenAI, meanwhile, has pushed back its IPO and is reportedly raising $30 billion privately at about $1.4 trillion.

Jess goes back to the software selloff earlier this year, when investors decided Claude Code and Cowork would kill SaaS, a prediction that hasn’t come true yet. Rick thinks the old buy, build or partner decision now co...

I asked the retailers and brands at Retail Club to raise a hand. About ten or eleven went up. When I asked who had good data, one hand stayed.

This was our first Watson Live! The Retail AI Debates at RetailClub Presented by KIBO Commerce. Speakers argued assigned sides, some they don’t personally hold, and the room voted with red and blue plates after each round.

Debate one asked whether retailers should rebuild workflows around AI before their data is ready. Gireesh Sahukar took the yes side and won the vote. His point was th...

Salesforce agreed to pay about $5.7 billion in cash for Braze, the software brands like Instacart and Urban Outfitters use to send push notifications and texts. Rick works out what that comes to per customer. Salesforce hasn’t said how it will sell Braze alongside Marketing Cloud, the product a lot of Braze customers left to get there.

ChatGPT referral traffic dropped out of analytics reports for about a week in October. Profound traced the missing tracking tags to ChatGPT’s new Intelligent UI. The visits still arrived but were counted as direct traffic until the tags came back...

Shopify has bought shop.com from Market America and won’t say what it paid. Rick Watson and Jessica Lesesky use the deal to work out where Shopify fits once AI agents do more of the shopping.

Rick thinks Shop Pay matters most. If agents skip the storefront, Shopify may be left owning the checkout and not much else, and he thinks that could still be a very good business. Jess sees Shopify going after PayPal’s share of checkout. They also get into the Shop app, which most people only open to track a package, and Shop...

PartsTree has sold replacement parts for lawnmowers and other outdoor power equipment for about 20 years, mostly on software its own team built. By this year the code had become something nobody wanted to touch. Some of it was written more than 20 years ago, and only one person could fix it when it broke.

Vinny O’Brien sat down with Doug and Drew from PartsTree and Chris from Altus Nova at Shoptoberfest 2026 in Nashville to talk about the move to Shopware. It was Altus Nova’s first Shopware project. PartsTree’s rule had always been to change systems betwee...

Vinny O’Brien says e-commerce conversion rates have hovered around 3% for twenty years. He puts that to Darin Lynch at Shoptoberfest, and Darin’s answer is that a lot of B2B companies are measuring success in the wrong place.

Darin started Irish Titan 22 years ago. He sorts commerce history into rough eras. He calls the early one Neanderthal commerce, when sites were difficult for merchants to build and for customers to use. Then came a long stretch shaped by platforms and search engines, more trustworthy but still built around the merchant and the tech. Now a buye...

UPS has now shed almost all of its Amazon volume. The 18-month wind-down took out about two million pieces a day and roughly $4.5 billion in expenses, leaving UPS with a smaller network that earns more per package but has less volume to set prices with. Rick looks at who held the leverage in that split, and whether a UPS focused on healthcare logistics is turning into a specialty carrier.

BJ’s Wholesale Club plans to cut about 20% of its products over the next couple of years, taking older clubs from around 7,500 items to 6,000 or 6,500. The last time BJ...

Rick thinks Starbucks has lost its way. Jess thinks Brian Niccol’s turnaround is working, and she points to four straight quarters of growth.

Niccol has put handwritten Sharpie names back on cups and is spending $1.2 billion to make stores more comfortable. Rick says a better seat means nothing when you wait 25 minutes for burnt coffee. Jess says consistency matters more than quality, and that cake pops and pink drinks keep parents and Gen Alpha coming back.

Rick asks whether Starbucks should accept being the McDonald’s of coffee or go upscale with Starbucks Reserve. He a...

Keith Pires is CRO and co-founder of Boldest, an agency built on top of an agent platform called Pathfinder. Vinny O’Brien caught up with him at Shoptoberfest in Nashville, shortly after both of them came off the mechanical bull.

Pires says his co-founder and CTO, Ramy Youssef, has been developing Pathfinder for many years with a team based in Egypt. He describes it as the foundation of the agency. Boldest owns the environment, and Pires agrees that settles most of the governance and security questions clients bring.

The clearest example is a sales agent Bo...

Naturepedic has made organic mattresses for years. Its three owners are engineers, and the marketing used to read like their spec sheets. Arin Schultz, the chief growth officer, changed the messaging before anyone approved it. He says sales were up 46% in May and close to 68% in July, and he puts the mattress category down by double digits over the same period.

Arin runs sales and marketing as one job. He tells Rick why he goes after shoppers who have never heard of Naturepedic and don’t care about organic, and why he treats a 5% growth year as a...

C.H. Robinson is paying $5.8 billion in cash and stock for RXO, which Rick works out to more than 40 times RXO’s expected adjusted EBITDA for this year. The deal deck brings that down to about 13 times, but only by counting $300 million in cost savings that haven’t happened yet. Retail and e-commerce make up 37% of RXO’s revenue.

Also this week, ChatGPT adds virtual try-on to its shopping results, and Rick still can’t see how features like this pay back what OpenAI’s investors have put in. Apple’s iOS 27 shipped with a Safari block list that in...

Costco’s sales rose 11.2% last quarter, and Rick Watson and Jessica Lesesky talk through where that growth is coming from. Costco says members under 40 now make up more than a quarter of the base. Many of them live in apartments and order on their phones, and Costco says delivery orders arrive in under an hour on average.

Rick joined recently and bought a mattress there. Jess isn’t a member because she has nowhere to store bulk paper towels. They get into the executive membership tier, the $4.99 rotisserie chicken Costco supplies from its own Nebraska plant, the $1.50 hot...

Tom McFadyen has spent decades building marketplaces and commerce platforms at McFadyen Digital. His firm's new book, AI Best Practices for Commerce, runs more than 500 pages in print, and Tom says the printed version couldn't keep pace with how fast the material changed.

I caught up with Tom at Retail Club. The book launched with 125 AI use cases, sorted into four phases of commerce that McFadyen calls market, sell, fulfill and support. Online, that count is now past 500, with several hundred case studies alongside it, and McFadyen made the whole thing free at ai-best-practices.com.

...

Amazon now lets US sellers run their eBay, Shopify, TikTok and Walmart sales inside Seller Central, free of charge. Amazon says more than 95% of its independent sellers already sell elsewhere, and each of those outside orders now sits next to an Amazon shipping button. Rick Watson thinks most sellers will be reluctant to put their Walmart numbers inside Amazon's software.

Oura postponed its NASDAQ debut the day before it was due to price, after planning to raise up to $2.2 billion at a valuation as high as $15 billion. OpenAI has said it won't list in 2026.

Reuters...

Amazon is blocking nearly every AI shopping agent, starting with Perplexity. Rick Watson and Jessica Lesesky go through Goldman Sachs' 64-page report on agentic commerce, which opens on Amazon's blocking and includes a section on agent liability that is labeled TBD.

Rick reads the blocking as a negotiating position, the same move Amazon made with Buy With Prime and Shopify. Jess thinks Amazon is right to keep agents out and points to Meta's record on account security as a reason to be careful about handing any agent your cards. Shopify and Walmart are going the other direction...

Every retailer wants AI agents, and very few have data an agent can use. Abhi Sachdeva, co-founder and CTO of EKYAM, has spent 18 of his 24 years in technology inside retail, running tech at 1-800-Flowers, Tory Burch and QVC. He joins Rick to explain what data readiness requires and where retailers keep getting it wrong.

A data lake stores rows. It doesn't tell an agent what those rows mean or which system to trust, so the agent picks up the first answer it finds and presents it with full confidence. Ask a retailer for its customer count...

Rick Watson reports from the Retail Club AI event in Huntington Beach, which he's calling the source of the agentic fog he first described at Shoptalk. This is the second stop in the on-location series that started there.

It's hot, there isn't much shade, and lunch is small portions from a handful of food trucks. The talks are better. More presenters are now separating the places where AI fits from the places where it doesn't, and Rick says the startup alley has been the strongest part of the show.

The booth he keeps coming back...

Hairstory launched at the end of 2015 selling online to consumers and hairdressers across the US. It collected sales tax from launch but registered in only a handful of states, so for about a year the tax it owed everywhere else sat in a separate bank account and kept growing. Catching up, even with Avalara's help, took months of pulling order-level data for each state's forms, work that fell largely to cofounder Erica Halliwell, who had taken on sales tax with no background in it and says it left her in tears at least once.

Erica and Katie...

The FTC says Amazon ran an ad auction, got an answer, then replaced it with a higher price it set itself. The complaint landed in Seattle on August 31 with 22 state attorneys general attached and runs 181 pages. The agency puts the money involved above $20 billion.

Amazon answered the next day with a blog post. Average winning bids on its search ads fell 50% between 2019 and 2025, it said, while the inflation-adjusted price advertisers actually paid held flat. Both figures are Amazon's own. A 50% drop in winning bids should show up in what advertisers pay, and it did not.

...

The FTC and 22 state attorneys general are suing Amazon over its ad auctions. They say an undisclosed soft reserve pushed up what 1.2 million advertisers paid and cost them more than $20 billion since 2019. Amazon says CPCs stayed flat after inflation, conversion went up, and nobody was harmed.

Rick Watson and Jessica Lesesky go through the complaint, Amazon's same-day rebuttal and its Genesis-style blog post, why Chair Andrew Ferguson picked this fight in a midterm year, and what Amazon's struggle to grow CPCs means for the fees and ad formats sellers will see next, including sponsored prompts.

...

Every CIO has been told to invest in agentic AI. Nobody has told them how much to spend or when.

Shawn Mandel is working through that decision right now as CTO of Dentalcorp, which supports more than 650 dental practices across Canada and, since July, the US. He joins Rick Watson for a Watson Weekly webinar on technology decisions in the agentic era, alongside Jason Cottrell, founder and CEO of Orium and president of the MACH Alliance, and Anatolii Iakimets, director of product marketing at KIBO.

Shawn has lived through cloud, mobile, big data and the...

Dollar Tree's everyday basics grew almost 6% last quarter. The discretionary side, toys and seasonal and party goods, grew under 2%. Dollar Tree and Dollar General reported the same day, and both chief executives worked hard to tell analysts the spread doesn't mean what you think it means. Dollar General credits its share gains to households making over $100,000 a year and raised full year guidance. Rick's read is that a retailer winning because the economy is bad has borrowed the quarter and pays it back later. The more durable move is the $1 frozen set sitting on top of DG Fresh, because...

Anthropic has moved into commerce. On September 2 it put an open-source blueprint on GitHub for building a shopping agent and a merchant agent on Claude, with demo builds for retail, travel, telecom and ticketing. Rick Watson and Jessica Lesesky have about 50 years of e-commerce experience between them. By their count, the co-authors behind Anthropic's commerce memos add up to roughly four.

Anthropic says pilot customers saw carts up to 35% larger and 60% more completed purchases. Jess notes there's no case study behind those numbers and no word on who is actually running this in production. The hosts think...

Andy Hoar thinks the industry is fighting over the wrong ground. The storefront and the last mile get the budget because those are the parts a customer can see. Andy's case is that in B2B the money sits in the middle miles, the stretch between the click and the dock where pricing gets calculated, inventory gets allocated and orders get tracked. Bots are already good at that work, in part because the buyer never sees it and doesn't much care how the result arrived.

Andy cofounded MasterB2B, wrote Forrester's first B2B playbook, and his...

Retail's second quarter doesn't compare to anything, and the reason is a refund.

In February the Supreme Court ruled that the emergency powers law behind the White House tariffs never granted the authority to impose them. Importers of record filed to get the money back and it landed in Q2. Walmart was eligible for roughly $2.9 billion. Home Depot took $730 million. Target booked a $994 million pre-tax benefit. TJX got $331 million, Kohl's $100 million, Lowe's about $80 million.

That put a private question on a public earnings call. Shopper or shareholder. Home Depot ran roughly $685 million of its refund...

Walmart ran 11,000 rollbacks last quarter, roughly double the same period a year ago, and the money paying for them comes from a business most of its competitors don't have. Advertising and membership now account for about a third of Walmart's operating income and grew 38% in the quarter. Rick Watson and Jessica Lesesky go through what that does to everyone on the other side of the table: suppliers facing another round of concession requests, grocers without a profit pool deep enough to fund a price war, and Target, which took its tariff relief to the bottom line while Walmart handed...

Kyle Bertin thinks the industry has the returns conversation backwards. His company, Two Boxes, builds software for the section of the fulfillment center nobody wants to walk into, and his argument is that returns are an inventory management problem. He calls it the least optimized inventory pool most merchants own.

The math he runs uses a hypothetical $100 million apparel brand. A 25% return rate sends $25 million of GMV back through the door, and at the 50% restock rate he sees in unoptimized operations, half of that never makes it back to full-price sale. Bertin says 80% restock is achievable across...

Three years of the Watson Weekly, and Rick Watson and Jessica Lesesky mark it by doing the one thing a retail show almost never does on air: putting a grade next to the stores they actually shop.

It is a tier list. S through C, live, no rubric shown to the audience. Alo Yoga takes the only S, on a hundred-plus stores, international expansion into London and Korea, and a King Street address in Charleston sitting between Skims and Gucci. Rick admits he was a hater first. Amazon lands at A on the strength of everything that...

Walmart collected about $2.9 billion in tariff refunds and spent it on roughly 11,000 rollbacks in Walmart US. Transactions grew and operating income rose 28.8%. The comp still slowed to 2.6% excluding fuel, the weakest quarter since 2020, with the softness concentrated in lower-income households. Walmart raised full-year guidance on the assumption that the second half improves on the back of that price investment, which puts a refund that will not repeat into the base of next year's math.

Lowe's earned $4.27 a share on $2 billion more revenue than last year, when it also earned $4.27. Comparable sales rose two tenths of one percent...

Spirit shut down on May 2 with roughly $8.1 billion in debt and about 17,000 people out of work, and the estate has been selling the pieces since. A court approved 22 LaGuardia slots to JetBlue for $58.5 million in July. Last week's lot was the data. The August 14 notice out of the Southern District of New York itemizes 100 million emails, 500 million Microsoft Teams chats, around 30 million lines of code, pricing from 7.2 billion competitor flights, 7.5 billion passenger transaction records going back to 2008, and more than 175,000 employee records dating to 1986. Google says a third party will scrub personally identifiable data before the handover. Rick thinks $10...

Rick Watson and Jessica Lesesky work through the reported talks, and Rick lands firmly on the skeptical side. Stripe grows around 34% a year by the hosts' count, throws off billions in cash flow, and has spent years buying up pieces of the stack, including Indie Hackers, Payable, Index, and Lemon Squeezy. It runs in stablecoins, crypto, and AI routing. The one thing missing is a consumer relationship, which is what PayPal and especially Venmo are supposed to supply. Jessica's counterpoint is that the PayPal button already lost that fight to Apple Pay and Google Pay, partly because she forgets...

The storefront stopped being the differentiator. Kibo CEO Ram Venkataraman argues the money and the difficulty both moved to order management, and that most B2B distributors have an OMS problem they have no name for.

Rick opens on accountability. An autonomous agent takes an order, routes it to the wrong warehouse, approves a return it shouldn't have. Who owns that outcome? Ram says shoppers will blame the retailer every time, and the burden falls on vendors to build systems that earn the retailer's trust. He also draws a line most vendors blur. Kibo's routing runs on...

Ryan Cohen may pull the $56 billion eBay bid. Bloomberg reported Monday that GameStop is weighing a partnership instead, opening roughly 1,600 stores to eBay for cards and collectibles while taking board seats. Reuters could not independently verify it. The 9.8% stake GameStop disclosed in July is what makes the governance ask possible.

QVC is out of Chapter 11 with more than $5 billion less debt, a $600 million ABL facility, and Mike George back as interim CEO. Creditors took equity and equity took seats. The one name worth watching built TikTok Shop.

Numerator puts 22% of US households on a GLP-1...

Amazon put up $200.6 billion in second quarter net sales and still ran negative free cash flow. Rick Watson and Jessica Lesesky work through the quarter Amazon would like read as a straight growth story.

The reported numbers: net sales up 20 percent, income of $27.5 billion, advertising up 26 percent to $19.8 billion, online stores up 15 percent to $70.4 billion. Trailing twelve month free cash flow came in at an outflow of $7.6 billion. Sitting alongside all of that is $53.4 billion in non-operating pretax income, a good portion of it paper value on Amazon's Anthropic position.

Then the $496 billion AWS backlog...

Going global stopped being a phase-two project. The brands winning now are global on day one. Going global profitably is the harder business, and the levers that decide it are the ones nobody puts on a slide.

Matthew Merrilees has spent two decades on the operational side of cross-border, starting at DHL and now running North America for Global-e. He and Rick walk the international P&L line by line. Payment acquiring, which is bigger than most operators assume. Duty and tax. Classification. Drawback.

The math changed underneath everyone. US de minimis went from $800 to...

Four companies reported. Three of them are paying more to grow.

UPS did $22.8 billion in the second quarter, up 7.6%, raised full-year guidance, and watched the stock fall 6%. The model right now is charging more for fewer packages, and domestic operating profit took transformation charges on the way through.

PayPal put up $8.68 billion, up 5%. Volume keeps climbing. Take rate and operating margin keep sliding. Buybacks are doing the work of holding EPS flat.

Amazon hit a record $200.6 billion quarter with strong AWS growth, though part of the earnings line came from a paper remeasurement...