The Jason & Scot Show - E-Commerce And Retail News

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Join hosts Jason “Retailgeek” Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Founder and Executive Chairman of Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

Jason "Retailgeek" Goldberg, Publicis & Scot Wingo, Channel Advisor

    • Sep 18, 2023 LATEST EPISODE
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    EP311 - Video Commerce with Qurate's Brian Beitler

    Play Episode Listen Later Sep 18, 2023 49:56

    EP311 - Video Commerce with Qurate's Brian Beitler Brian Beitler is the Founder and General Manager of Live Shop Ventures, a video commerce initiative within the Qurate Retail Group, which is the parent company of HSN and QVC. Brian has also served as the CMO of Qurate Retail Group, in addition to many other interesting marketing roles in the retail world. We met Brian at Etail Boston and arranged this interview. We cover video commerce, differences in adoption between Western and Eastern Markets. The role of livestreaming, and the benefits of being a "commerce platform with video" vs. "a video platform with commerce." We also explore the origin on Live ShopVentures, it's first video marketplace on a mobile app, Sune, and the benefits on incubating a start-up within an established company. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 311 of the Jason & Scot show was recorded on Thursday, August 31th. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 311 being recorded on Thursday August 31st 2023 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:39] Hey Jason and welcome back Jason and Scot show listeners Jason as you know one of the most common questions we get from our huge listing audience is about live streaming with e-commerce is it a big deal why is it seem to be growing faster in the East versus the west and how important is it to live live streaming so we thought we'd get a expert on the show as a guest that could help unpack that for us all and you better than someone who's LED marketing for numerous historic Brands and served as the CMO for the mother of all video shopping sites QVC / HSN and so that's exactly who we found, we're excited to welcome to the show Brian beitler he is the founder of mobile V Commerce app called soon and the general manager of live shop venters both part of the Keurig group. And I'm not sure Jason but that's a lot of words in the title but I think it's maybe half of the words in your title but welcome to the show Brian we're excited to have you. Brian: [1:36] Grateful to be here and I'll work on trying to lengthen the title so I can keep up with Jason. Jason: [1:41] Set your set your goals higher Brian. Brian: [1:43] Thank you for having me. Jason: [1:48] Brian we are thrilled to have you and as our listeners will quickly figure out and we are eager to jump into all this video Commerce stuff but before we do we always like to give the listeners a little bit of perspective about our guests background and where they're coming from and in your case it's a super impressive retail / consumer background so can you can you give us the version that your mom would share with her friends in the elevator. Brian: [2:15] Happy to do so so I'll back up a decade or two but I started well where I consider I started my career was at Mattel that huge toy conglomerate in fact they're very popular right now coming off of a I think a major hit movie. It's doing very well. Yes I think so has the rest of the world at this point but I started my career there and fell in love with the toy industry and thought that's where I would really spend. My entire career when I left Mattel. In the early 2000s I at the time was leading the core part of the Hot Wheels brand a dream job as a father and a former young boy. [2:56] But I thought I would give myself a taste of retail in the toy industry so I actually left metallic thought I would spend a couple of years on the retail side working with it. A brand I knew we all knew and loved at some point in our childhood called Toys R Us and truthfully I the reason I'm here today is I fell in love with retail there, and what was different for me about retail versus consumer packaged Goods was just the speed of retail it felt like it moved at light speed compared to kind of course EPG brand management, and you know I often tell the story you know working in those days to change you know the package on a five car pack took a couple of years to get it to Market and. I joined Toys R Us and we had this idea to launch a birthday club and. At the time I went to the CEO of the company John I learned and it was how quickly could you get it in Market could you do it in a couple of months. And that and I was often running and in love with retail and so spent a couple of years there and then just continued to be given these remarkable opportunities to work with, really amazing Brands and helping them reshape their narratives with their consumers or and or finding new Pathways new emerging ways, I could grow I was you know there at Bath and Body Works when we launched e-commerce we redesigned the site as a marketing site decided oh we might be able to sell something. Through here and that's been my journey so from from Bath and Body Works to Kohl's department store. [4:24] Then my hand in the bridal industry and private Equity with David's Bridal and then women's apparel and you know fast forward. A few few years and here I am at curate Retail Group. Working in what I think is an exciting future for digital Commerce. [4:42] All of those roles you know usually leading the marketing you know the marketing or e-commerce function for those various Brands and learning a lot making a lot of mistakes a lot of mistakes I'm getting a few things right every now and then, and you know kind of Landing in a pretty exciting place here at grea where we think we're going to do something you know again interesting a new in the digital space. Jason: [5:04] Yeah and a couple of fun facts brand you've LED marketing for for a bunch of those Brands you just mentioned and while you were doing that I was nominally helpful in building a bunch of the the backend e-commerce functionality for those same Brands and so I think without knowing it you've hated me your entire life for all the the features you wanted and didn't get or the the the pace of evolution so I just wanted to apologize publicly for all of that. Brian: [5:34] I appreciate that. Jason: [5:35] But one of the things I particularly love about your career is is I have this theory that, you know though all of retailers has been profoundly disrupted by digital but not all at the same time and so there were there are industries that are disrupted a long time ago and there's you know if you're a grocer or a car dealer you're probably getting disrupted you know right now and I feel like you serendipitously or maybe intentionally have have been in a bunch of Industries. Right at the peak of their disruption so your Toys R Us when when shopping online became a thing and then urine Beauty when that became a thing and then you are you are in the the the heat of the the apparel Wars online and now you're you're squarely in the v Commerce space and it's you know one of the things we talked about the most on the show so whether you did that on purpose or not congratulations on on surfing that digital disruption wave. Brian: [6:32] No I appreciate that I think much much of it was serendipitous I would say that the pieces that probably weren't was my desire to always work for, brands that were leaders in their respective category or industry and as I look back and reflect that's probably one of the things that has been the most rewarding and probably given me the best. Growth is being able to work with you know brands that were at the Forefront Mattel at the time was the leader in in toy manufacturing still still are. Toys R Us at the time was the leader in toy retail Bath & Body Works was the largest kind of. Bath & Body brand at the time Cole's was it was a chaser of you know kind of the discount Department space and ran past JCPenney's and Sears and its competitors and so that for me has been exciting because you know I think being with those who build powerful platforms, let you learn from the best and you know here I said today with curate retailgeek which owns QVC and HSN. You know the largest livestream platform on the globe by far the industry, leader having changed the landscape of how you could use television to shop you know some 35 years ago and continued it for nearly four decades now so that part of trying to work with brands that, I felt were really leaders in their space because I thought it would be a great place for me to learn has certainly been intentional and then this digital Crossroad just happened to kind of line up and almost all of those places at the time I was there. Jason: [7:56] That is awesome and today I sort of perceive you you are on the Leading Edge of the curate retailgeek Roop with your current responsibilities and I definitely want to talk about those but if I have the story right before you took on your current role you also had broader marketing responsibilities for the core QVC HSN Brands is that. Brian: [8:19] I did I did that's that's right I joined you know curate retailgeek rupe. And 20/20 is the chief marketing officer for QVC and HSN are two largest video Commerce businesses, at the time and you know fast forward we obviously are in the midst of those businesses are in their own form of transformation and disruption right for. In some ways you know you talk about a Crossroads, ask for businesses you know having come through retail when e-commerce was exploding and and Retail foot traffic was being affected as people. Spent more time online and less time in stores if you look at where accurate retailgeek Roop you know is today right streaming has remade the way we View television and so we've had to remake our business, there as well primary our audience used to be almost entirely on. [9:07] You know on cable or we reach over 100 million households in the US we used to reach all of those almost on cable and over the last several years is as people have migrated from cable to streaming services we've migrated our business we still reach 100 million households, but today we reach many of those through streaming services because they don't have cable subscriptions any longer and so, you know joining another business who was in the midst of transformation again was was somewhat serendipitous I was excited about the future video and video Commerce had use that, extensively at kind of my two preceding roles and so part of the excitement of joining curate was joining someone who is at The Cutting Edge of this but to your point that's been migrating, and then as we look at the future we said Gee what places do we really own, from an e-commerce perspective and we own the 10 foot screen the screen that you see in front of you from a living room perspective. [9:58] We do really well on the laptop you know the desktop for for e-commerce shopping like most traditional e-commerce retailers but as we thought about the small screen that wasn't a place where we had really built, for the future yet we thought were really well positioned we could certainly see what was happening in in Asia and the explosion of Live And mobile driven Commerce. And realize that that was going to happen here in the west as well. And felt like we were in a position to innovate around that but we needed to put some real Focus around that so you know about a year ago I stepped out of my role as Chief marketing officer of QVC nhsn, to build live shop Ventures and ultimately to launch the soon platform that we're going to talk about today. Jason: [10:42] Amazing and and I for sure I'm going to get into that but I did think you could help us clear up a few just basic questions about the industry first a I now have some some Envy because your TV is 10 feet at home I'm kind of jealous but the. You you call that V Commerce and I'm just curious like I hear all these different phrases all the time I hear people kind of talk about live streaming when they they don't necessarily mean live and video like is there a preferred label that you guys like to kind of describe this, this industry. Brian: [11:18] For sure we love the V e-commerce label in fact we think V Commerce will be the new e-commerce and what we mean by that largely is that, more and more consumers shopping experiences will be driven by video in fact if you look at today's youngest consumer right gen Z or the Next Generation Rising almost all of their Discovery happens in a video experience. If you think about it and it could come from one of the well-known video players right who's in this space Instagram which has become largely video Tick-Tock who obviously has led the way there YouTube. All of these places if I think about and I have so fun fact I have six kids, the youngest is squarely gen Z 12 years old the oldest is Millennial 29 years old and I watched their journey and most of their Discovery right the new trip they're going to take. The next meal they're going to make the next product they're going to buy the next television show they're going to watch is all coming through their video feed. Yet in the e-commerce space we're still largely dependent upon static images and or in the physical space on boxes and shelf talkers and that's just not the way that the rising generation discovers. Anything new. Scot: [12:34] Yep ingredient it's interesting you have a built-in test bed is that was that part of your strategy. Brian: [12:40] I think that that if. Scot: [12:42] We need more kids I need to get another generation. Brian: [12:44] If you went back in math my career I did a pretty good job landing at the right Brands and price basis for my for my kids ages the only one they might say I got wrong was the bridal industry I was a bit premature on the bridal industry, but but you know as I look back so we do we talk a lot about be Commerce and that for us means live it also means pre-recorded, right it can mean you know things that are that are behind the scenes it's anything that really leverages video to help tell the product and Brand Story to a consumer in a way that helps them make better decisions and get to yes faster. That's where we see the Innovation going that's where we see all brands needing to play we think it will look different in the west than it looks in the east. And that's because different consumers and different markets and different level of kind of retail development but we think it'll be globally relevant over the course of the next you know five to ten years. Scot: [13:37] Brickell as the entrepreneur host on the program Jason's a big company guy he's a you can tell by his title. He's corporate drone and he doesn't know who he works for half the time over there there's like he's like I think I have a boss but I don't know I don't know who approves my expense report Seymour, that's how big is a company and you know one of my favorite books is the innovators dilemma where and I'm sure you're familiar with it where you know most companies like tear you they were super Innovative and really did a ton in the category and you know a lot of them don't make it it's interesting to me that you're now working for a company that you know obviously. Is working to not get caught in that in most companies don't kind of sounds like and I may be reading too much in this you you either put your hand up and said I want to do this or they said we need someone to incubate this and you volunteered I'd love to hear the story of how your kind of like starting this company inside of a bigger company that that's interact to excuse you know the extent you can share our what you want to do that that's always interesting to hear because a lot of a lot of big companies don't do that. Brian: [14:39] No I appreciate that you know we feel, you know we I feel honored to kind of be in an organization and part of a company that's trying to lead that way Forbes just named, secure it retail one of the you know the country's top three hundred Innovative companies right so we're recognized for having thought about this space and we've innovated over the course of the last, 35 plus years if you were to look at what QVC nhsn looked like 30 years ago they look very different than what you see today both in the way that we reach interact with customers and so you know the story here you know I'll keep it relatively 34 for time sake but we were looking at you know the future of curate and looking for where we think, you know girls could come from I was obviously looking at that in my core role as Chief marketing officer I let our you know our insights and analytics team and we were looking at the consumer and we're looking at the businesses and the ages of and cohorts of consumers where we did really well and where we felt like, there was opportunity for us and one of those that was clear was we had an opportunity with the younger consumer and unlike many many brands that will often make the decision to go how do we stretch our brand younger it's one of the hardest things to do our view was to say. [15:49] We have a core customer we love our QVC and HSN customers 50-plus their affluent they have disposable income they love to engage with us and Us in this way as we think there is, potential for growth with still the 50-plus customer we have plenty of, consumers who can discover our experience who aren't you a shopping there and we think can fall in love with it but we did recognize hey there's a there's a rising generation that's that's embedded and videos embedded in the way that they operate, why aren't we doing anything there so I did raise my hand and talked a lot about you know that consumer and about the power of video and our expertise and, you know that with. David Robinson who was a new CEO Who had who had joined us in you know late 21 had a knife or for growth and an eye for the digital landscape and. You know started he started to think about where our future would would would lead and he knocked on my door. [16:45] Early and 22 and and we started to talk about what the future could be and how we might do that and decided he decided to establish the e-commerce Ventures is a new unit inside the organization and I join that team to help, you know lead a component of our Innovative future and so it does take having. A CEO that's got a mind for Innovation and you know the ability to say we're going to make the investment necessary to do that so. You know this isn't one of those I feel you know grateful for the fact that I get to work in this call it an intrapreneur setting. We're not chasing you no seed series a series B series C where we're going as a company we believe that we need to invest in the future and this is one of the ways that we can do that. Scot: [17:29] Yeah that's neat that you still sounds like you get the flavor of kind of a start-up within a big company but you can use infinite resources you guys have. Brian: [17:37] Yeah and that we think gives us an advantage and that that's true I we operate we don't have an operation in New York I soon is based in New York right are. QVC is based in West Chester Pennsylvania HSN is based in st. Petersburg Florida. Right so you know we set this up in a new location so that we could operate as an independent and entrepreneurial company but knowing that you know. Just an hour train ride away I've got hands and resources and folks that can kind of help us get through some of the tougher things of getting something off the ground. Scot: [18:09] Yeah exactly now do you have a pretty wide aperture what you could do so you could you say hey we want to just try something real fast on Tick-Tock or is your mandate it kind of needs to run through one of the mother ships or tap into. Brian: [18:24] No not at all. Scot: [18:25] The mothership or something. Brian: [18:26] No we have a very a very wide mandate most of the team comes from Industries outside of kind of are. Our CORE family fact most of the town I've hired has not been former or current QVC or HSN employees they have been, you know team and talent here based in New York City most of them which is where we found the talent pool that, looking forward to kind of build this future and we have a pretty wide aperture to test and try and that's we say we've been up for for several months now we're still we largely consider this the beta version because we are, finding the things that we think will be the best fit for the market and create the best experience for both consumers for Brands and ultimately for creators because we do the reason we refer to this as a platform is, we don't see this as just a one-dimensional or two-dimensional relationship you know brand to Consumer retailer to consumer, but we're also trying to build a place where creators can build a livelihood as well where Brands can create their own content to connect with consumers and where we've built kind of a new way for consumers, the kind of interact and discover new brands. Jason: [19:32] That is awesome and so it sounds like the soon mobile app is kind of the first public release from live shot Ventures am I thinking about that right. Brian: [19:42] Yeah it's the soonest kind of our first public facing you know component of the platform we have components that are that will face Brands and that will face creators to help round out this ecosystem that we think. We'll create a new way for you know these different constituencies to meet one another in a pretty exciting and interesting. Interesting way and they'll be more to share I'm not going to share a ton about those back-end Solutions at this point but there will be more to share in the future as we as we continue to round out the experience, we think it takes to really make this kind of new be Commerce mobile experience. Jason: [20:22] Awesome so maybe you can help it like paint us a picture like what is the unique value prop of soon like is it live is if e-commerce like is there a particular category focuses on or what's the. Brian: [20:35] Yeah to know it's appreciate you asking so look at the core of what we're trying to do is take the the style of video that is loved by a young consumer set column you know. Gen Z too early young Millennials we can't digitally native consumers what we mean by that that's a buzzword everybody said but we simply mean people that seem to have been born with an iPhone implanted in their hand, or some sort of device and if you go back up to 2007 when the iPhone and these devices launched we're looking at people to kind of get there. Hit their teens or younger in that view I look at you know the way that they navigate and that's kind of our core audience because they've grown up with this fat. Device being their primary form of discovering the world so that's our Target so our goal was to build. [21:23] An experience that would make sense to that to that audience so would be short would be fast could would be personalized. I would include the kinds of voices that they're used to hearing from that they trust and that they find credible. Would give Brands a place that are searching to find a pathway that are working so hard to build there. Their products but are can get caught in the jungle that are the very very large marketplaces would give these younger Brands these Innovative brands of place to meet the consumer and to be discovered and to be seen and to have their whole story told. You know it's one thing to just become a product listing on a. On a massive platform like Amazon or Walmart it's another to be able to have someone who understands the consumer tell your brand story so the value prop is to really build what we think is this entertaining. [22:13] Joyful serendipitous shopping moments where you can just discover Brands when you're when you're on the go we think. In some ways part of what. So wonderful about the e-commerce experience is also what's so difficult about the shopping experience and what I mean by that is e-commerce made it easier than ever to buy something. It also made it very difficult to just go shopping and if you think about the experience we used to love as teenagers by the way that gen Z teenager still allowed which is the notion of wandering a physical location a mall or a Target or pick your brand or. You know any of those physical experiences where you can just wander and things just inspire you and you you may have gone into by something you may have had an idea in mind you may have not had an idea in mind. But it was fun and it was a Pastime and it was, enjoyable just to go shopping digital Works differently digital is great if you know I need I need luggage for my trip to Europe I'm getting a backpack I'm going to take a three months and traveling through Europe. [23:18] You can go to the internet and I'll help you find the best backpack in the most array of choices at the price but if you just. Want to sit back and shop and so our goal was to build a platform where the Serendipity of shopping could come up again you could just thumb if you're standing in line at the. At the Starbucks or if you're standing in line at the store you're standing on the platform in the subway station, or you're sitting in class and you're done listening to the professor and you just want to see what might be in your feed that's relevant to you this could be as fun as opening Tick-Tock or opening Instagram. This would be opening shopping for the joy of. Jason: [23:52] I love that there's a this entrepreneur Julie rain Wainwright who founded real real and I don't know if she actually said this but she's always attributed with his quote the internet solve buying but broke shopping it's I. Brian: [24:06] It's a great quote I've heard I've heard that quote I'm not sure if it's hers or not either but I fully subscribe to and that's and that's the reality and so this is a way to bring it back in a way that we think is relevant to you know this. Young emerging audience who's up who's about to have a lot of spending power. Jason: [24:26] Yeah now I'm curious you've talked about this as a platform and it sounds like it's what I would think of as a sort of two-sided market place that you both have to you know recruit and keep happy a bunch of world-class creators that are creating content and you've got to recruit and keep happy in audience that consumes that content and buys stuff that shows up in the content and my am I thinking about it right in terms of it being a two-sided marketing challenge. Brian: [24:54] Yeah I think I think we've called three-sided because we think he have to keep the consumer happy you have to keep the brands and their Founders happy and then you have to, you know create something unique and special for creators who may or may not work directly for the brand that they're going to create content for, and so our thought process is thinking about all three of those audiences as we build and it's why you know we don't see this as a, you know as a Sprint but is building something that we think will be lasting because we're trying to build something that's going to be relevant and meaningful to all three of those participants in the platform. Will you operate as a marketplace right so we're not buying retail we're not buying inventory in the traditional sense right we're building the destination we're working to drive consumers to the destination we're working to source and find great creative talent that we think can build the right kind of content and then we're looking, and reaching out into the. You know into the Reit into the brand landscape to find Brands and products that we think would do well with this with this audience and so we got all three of those things kind of. You know working at once if that's not easy but sometimes the most rewarding things are difficult. Scot: [26:04] Yeah absolutely the marketplaces are hard because you're kind of building to businesses at once you get kind of the consumer and thus the demand and the supply side it can be. But once the network effects it going it's a great business but sometimes it's hard to kind of kick start them do you feel like you guys are at kind of like that product Market fit or you're still kind of. Experimenting and figuring out or like. Brian: [26:25] Yeah we think you know what we're excited about today is the engagement from the number of brands that have come on our platform has gone much faster than we expected. The consumer You Know download and engagement we're in that that nice stair-step each month each week of downloads, increasing on the platform so we feel that we're moving very strongly towards that you know that market fit place but that's why we say we're in beta right well when we're, one more there will declare that were there and we'll change the even the way that we go to market even more aggressively but we're excited about the early signs both the excitement from creators excitement from from Brands who come on board, and again the excitement from the early consumers who have engaged with us the early adopters and starting to experience the platform and so all of those things right now are very positive and. Giving us a lot of optimism as we think about the future. Scot: [27:25] There's wear it sometimes, great to be in a big organization when you're ready you can say hey we need a little distribution and suddenly you know you can you can turn that funnel on you got to be going to make sure you're ready for it and it sounds like you probably haven't you know you should definitely get out of beta for you do that but then even you know even you know how do you do the shoots the right way and you know, inside the work there's tons of just knowledge around streaming and video quality and I'm sure there's some interesting craters that overlap that would be fun to tap into it even brands that you know I'm sure if you were looking for a brand it's much easier being part of the larger or more brands are going to take your call versus you know Joe's startup LLC. Brian: [28:11] Yeah yeah I would say one of our I think that's well that's well well said one of our advantages right is the reality that for you know, for decades we've been helping small Brands become household names become very large businesses because we understand the power of live we understand the power of video and using it to help. [28:30] You know a Founder commercialize their their story and help it reach and reach an audience and so. For sure that is valuable as we talked to Brands who go hey this isn't you know this isn't just somebody out of there, out of the corner of their garage going hey we've got an idea for the future of video shopping this is you know the the leader in video and live shopping who said hey we're going to build a new platform a new experience for a new audience and, we're going to bring our expertise to video shopping to that to that platform and we're going to help you learn how to do it as a brand we're going to help you learn how to do it as a Creator both of those things have been very important, add helping us you know get to yes as we don't get a lot of NOS as we have conversations with Brands right now we get a lot of people excited, even in this early Journey even recognizing that we're in the beta phase because they believe in the business where you know we're over 300 Brands already interested in on the platform, at this stage and you know we're early on we launched in March. And so it's not been hard to get people excited about the potential here and I think part of that is because they can look to the parent of who's building this, and who's making the investment. Scot: [29:46] Yeah very cool would you say so that made me I'm a huge shark tank junkie and I always love when Laurie's on there because she always has that trump card of like, I can probably get you on HSN and everyone's like who so she could tend to get a good deal so then it made me think are you dealing with Challenger Brands kind of like you know things we people maybe haven't heard of or is this kind of like you know Kate Spade or whoever I don't want to go into details but like more long-term brands that are just kind of looking for a fresh new channel is there. Resonating. Brian: [30:22] Yeah so we have a lot of what we call emerging Brands and we can define those in a couple of ways right so there you know I'm an emerging, might have been around for 10 years or 15 years but they're just very tightly, geographically located maybe they just had a couple of stores and a little direct consumer website but they weren't really propagating their brand through there, back in the emerging and we have several brands that look like that we also have Brands there. Relatively young this could be year 1 year 2 year 3 right and they started as a direct consumer brand and they're looking for other points of distribution and other places to be able to tell their story. [30:58] But we've not preclude ourselves from from other brands that are better known and more, National in nature because again at the end of the day you know where our Focus has been, I'm in the early days is and it's because this is this is an area that works really well and video right or proper products that are problem solution oriented products and, Kelly's are great Brands who innovate and develop some new products that solve a consumer problem those do really well in video right now and if you think about, all the you know Tik Tok made me buy it friends you know so many of those products are built around the idea of hey we've got a new solution, a problem that you have or we've got a new take on solving a problem that has been solved a bunch of other ways but never quite solved this way those are the kinds of products and brands that do really well and we find those both in this emerging space and we also find. You'll also find it in some more established brands. But the focus has really been can we bring consumers content that's interesting to watch because what the product does for a consumer is. Have itself useful and highly valuable and that's if you spend some time on the app you'll see a lot of products, better focused in that in that regard and so you know we've not been exclusionary and by any stretch of the imagination but we do have a lot of young and fun emerging brands with some amazing Founders and some amazing founder stories behind them on plan. Jason: [32:23] That is awesome and Brian a fun fact about Scott like most people watch CNBC for Shark Tank and then they accidentally stay on for for Jim Cramer Scott's the one guy that watches CNBC for Jim Cramer and then accidentally. Brian: [32:37] Technics days I'm free. Scot: [32:38] I watched a shark fresh shark tanks on ABC come on. Jason: [32:41] Yeah. Fair enough Earth but inside not I keep telling Scott Scott keep saying hey we need to get on On Cue be on Shark Tank to get into QVC and I keep telling him that curate retailgeek has great merchants and if you have awesome product you can get in regardless of what whether you know a shark or not. Brian: [33:00] And that you know what that's so true Jason that in the reality is is that again if you have a great product curate wants to hear from you and that's and that's the truth and you know we understand what works well for our audience and we understand what works really well. For the video platform and if you bring it you can find your way there I will tell you we get a lot of submissions and for obvious reasons. But yeah you absolutely could find your way there without getting on Shark Tank although a little bit of notoriety never hurts. Jason: [33:30] Know for sure so I'm curious about a tactical element of soon it seems like you made a conscious decision to natively be a nap and and on the one hand. Like man you look at all the data and mobile apps are where it's at like that the overwhelming majority of all minutes spent on mobile devices are an app's you know the top apps have the best engagement and all this stuff but the flip side is, it's a brutally competitive space and it's like really hard to get people to download the app and then it's really hard to get them to to reuse it like I'm curious did you guys. Like debate about a mobile web experience versus an app and and decide that that's where you needed to be or how is that played out for you. Brian: [34:15] Yeah so we absolutely did they say it was probably one of the one of the bigger conversations right as we thought about our future and our Direction working with my team and and. Our partners to think about hey what's the best way to go forward and build a new shopping you know destination and we certainly researched all the hurdles. As well but we saw all the things that you highlighted in the beginning right the notion that, more time is spent on apps particularly from from the target audience we were going after the engagement is much higher the commitment once you have it as much stronger all of those elements that. This is going to be a heavier lift but it's going to be the right lift for us and. And we have to be committed we know it's going to take time but this is going to be the right lift because inside that app also it just gives you the flexibility to do and create some experiential things that just aren't as as. [35:12] They're just not as intuitive or as functional as they are in a mobile web app. Right so you know I'll give you I'll give you one of the features that we love that's just really hard to do in mobile web but amazing an app so you know part of our vision was to be able to create this window, shopping experience again right to bring the joy back to shopping we're literally as you thumb through things consider each one of those swipes the window, write as if you were walking down your favorite shopping destination and you know there's an amazing product with an amazing Storyteller so instead of being on a mannequin in a fixed window it's by a voice that, you know has some credibility and authority and as they tell you about that but what if you want to see more from that brand well you just swipe left. And you're into that brand store. Or what if you want to love what if you love this soon said what if you love this Creator we call them soon satyrs that's telling you the product and you want to do you want to see more will you just you know tap the screen and up comes all the video content that that person is created, doing that in a mobile app mobile apps just don't have the same kind of tactical functionality that you can build inside of an app I'll be realized, part of this if we were going to build a new experience we needed. [36:22] The flexibility in the capabilities to be able to use everything the mobile device gives to you you know ultimately we don't have haptics in our experience yet we will you know they're all those things that are that are native to the app experience that you know. Is opened up an iPhone and ultimately Android which are not on yet but will be in the future. That we wanted to be able to have access to to give it the richest experience even knowing we'd have some hurdles and getting apps downloaded keeping them on the device and getting people back to him. Jason: [36:52] I got it that totally makes sense another one that comes up a lot in a specially you mentioned it seems like adoptions a little earlier in China so I watched the Chinese Behavior a lot to sort of see a bit it predicts how things will evolve here and it's interesting there are amazing social platforms that had huge engagement that are all pivoting to become shopping platforms right so that's by dance that's we and then there are amazing Commerce platforms like Ali Baba and Team all that are kind of pivoting to become engagement platforms and so that's why you know ding dong live and Ali Baba live and all of these these things like I'm kind of curious do you have a position like in the long run what wins right being a a platform that has a lot of video engagement and adding Commerce to it which in the u.s. I guess that could be. Tick tock on Instagram or is it a platform that really is good at Commerce and adds adds the video engagement and so you know maybe that's that's obviously but Amazon or Walmart and then I assume like The Perfect combo of both of those is of course you guys. Brian: [38:00] Yeah so I'm not trying to sidestep but here's what I'll say, video wins video ends and I'll come back to it and here's a here's why I say that so do I think you know Tick-Tock and Instagram and all those who are building you know shopping experiences into their platform, have an opportunity to win and do conversate for sure do in fact I'll give you an example I often share. With you know Brands and others as I'm eating and it's a very simple question for both you Jason and Scott have you ever bought anything while you were in an airport. From a retailer awesome have you ever gone to the airport have you ever gone to the airport to go shopping. [38:36] Right so the reality is that airports have a purpose right which is they help you get from one place to another and it's a very valuable part of your life experience. But what airports learned is have had a lot of people in my space I'll bet if I put some stores in here for you those people will buy something that is for sure going to be true with these social platforms they have a lot of people in their space. [38:59] If they create opportunities for people to buy people will buy but the purpose for opening Tik-Tok is not to go shopping, and people are finding Pathways there because that's like that's a place where I'm at and I'm learning their shopping there so now I can do this so I know if I'm Atlanta I like Ferragamo I know in the Atlanta airport there's a Ferragamo so I can find my way there. As a as a consumer and make it a point to go there when I'm in airports where I know the brands that I like are at, but that's very different than then going to your favorite neighborhood street or going to your favorite you know mall to go to go shopping and so we think those places exist on the other side you have right you have what's happened in the physical space that's taking place in the digital space right so malls have tried to figure out hey shopping isn't enough to get people here I need restaurants and entertain I need other things that are engaging, and team on everybody else is going to go down that pathway as well and go hey, if I want to keep people here I need I need things that are engaging because consumers are expecting more well-rounded experiences from all the places that they go and so our viewers to say listen if you know let's just build something, that recognizes that that's what the consumer needs and wants and create a place we're going shopping and being engaged and being entertained is, in and of itself the point the experience and we believe there will be space for that for an experience like that but I think I think Commerce is going to happen. [40:25] In all of these spaces if you bring video to them I think it's going to happen on on you know brand own websites as they bring video that's the that's the core of it, and again if you step back and go well gee how much space is there you know retail such a fixed base well that's what we all said. You know 20 years ago when e-commerce showed up like e-commerce can't grow the retail space there's a fixed space it's going to be you know give some take some. At the end of the day retail is just larger as as the platforms and places, have continued to evolve and to explode if you think about the difference between where we are and you know where Asia is and where we see the Western markets I think part of this is understanding that I think Asia is unique in that there. Retail ecosystem you know take China it's just very different. From Mars when you consider the scale their population and how much of that is urbanized versus still you know in more agrarian spaces and so it's not exactly the bear to make the comparison between. [41:25] Those two spaces and you know they have different tastes and different preferences and so I think for us in the u.s. I think part of the difficulty has been we've been trying to apply. A formula from Asia to Western markets versus saying hey what's the formula that's right for Western markets and video. And let's let's take stock of understanding what the Retail Landscape looks like here what the consumer behavior and preference for shopping looks like here and then how do you build something that's around that I think brands are starting to figure that out I think we're, you know we're just at the corner we're probably today where e-commerce was in 2001-2002, right so we're on the verge of exploding but if you remember back in those days there were a lot of brands that we're saying yeah we're not going to need any Commerce site. And and then five years later everybody in the country headed e-commerce site. Scot: [42:17] Yeah that first of all you should have qualified your question I'm pretty sure Jason is gone to airports just to go to the Starbucks. That much of a Starbucks not or are you just like is muscle memory for him he's like I want to Starbucks he just ends up at O'Hare and he's like oh oh I don't have a flight but man this this latte is delicious. The so I started a company Channel advisor andqvc was an early customer of ours and I got to go on that behind the scenes tour where you can watch the production room and it blew my mind as an e-commerce person because it was like this pure intersection of data meet Stevie because you know the talent on are would have a may be mic'd up, and the producers say when you talked about you know how the vest feels they watch this I think it was like orders per second some velocity. And they would tell him to talk more about that and if a product didn't make a certain velocity there like next so it's really so I'm kind of thinking you know can you guys because you're you've got both sides of the marketplace are you giving your creators some really interesting kind of youqvc any HSN informed data on on you know. How how to make a better video and sell more product and that kind of thing or you may be too early in your journey but it seems like you guys Doug be like right in your strike zone. Brian: [43:40] No that's the you know that's part of the secret sauce that's why we're so excited about this space it's taking that learning and absolutely the analytics right that we're putting in place and ultimately the. That algorithms that will drive right the personalization feed and the coaching that's given not just to creators but then ultimately to Brands is all built around enabling their ability to be as effective as possible at producing a video and what works depending on the category so. That's core to what we are doing at Stone is using data to drive decisions around content to drive decisions around. The speeds that ultimately will be will be you know shared with consumers right to create as much likelihood or much potential for success as possible and you know you you hit on the head Scott right part of this and part of what's made. You know curate successful for so long is that what seems very soft. Is very data-intensive and using data to make those decisions and we see that as being one of our core attributes in our core advantages is a boat as we build. Jason: [44:51] That certainly makes sense Brian I'm sad because I know we're running up on time and I have one more topic I want to make sure I get in which is this whole debate of video versus live video and I know you do you think about QVC and there's a lot of scarcity built-in which makes the the live model make a lot of sense and in China a lot of it has scarcity of deals and things in the u.s. I hear a lot of people calling things live that aren't even live and so I'm just curious like what you know do you think it needs to be live or is it a place for both like what how do you guys feel think about the live versus store and play video Commerce. Brian: [45:32] Yeah so we use both at soon so we think live live has a role in the sense of creating excitement creating a bit of scarcity also creating the the Serendipity the moment and the authenticity and organic and credibility of the content most of the content. In our mind is shot or created live meaning we're not trying to do a bunch of takes and a bunch of edits of the work in fact I tell people all the time I said it's part of the magic of one of the longest running show Saturday Night Live it's one of my favorite shows maybe maybe part of your audience loves that show as well as right it's taped in front of a live studio audience and part of what makes that show so engaging. Right is that reality and the fact that there's room for errors or groom for mistakes you know you may see one or two but it just feels so, in the moment we think that matters a lot in the experience but today. I don't know I don't know the facts but I suspect a lot of SNL is watched after the fact. [46:29] But the fact that it was shot in front of a live studio audience is what makes it so engaging so what we think about video we talk about it live here we often mean look what we want this to feel is live like meaning it should feel like you're having a fantastic conversation sometimes it will actually be live. But the vast majority of the content is going to be consumed post life because let's be honest gen Z doesn't really meet anybody for an appointment anymore from a from a watch perspective right they watch things on their own time when it makes sense for them, and it fits into their their life that doesn't take away from the fact that if the offer is big enough, for the products right right they'll show up in force for a live moment and so we believe that you need both in order to. [47:15] To create something that's compelling but for us you know largely what we think matters is creating content that is done by people who really know how to speak, can do it in one take right because you know they're good at what they what they do and can bring that level of Candor to the. To the content and that's that's what we think really will resonate candidly with people of all ages we don't think this is that's just specific to young people that's specific to everybody, we love candidness, we love I think you open the podcast here saying Hey listen if you make a mistake or two we're not going to stop and rerecord and all those things right and you're going to listen part of what makes this so natural is when it's. Captured in the moment we think that's true for video Commerce as well. Jason: [48:00] That I love that that that's a perfect way to sort of describe that the approach it makes perfect sense to me side note the reason we do that on the podcast is because Scott makes so many mistakes that we couldn't possibly go back and fix them all. Scot: [48:15] Hey I think Brian was saying we're influent we're popular influencers that's how I. Jason: [48:19] I feel like he's like as an l and the Jason and Scot show are the two. The two top top tier entertainment vehicles I think that's very fair but Brian I'm super sad to report that we've used up our allotted time this has been a great conversation and we sure appreciate you taking time to talk with us. Brian: [48:39] I appreciate you having me on the show thank you so much guys. Scot: [48:42] Brian if folks want to learn more about your online thoughts or you are you an influencer yourself do you publish somewhere or you just want to encourage them to check out that. Brian: [48:54] No you so you can absolutely follow me on LinkedIn for sure I do Post. On occasion I'm not an avid poster right now because my head has been down here but please do that and then again I would encourage you to download soon if you have an iPhone you can visit us at soon dot live too. Hear more about this if you're a brand and you want to be a part of it part of what we're doing here please go to soon dot live you can fill out a form and and someone from our our merchandising team will reach back out to you for fairly quickly and get you connected but. Yeah thank you again for the time. Jason: [49:30] Brian we will put all those links in the show notes for anyone that wants to follow up with soon and until next time happy Commercing!

    EP310 - Sam's Club VP E-commerce, Sabrina Callahan

    Play Episode Listen Later Sep 6, 2023 40:20

    EP310 - Sam's Club VP E-Commerce, Sabrina Callahan Sabrina Callahan is the VP of E-Commerce at Sam's Club. She participated on a panel at E-Tail Boston entitled "Humanizing your brand through effective storytelling". After her panel, she sat down with Jason to discuss all things digital commerce at Sam's Club. This broad ranging discussion included: Mobile's impact on shopping Challenges and opportunities of membership clubs (and their unique access to data) Role of omni channel Connecting digital marketing channels to digital experience Building a brand for Sam's Club in the digital era Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 310 of the Jason & Scot show was recorded on live from e-Tail Boston on Tuesday, August 22, 2023. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:23] Welcome to the Jason and Scot show this episode is being recorded live from e-tail Boston Trade Show on Tuesday August 22nd 20:23 I'm your host Jason retailgeek Goldberg and unfortunately Scott wasn't able to join us so you're getting twice the Jason for the same great price which if you think about it is double the value. And while I know it's disappointing to miss Scott we're making up for it by having a way better guest I'd like to welcome to the show Sabrina Callahan who's the VP of e-commerce at Sam's Club. Sabrina just completed a panel here at retail and titled humanizing your brand through effective storytelling Sabrina welcome to the show. Sabrina: [1:04] Thanks for having me Jason. Jason: [1:06] We are so excited and I'm hoping this ends up being a permanent replacement for Scott. Sabrina: [1:09] I think I'm up for it I've heard him so I think I could do it. Jason: [1:12] I feel like in the first five minutes you're way more interesting and pleasant than he then he he's kind of a curmudgeon. Sabrina: [1:18] I'm not I'm just not even going to say anything but just know that I'm ready. Jason: [1:20] Smart so before we get into all the meaty topics I always like to let listeners kind of get to know the background of the guests a little bit so did you work for Sam's Club straight out of the Cradle how did you come to Sam's Club. Sabrina: [1:34] Surprisingly no not right out of the Cradle. I've been here for the last four and a half years and Jamie rule mark my five year so I'll get the coveted 5-year badge but kind of backing up all the way to, my background I was born and raised on a small farm in Kansas. Jason: [1:53] And in Kansas a small farm is like 100 acres right. Sabrina: [1:57] Yeah exactly so I grew up on the farm grew out in the field by somebody dad does all of the crops and my uncle has the dairy so I was out on the tractors driving the semis trying to not get myself. Killed you know all of the fun things that come along with Farm life and left went to University of Kansas. Chuck that's exactly right that's Rock Chalk. And then graduated in journalism and then made my way down to Dallas so as much as I love Kansas and small-town farm and and everything I wanted to kind of experience, bigger city and been in Dallas ever since and we love it there so worked at a start-up in the beginning my entire career has been in digital and marketing and brand and social media and everything that goes kind of along with that storytelling and driving digital performance so I was a star but at startup and then I went over to Hilton corporate and was there for about seven years loved it there I think I. Jason: [3:00] Are you okay this event is a tan on Hilton property. Sabrina: [3:03] I know listen you're not supposed to say it don't say it. Jason: [3:07] To our loyal Hilton listeners were sorry. Sabrina: [3:10] But what if he found out I was staying at the Hilton and walking all the way over. True loyalty rate my shoes weren't word up for it today but no I was at Hilton for about seven years I loved it there and really grew up there and they took a they took a lot of. [3:28] You know bets on me and allowed me to thrive I was there in the e-commerce space really when they launched the pilot of e-commerce, and and got to work with some of the biggest hotels, in the world with them and a lot of great opportunity got to start managing people you know they kept growing me and investing in Me And It ultimately LED I was in the e-commerce space for the majority of the time and then It ultimately LED to driving and leading the social media strategy and Innovation for Hilton so it was across all 15 Brands and at the time. There was a lot of opportunity to kind of pull it together and say what's the role of social media, for a for a big company right not just hey we're going to go post but how do we think about the tech stack how do we think about the member feedback to drive business impact how do we think about, content and how do you think about influencers in the role of influencers in the partnership and understanding the rules of the Ft c-- all of the fun things that come along with that and then how do you make sure that, the Brand's all understand the value of it and lean in the right way so I got to present Hilton's first Evers social center of excellence and then that led to, a lot of opportunity that opened me up in the social space and I was on maternity leave with my third baby, when Walmart came knocking. Jason: [4:50] Wow congratulations on that by the way. Sabrina: [4:52] Yeah three babies is a lot especially we're in August right now and school starting so it's slightly chaotic around my house but still good so. No so then Walmart and Sam's Club came knocking and I didn't think I would leave Helton but I really had some fantastic conversations during my interview day and a lot one of the last ones with was with mr. Tony Rogers and have you met him before he's. Yes so you know you know. Jason: [5:26] Put my life in his hands on an airplane before. Sabrina: [5:29] Oh yes good luck yeah. That's good you're here to talk about it so that's good no and so we. We hit it off and they offered me the job and and four and a half years later it was a big giant move in a bet for me but it was obviously well worth. Jason: [5:49] Very cool and you've actually had some really interesting responsibilities at Sam's waiting up to your your turn responsibilities briefly talk about some of the projects you've been in. Sabrina: [6:00] Absolutely so his pitch if he will at the time was come build a 60 billion dollar brand with me. Now how can you say no to that so that was a fantastic first start and so coming in really we built the brand together I learned I think about 10 years worth of information from him about Brandon, three short years but we developed the brand so the look and feel the tone of voice the target audience we revamped all of the marketing channels including you know site email everything digitally and then really launched social media right so Facebook Instagram Pinterest, YouTube you name it all the things that have to do with social media including the influencer strategy again and and moderation and care so. We did some really fun things I think it was a bit of a whirlwind so our first brand campaigns got to do you know the Super Bowl with Kevin Hart all of the the fun things that come along with leading you know a pretty awesome brand. Jason: [7:09] That is very cool and for listeners that might not be familiar Tony was the former CMO at Walmart and Sam's and the next time he calls you I have a feeling free jewelry is going to be part of the offer because he. Sabrina: [7:21] Yeah I should make a list of things that I want. Jason: [7:26] It should be a long list but be my suggestion that he's at signature Georgia. Shout out to tell me I know he listens every week very willingly and so in the current role you are responsible for All Digital at Sam's Club and is that a thing is digital a fad at Sam's Club or. Sabrina: [7:44] We just a Fab yeah who probably probably gone. Yeah no big deal yeah is super super fat yeah so I along with two of my peers we lead the e-commerce business and so I'm basically the upper funnel piece, so working really closely on the traffic strategy so what types of traffic re driving in and then how are we actually moving that traffic down the funnel so you can think about that of all of the Cross category, you know Stories the homepage anything that really allows us to show the breadth of what Sam's club offers so not just the categories and Merchandising but also the membership the Sam's cash that we offer the Travel and entertainment all of the things that come along with an actual full membership not just retail only. Jason: [8:32] Yeah and there's all kinds of interesting Dynamics to me it seems about marketing em in a membership environment versus a. Traditional, wide open and retail business so I assume you're trying to get people in the funnel for membership and at the same time you're trying to get members in the funnel for individual transactions. Sabrina: [8:54] Absolutely right the bigger the base the more sales you can expect so it's a balancing act right in terms of we need them to be purchasing things but ultimately we need more members and we need them to renew right so at the end of the year would it becomes renewal time we want them to see have seen the value throughout the year that they say oh this is a no-brainer when we're on the brand side or I was on the brand side a lot of it was we're trying to build brand Advocates because there's nothing more powerful than someone saying you've got to join Sam's Club I joined and I love it, so that was the the sole purpose of we're building Advocates we're building brand passion we're getting them excited and every piece that we're pushing you should be pushing our value prop of the overall membership. Jason: [9:35] Awesome so before we dive any deeper in that I need to know what your favorite Members Mark product is. Sabrina: [9:39] Oh okay it's really hard to just pick one so I think I'm actually gonna pick two. One of them because one of them is very seasonally relevant and one of them something we do all year long so the seasonally relevant one I'm going to say. There's so many things I would say probably the members Mark beach towels and or pool towels I've had some of the same ones. For since I started working there they are thick their giant and big and they have a fantastic value to Market and we just keep I keep adding every year this year they didn't kid towels to with awesome designs on them so I'm a big fan of mild that's you know anything about you're advocating for something I advocate for a lot of things there and not because I work there but because I genuinely like them and then the other one that I love that I try to get everyone to do is we have these Members Mark southern style chicken bites. And you just pop them in the airfryer and sad sad to say is good and bad it's sad to say I give my kids then like once a week but they're addicting some always like well they're just for the kids and then I end up eating them all for dinner to they're just really good. Jason: [10:43] I'm well familiar with all those phenomenons and I'm going through an airfryer phase right. Sabrina: [10:48] Few are so easy. Jason: [10:49] I'm I gotcha yeah it seems and I thought you were going to go with salty snacks I mean that's the easy answer and then you curveball Benny with the beach towels which as a parent I have learned you need way more beach towel. Sabrina: [11:03] It's important we've got a pool and we always have kids coming over and using all the beach towels so it feels like it becomes a full-time job and then you can't find them all and I don't want to go spend a ton of money to replace them, and so we either have them on hand or they're not that expensive to go by Exo. Jason: [11:19] Now I don't know if you checked with the home this week but your pool has probably evaporated it is hot in Dallas. Sabrina: [11:23] Oh my gosh it is hot I think it was like 109 on Sunday. Jason: [11:28] Yeah good call to come to Boston. Sabrina: [11:29] Yeah yeah I walked around this morning it was so nice you Dallas is brutal yeah I did you ever see the thing that went viral with the guy who he was pointing out the temperatures and then he showed McKenney and it was like a hundred thousand degrees he's like everyone in McKinney's dead. That's how it really feels. Jason: [11:46] It does and pro tip is someone that does a lot of business travel we probably don't want to mention to our family that it's more comfortable here than it is at home. Sabrina: [11:55] I already texted them like sorry. Jason: [11:58] Just saying be careful so I have a new and it's so Members Mark is a of course the famous owned brand for Sam's Club. And I won't put you on the spot with any proprietary information but it's a on its own a very large brand I think Walmart in the past has disclosed that it's over a 10 billion dollar a year brand so so remarkable the Walmart, there's a number of own Brands but of course the one most associated with Walmart in my mind is great value, and so I'm now in a murdered with a new Great Value product that's only available in Canada. Sabrina: [12:32] And it'll only available in Canada what is it. Jason: [12:34] And I just imported two cases of them to my home in Chicago Great Value ketchup flavored potato chips. Sabrina: [12:43] Oh my gosh things are off we got two cases. Jason: [12:48] Do not recommend you you try them but here's the thing there was you guys just had your earnings call congratulations it was a very very successful quarter. And Doug mcmillon to see ya. I don't know if he did it on purpose or on accident but in the investor car he talked about a trip to Canada where they made him try catch, potato chips and he kind of said it's the only Walmart owned brand products that he doesn't want so now my thing is I show up at every meeting. With a bag of these potato chips. Sabrina: [13:22] I don't see him in here. Jason: [13:24] I did not I didn't think about bringing him to Boston and you have to like it's a pain too. Sabrina: [13:28] Okay packing with potato chips in an airplane. Jason: [13:32] Chick early well. Sabrina: [13:33] Get interesting yeah well now I'm intrigued yeah so I'm gonna have to drive it. Jason: [13:37] Procure some. Sabrina: [13:37] Yeah I can't wait to try them yeah. Jason: [13:40] Come away if Doug comes for a visit just saying. Sabrina: [13:42] Yeah perfect you don't as much as I'd like to be picking my kids will probably even like two. Jason: [13:46] Oh my God my son my son would definitely the more like something's unappealing to my palate the more likely. Sabrina: [13:53] I'm a to be fair I've seen my kids dip potato chips in ketchup. Jason: [13:56] Yeah of course. Sabrina: [13:57] So it seems to actually make a little bit of sense yeah. Jason: [14:01] Um so zooming into Sam's a little bit like obviously in this last decade one of the huge changes is this whole mobile, um and I imagine it's fundamentally changed how people shop, the you know you hear a lot of stats about even how much people are using mobile in the store in the club so like I'm somewhat curious I don't think please don't be offended, don't think of Club as the earliest adopter of digital not saying specifically but all club like. Hilton was impacted by digital before Club was right and Circuit City was probably impacted by a digital a little before. Sabrina: [14:44] Sir. Jason: [14:45] Of our club was so that being said like, is like how has the Advent of mobile changed how you think about marketing and customer experience at Sam's today. Sabrina: [14:55] I mean it's extremely important so you're absolutely right at Sam's Club when we look at that the performance and understand where people are headed that's where we focus our time and energy Ray where do they want to be where they going how do we get ahead of it and provide a good experience which requires us to know where they're spending their time and we've seen a pretty significant shift. Into Mobile and app experience specifically and so what we've what we've done is try to get a better understanding of what's the data and the behavior that they're taking within the app so let's just focus on specifically app right because there's desktop there's mobile web and then there's a and if you think about it there's trial barriers to downloading an app on your phone right you don't just immediately say yes I'm going to put the app on my phone so there has to be a reason and a journey to move them from mobile web into actually you know committing and putting the app on their phone. [15:51] So I think there's different ways to say well what's a trigger to get them to download but we know one of those giant triggers is this can I go I so everyone loves scan ago if you've done it you know and and you have to download the app and actually. You know use it in the club to be able to make the purchase through scan and go what's interesting that you might not know is if you hope if you've got scan and go and overall digital and you're looking at it the numbers are pretty strong if you take out scan ago and you just look at online digital penetration only about a third of our members or shopping online so so to me I'm like well hang on a minute they have the app on their phone so we broke through a massive barrier already of loyalty they're purchasing with us but they don't see the value of shopping online. [16:41] Unless they are shopping on the app in the club so the opportunity becomes massive I got two thirds of our own member base for good acquisition and new members coming in if I just even start with our member base how can I give them a reason to see the value of pulling up the phone and building a relationship through digital when they're not in our clubs and I think that's what we've been trying to focus on and get to so really then it becomes the traffic drivers. [17:07] Right so how are they coming and how do we get them to ultimately make that decision to move from Google to the app or to mobile web to add to cart and ultimately ultimately make that conversion and we're really taking a lot of time and focus around the data so for instance they come in on the homepage did they come in on a category shelf page that has a bunch of items did they come in on a specific product page did they come in because they wanted to check their Sam's cash total what drove them in how much time are they spending did they bounce or did they stay did they look at things what was their scroll rate did they spend a lot of time we really focus on what it is they're doing what types of things are finding worth adding to their carts and then we start figuring out okay how can we drive bigger baskets your category penetration or introduce new member benefits like we were talking about earlier rate so if I've seen that you know Jason's come in and he comes every five weeks and he buys the same 15 things to stock up as house well how do I show him the amount of Sam's cash he's earned. [18:15] In between that five to six weeks to get in to come in and then give them things to potentially you know get them excited to purchase through digital using that hands cash or whatever it is that that you can create those triggers using the data so ultimately focus on on driving more app frequency and. [18:33] Also say as we continue to see the shift to mobile and to app I think members are at the center of everything we do so remember obsessed and as we see what's working and not working with what's working we can lean in, great okay they love it keep doing it if it's not working we know about it so every week we start off the week of one of the members saying what do they not like about us last week right so we look at not only the MPS but we look specifically at the word for word feedback so through member surveys the customer call center the social media I mean we're all pulling it up looking at the Facebook groups and looking at the comments and saying hey we could have done better here and so as you think about that and you put that lens of app and digital this is working this is not working how do we think about our roadmap and our prioritization to provide a better experience to remove, the things that are giving them reasons to not want to shop online with us and pick the big ones and and start to move the needle which ultimately is part of the reason we saw an 18% complex you too. Jason: [19:37] That's amazing and I do I want to double click on the data but before I do I just want to stay in the app thing for one more SEC because I couldn't agree more, people way underestimate the difficulty of getting customers just to download the stupid app. And in many cases I have a lot of clients that like don't have quite the, Market awareness of Sam's and they'll ask about building an app in before I let any of my clients build an app I take them to an Apple store and we sit down and Apple Store and. Talking thing you'll notice about half the people in an Apple Store are men and women that are my age or older and they're in line at the Genius Bar because they do not know their iTunes password. And guess what you can't do if you don't know your iTunes password and download an app. And so there is just this this huge barrier and the. For normal retailers the mortality of apps is huge two people download it only use it once like the abandonment rates are super depressing so for a lot of people like you go like. Explicitly focusing on app downloads is often a mistake. Um I don't actually see Sam's heavily promoting the act of downloading the app what I see you guys promoting are the. Benefits and the problems that are solved with the app is that I'm assuming that's an intentional decision. Sabrina: [21:00] 100% right because I think if you go into the club which I think is again, the true power and value of a true end-to-end Omni retailer right and and that's our challenge always is when you go into the club you feel the club, right the the first experience coming in like you're like this is awesome and where do I start right and it's a full brand experience and you feel the I feel you see you touch you experience the items. And digital you don't necessarily have the ability to do that so the challenge becomes how do you bring your brand to life, through digital and you have to know those touch points and I would say. You're exactly right is is it's really hard to do say go download our app it's another thing to say hey do you want to get out the door quicker. Jason: [21:47] Get this line. Sabrina: [21:48] And I would tell you I would say 10 out of 10 people are like yeah they're not going to say no I'd like to stay in touch in line the waste my time no they want out and it's actually really yeah. Jason: [21:57] Desert home with the with their their their significant other. Sabrina: [22:01] That's very true like listen okay we'll say nine out of ten, 10th person's a sad sad person but either way the the opportunity becomes okay we'll give them a reason valuable enough for their time and attention that it's worth downloading that app on their phone I think what's been interesting to is navigating the conversations rate because when you see the value of app and you see the growth and app me like yes app app and everything is focused on app you tend to forget the actual member journey to get to the app right so they may have started on desktop, when you know they were sitting at work and me and they were trying to figure out where to start for dinner that night that desktop Behavior may have said okay actually I was looking at something at work today and now I'm pull it up on my phone and they went through mobile web and then ultimately they shop with us a couple times and now all of a sudden oh I didn't realize they had an app that app would be easier right so there's a journey and you can't forget everyone else that that is experiencing it before they made the decision to put that app on their phone and so you it's hard to prioritize and forget about about everyone else you have to understand there's a journey in between. Jason: [23:08] No I couldn't agree more in before I go on I do want to just one shout out to scan and go because it's amongst my favorite digital experiences because unfortunate truth of many digital experiences is, they're awesome and members our customers love them but they often are problematic for us as retailers IE often, it's taking something that the customer used to do and shifting it to something we have to do right so you think about online grocery, the customer used to get the bananas now we're getting the bananas right if those are home delivery the customer used to drive those home now we're driving those home scan and go is one of those rare things where it both increases customer satisfaction or NPS score, and the member is doing something that we used to have to do for them so I feel like that just amazing, on the data side like obviously one reason a lot of people like to get people in the digital echo system and using the app is because you do get all that wonderful data that, describe activating that's one of the areas where I feel like clubs have an unfair advantage because of the membership structure right like most of my retail clients they talked about this capture rate and what they mean is what percentage of my customers do I have any idea what they bought. [24:25] Right right because a lot of people buy with cash or they shop anonymously or, they pre-shop digital and then they you know paid on a different credit card and there's this whole, you know family amalgamation all these complications which is why if you walk out of this room right now there's 47 CD P vendors all trying to help retailers, solve this data Quagmire and I'm not saying it's not still hard at membership-based retailers but you do kind of have an unfair built-in Advantage like you pretty much know. What and how much each members fans and on what. Sabrina: [25:00] And I know they're out there I might just stay in this room and close the door. No but there's a reason why they're booming right because it's a it's a lot of work to figure out I would say yes coming into the membership space I was, very excited and shocked by how much data we really truly had every time you know member makes a purchase we see it so it allows you to kind of. Really understand what it is that's driving their trips how often they're coming where they're shopping what are they buying you can also start to understand their typical journey and behavior, so I'll give you two examples of the way we're kind of leveraging data I know I already talked about app but let me kind of put it into real life for a second. [25:46] One of those is and I'm talking specifically to like end-to-end experience so one of those I'll start with on, specific promotion or sales or event right what gets exciting is you can put this money into Market you can understand where they're coming in so first of all to drive the traffic and you're looking at a year-over-year confer a marketing campaign okay great so the traffic was there and hit the pages you needed it to hit well now you can say okay what they do next right and you can start to say all right did they move from that page to the next page and so you can see the analytics team has done fantastic jobs not only of having the data but making the data. [26:30] Readable digestible and actionable is a completely separate, right so there's a lot of work that happens behind the scenes of late great I'm looking at a table of a massive amount of data but what am I supposed to do with this to make a business decision and what they can do is they can take that and they can build it out for me across the funnel so they'll say okay traffic was up well and then it moved to the next page to it so it actually moved from let's say the home page or landing page we built to the Shelf page with all of the categories and then it moved from that category page to the product page and you can see all the product pages that were tagged with in that event in that campaign, then you can and it has your year-over-year growth of each so you can see the continued strength in growth throughout the funnel and then it moved to check out and ultimately her to cart and ultimately to check out and so you can see okay but you can also see when it's off right what happened okay so something's off you can say oh well that's because X percent of our items ran out of inventory in the first two hours because maybe we didn't estimate, demand properly right and so now all of a sudden okay we'll stop marketing that so go back up to your upper funnel and stop talking about those because you're making some angry members because they're falling off here and not because there's not strength in the funnel, it's because it's not actually available when they tried to go add it to their car so we got them all the way to the PDP and then something breaks. Right so it makes it makes it really easy to be able to do that in a way that allows us to actually pinpoint the issue. Jason: [27:57] Side note that used to be way harder to do in the store circular let's hard to erase the printing when you run out of. Sabrina: [28:04] Yeah it's not it's not exactly it's not exactly possible okay so and then other than the the funnel I think the other thing is understanding kind of their behavior on the pages, so if you think about let's just take the types of traffic coming in where they going and is it working raise so if they're coming in through paid marketing or if they're coming in through CRM or they're coming in through SEO where are they going and is it actually doing its job, right and then once it lands how to use the data up to optimize the right message you're putting in front of them at the right time so, not only just on personalization right so let's take our home page you have, frequently ordered items you have no inspired by a recent views things like that but you also think about well where is it they're clicking on that page the most and how do you take that that, that knowledge and that data and say okay here are the things we need to be putting in front of them based on that traffic driver that came in so we can connect the message, and make sure that we're taking advantage of that quality traffic so that we can actually move them down that funnel. Jason: [29:08] Yeah that's amazing and hearing those two examples it makes me think and hope that we both have kids in school hopefully they become data analysts because. Seems like there's an ever-increasing problem with processing all this data I heard a rumor that Walmart has like seven petrol bytes of data and I don't actually know what a petrol B is, but my seven-year-old tells me it's a big number. Sabrina: [29:33] I don't know what that is either but I'm not doubting it. And you're absolutely right like I think it becomes a if you have so much data right at your hands how do you make sense of it how do you organize it and again make it actionable because otherwise it's just a bunch of days that you're just sitting on and you're not actually doing anything with it to improve the experience, Sokka. Jason: [29:53] Compounding that data problem even longer we have the whole omni-channel, right and you know we used to talk about what percentage of our sales were digital and you know try to get that digital percentage up but increasingly, every customer using digital tools somewhere on the path to purchase and very often they're using physical stuff so how do you guys think about that at Sam's eye. That seems like it makes that whole analytics problem even more. Sabrina: [30:18] Of those it does but it's good right like you don't want them necessarily only shopping in the cupboard only shopping online you want them to think about it and we try to put ourselves, through this Member First mindset. Approach right so what is it that's driving that that needs data that purchase intent so are they just looking for inspiration right they're building their patio where there's getting ready for tailgating so they need a full solution or you know is it they just needed their paper towels or their bananas or their bottled water and on top of that you think about what what's the most convenient way for them to shop at the moment maybe they're on their way home from work and Sam's Club is right there five minutes from their house will they can. [31:00] Hop in because they know that they had a list of they can't remember what was on their list and they're already here so they're just going to do it maybe while they're in there they don't want to deal with the line so we give them another convenient option of scan ago okay well maybe they head home and then all of a sudden that night after Sam's Club is closed they realize they forgot all of the Lunchables for school tomorrow, bummer yeah been there multiple times and also big bummer or you're out of milk and you know your kids are going to cry because they have cereal every morning and now you've got an issue or whatever it is and I think based on whatever situation there and we want to make it convenient for them to be able to choose Sam's Club so you've given them the two options in the club will now you've got multiple options from an online purchase perspective you've got curbside so I'm going to put in my curbside order and I'm going to be able to go get it in the morning when it's ready and it'll be ready just in time or you're going to go you know put in a same-day delivery the next morning and you know you're going to get it really quickly or you can order on you no shipping and get it there in 23 days and you can wait a little bit because you can get free shipping as a plus member so you kind of see the opportunities for us to build around you you remember us have told us was most important to you and what you need so you know what the quality you want a great value you want it conveniently we know that about you so how do we think about all of the different scenarios you might be in and make it as easy as possible for you to choose Sam's. Jason: [32:26] Yeah and I'm assuming those successes and near-misses come up a lot and all that qualitative data on your. Sabrina: [32:34] They tell us yes they tell us they're like you know know but also a lot of times yes it worked. Jason: [32:39] Yeah I worked with a retard once they said there's two outcomes successes and learnings. Sabrina: [32:43] That's exactly right that's exactly right. Jason: [32:46] If that were true I would be a lot smarter than I am so. Sabrina: [32:48] So yeah it's a it's interesting because you see you know from one member of might have been a great experience and the same exact experience didn't work for the next member and it's because it's like well how do we put how do we let them know of all the options that they actually have to shop with us and let them choose the right Journey for them so a lot of it also is an opportunity around awareness right so do they know we have a curbside we just launched delivery not that long ago right so do they even know we have same day delivery I think you then get to the point of in the funnel again is this a conversion issue or is it just an adoption issue or is this an actual awareness issue, right so being able to kind of pinpoint where those opportunities are and the funnel I think is just just as equally important. Jason: [33:31] You know at the beginning of the show you mentioned that earlier in your exams career one of the projects you worked on was the actual Sam's brand which a would be terrifying to me because it's I mean. Is always Gary but then when the blank brand quite literally is the name of an American icon is kind of more. Sabrina: [33:51] Little bit little intimidating. Jason: [33:53] You don't want to screw that one up but when I think of, the sort of original Sam's brand right it was a lot about the store experience right and we've just spent 45 minutes talking about, all the cool new paths to Sam's and a lot of them are digital like do you guys have to think about. What the Sam's Club brand even means to members today in a different way than maybe you you were able to five years ago or ten years ago. Sabrina: [34:23] A hundred percent and I think you know we have continued to evolve with the members to to be able to say hey these are the most important things for them so let's continue to evolve the brand I would say yeah like starting out in the beginning it was really clear and again we used the member feedback to say like if we look at our brand passion index well here are the things that they're talking about and it's not driving a ton of volume and they don't really like it or they're rather neutral okay well when they are talking what are they talking about right both negative and positive and when you've got the - address it and when you've got the positive lean in right and the way you can lean in is on digital, so they not only from all of the marketing channels whether we know we talked about earlier marketing the social media all of those things but it's also on digital in the experience so if you know they like something how do you make it easy for them and bring the brand to life and tell the story so it's not just about again items are merchandising but it's the full membership experience and the ability to say hey like welcome to the club, right I think when we we've identified some of those opportunities when we think about their full Journey so the first year is extremely important to us they become a member. [35:31] If they didn't join in the club how do you make them feel like they're part of the club if they didn't come to a membership desk and say Hey I want to be part of this you might have gotten them through something a non-digital, well we also know that that first 90 days is extremely important and how do you get in front of them and say okay this is awesome welcome to the club and you should be shopping with us digital did you know our Omni proposition did you know the value and convenience that we provide and the team looks at those ways I think one of the things we did was build. [36:03] A digital membership booklet that's like okay we don't really talk about anywhere all of the things that the membership has to offer any more digitally we usually relied on the Associates at the membership desk to do that for us as they're like hey now welcome to the club here's everything you have well when you join digitally you're kind of Flying Blind right so okay I'm here now what do I do right what do I even get and if they don't want to spend a ton of time looking around and or it's not easy for them to find it then how do you introduce the journey that says welcome, look at all this stuff that you now have access to as a member of our club and and really kind of bring that brand to life and feel it even if you can't have your foot in the club so there's opportunities like that where we look for for bringing it to life and I think there's probably many more to go but we use the data and the members to say hey this feels like a gap let's figure out how to address it. Jason: [36:55] I'm in is that the big filter because I. Follow-up question is going to be what are the things that we could expect to see evolve over the next five years and you know we're at a trade show where there's a bunch of vendors that each have a interesting widget that. They want to sell and you every one of them you could imagine use case where that would be really cool and I imagine for someone in your shoes one of the challenges is which of these three hundred things is actually. Going to add the most value to to our members lives right and. Sabrina: [37:27] You're a hundred percent right and which way is the right path and I would say when I talk about Sam's something that I love is that it feels like we run, like an 84 billion dollar startup, and it truly feels that way and one of the reasons it feels that way is because of how quickly we test and learn and you know we work really closely with product and Tech and Engineering with a problem what's the problem we're trying to solve for the number that's what everything starts with right so again back to the member Obsession hey they're saying this is an issue and I think if we could solve it for them it could be really impactful so we give that problem to the product Tech and Engineering teams and they come back with like I think this could be it let's go test, we don't know it might crash and burn but we think this could be a potential path and they do a lot of customer surveys research to say, feels like it's down the right path and could solve for this problem and then they go out and they if it does well great let's try to scale a little bit more maybe move it across some of the platforms and see if it works across desktop mobile web and app maybe IOS and Android different behaviors right and then once they say oh okay no this is actually going to work and they're telling us they really like it we run, and I think that's the way we've done we've always done it is what the members tell us their problems in their pain points it's our job to go solve them for them and then run as quickly as possible and let them tell us whether we figured it out or not. Jason: [38:49] That sounds like a totally sound approach and I know I can't put my thumb on the scale but I hope one of those problems ends up being that I never have to run out of Lunchables again. Sabrina: [38:59] Yeah me too that could be really nice. Jason: [39:02] Significant quality of life. Sabrina: [39:04] My kids would appreciate it. Jason: [39:05] Exactly and sadly Sabrina that is going to be a great place to end it because it's happened again we've used up all our allotted time there are 45 CDP vendors waiting outside this podcasting studio and I've promised them all the time. Sabrina: [39:15] So excited yeah I'll thank you I appreciate it yeah nice of you. Jason: [39:21] But it's been a real Joy chatting with you and we appreciate you sharing a peek inside the covers with all our listeners I hope you'll come back. Sabrina: [39:29] Thank you guys for having me this has been awesome and I've Loved listening to your podcast you guys are extremely entertaining and I'm excited and honored that you guys had me here today. Jason: [39:38] Scot and I both agree that one of us is funny we just don't agree on. Sabrina: [39:41] It's clearly you because I'm replacing him so it's obvious who it is but we won't tell him he'll have to just hear it let he'll have to listen to the his own podcast so he decided not to come to ya. Jason: [39:51] Yeah he definitely does not listen to the show he's like the one person in e-commerce that doesn't listen. Sabrina: [39:54] Perfect yeah oh great. Jason: [39:58] It's been great thanks again and until next time happy commercing!

    EP309 - Instacart IPO Filing

    Play Episode Listen Later Aug 30, 2023 89:23

    EP309 - Instacart IPO Filing  Warning: Given the complexity and breadth of topics, this is a longer than usual episode with a runtime of 90 minutes (if we had more time, we'd produce a shorter podcast). Update: In this episode Jason mentioned that he didn't think Instacart accepted SNAP payments. It turns out that Instacart did start accepting SNAP earlier this month. On Friday, August 25th 2023 Instacart filled its S-1 IPO form with the SEC, in advance of its intention to make an initial public offering. The complete filing is almost 400 pages. In this episode we summarize all the key points, including a number of surprises, in the filing. If you want to follow along with the actual S-1, you can download it here. Scot suggests you focus on pages 101-124. Topics Covered: Cover Page and Entry Level Items Overall Growth Trends 25:50 Unit economics 42:90 Cohort Analysis 48:10 Instacart Ads 56:30 The Big Risk/Concern 1:00:11 Other observations (Instacart+, Carrot Services, Generative AI) 1:22:50 Other episodes mentioned: Episode 255 - Instacart Chief Revenue Officer Seth Dallaire and Episode 224 Customer Cohort Analysis and CLV with Dr. Daniel McCarthy. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 309 of the Jason & Scot show was recorded on Tuesday, August 29, 2023. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Jason: [0:23] Welcome to the Jason and Scot show this is episode 309 being recorded on Tuesday August 29th I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:38] Hey Jason and welcome back Jason and Scot show listeners. We are going to jump into the talk tonight because one of our most popular shows as you know Jason the format is a deep dive and we have got a great Deep dive for you guys this episode. Last Friday August 25th there was a very big event not only in our favorite world's grocery which is Jason's favorite world and my favorite world of e-commerce and then Jason's favorite world of. But also in my favorite world of startups so this is this is a pretty big event and we wanted to dedicate a complete episode to it. I mean it is the filing of the S14 instacart. [1:24] And just to set it up the you know in my world of start-up land it has been very hard to get an IPO done so there's been a couple post coated and like late 2020. And then summon 21 and then there's been a dry spell there's been something called a dese back so you have this spec which is this. [1:44] Special-purpose acquisition thing and you can kind of go public through this kind of complicated convoluted thing. Tends not to go very well so there's been some of that like in My World Mobility there is one called get around and there's been a couple others and those typically have not. Gone so well they're down like 95% bird the scooter company did this as well. So it's been a very dry IPO market for startups and thus of interior backed investors. So there has been a lot of anticipation around when is that a PO when they're going to open who's going to be brave enough to kind of stick their foot out there first. And you know a lot of people have been rooming that instacart would be out there there's a couple other companies in this kind of unicorn Stratosphere stripe is another one that we cover a lot on the show from the payments world. There's also the others you can think of Jason there's this one. There's a software one that is just doing really well in AI that's been mentioned a lot not not open AI it'll come to me in a minute. So you know so this is kind of the real. Bang the Big Bang of here's a company that is being brave enough they're gonna go first and we're going to see what happens so it's going to be really interesting and we thought because it hits this Venn diagram of all of our favorite things that we would spend a fair amount of time on. [3:10] So first of all this is a 400 page document so our value add to the listeners is we have distilled it down into what we think are the most interesting little tidbits and some of the things we've learned from instacart it is nice because there's been a lot of rumors about how instacart Economics work and Jason has been tracking their ad piece which is you know cpgs have really seen some really nice results from that so we know that's been active and the areas we picked apart we thought we would cover tonight is I wanted to kind of give you a quick and dirty Scott's guide to reading an s-1 and we'll start at the cover page that's there's actually a lot that happens on the cover page so I want to spend a little time there and kind of give you a little I haven't taken a company poet behind the scenes of what's going on on there and then we're going to talk about some of the overall growth things that just kind of help you understand. [4:07] How to think about instacart how they're growing and what they do and what role they play and then unit economics one of the things that is happening more and more in these s1's is they're doing a more comprehensive cohort analysis and this is basically showing hey if if I car to a customer in a certain period how are they doing now and what are those Trends so that this this had a lot going on there of course we want to talk about the ad business and then little bit of a catch-all for other observations, Jason anything I missed before we jump into the cover page. Jason: [4:42] No I think you mostly covered it just one slight correction it's four of our five favorite things for those listeners that tuned in to hear us talk about Ahsoka we're going to do that on an upcoming episode so that Star Wars would be our fifth. Scot: [4:56] Yes sadly there was no Star Wars in this one so it's that one little part of the over the Venn diagram was left is its own little circle out in space. Jason: [5:06] That's a we call that a teaser for a future episode. Scot: [5:09] Yeah yeah we're we're Pros were 300-plus episodes into this thing and this is the kind of you know Pro level that we deliver on the pod. So you guys missed it Jason forgot to plug in his microphone earlier so that's a yeah we're still still learning every day, so when you open an s-1 the first thing you see is the cover page and it you know a lot of people just Breeze by it because it's a cover page but it has a lot of really valuable information so first of all the first thing that I noticed is I was searching for this on Edgar and I kept typing in instacart and it wouldn't show up and I was like WTH I know this s1's out there why can I not find it and then I saw an article and it said oh the company's real name is maple bear so that's the first thing you see on the cover is the company we all refer to as instacart its actual Corporation name is maple bear and it does business as instacart so I thought I did not know that prior so that was the first thing I learned right there on the cover so that's interesting so if you do go to the will put a link to the s-1 in the show notes but if you do Brave the Edgar SEC database yourself throwing a little Maple bear there and not instacart. Jason: [6:22] Not to be confused with Amazon's house brand Mama Bear. Scot: [6:26] Yeah yeah and I'm sure there's a honey bear and brown bears there's a there's a lot of a lot of bear things going on. The other thing that I was like to see is what symbol are they using I think it's fun to kind of you know as an entrepreneur to kind of think about what symbol you're going to use that best personifies your brand Channel Bowser we had ecom's so that was an exciting one so we captured e-commerce Shopify go. Jason: [6:52] The best ticker symbol of all times by the way. Scot: [6:55] Thank you thanks thanks I appreciate it. Shopify head shop and that was a good one and instacart / Maple bear is going with cart so I think that's a that's a that's a pretty nice one you know it kind of there a multi grocer chart cart and we all think about instacart I'm sure they hate being called Instagram so this kind of like really punches on the cart so maybe they get away from everyone mistakenly calm Instagram. Jason: [7:19] I think it's solid. Scot: [7:20] Yeah A-Plus on the symbol and then in the you'll notice that a lot of the evaluations and how many shares they're selling are blank and that's you know in this draft of this one which is the first kind of public one that they're dropping out there they'll they'll iterate a couple more times they'll do their Roadshow and then write one that, it prices they'll update the S12 include all that information so they'll make kind of literally a game day decision the night before IPO of how much based on the order book how much they want to sell and at what price so that, that's going to be blank through probably several more iterations as we go on then this is did you want to do something in. Jason: [8:04] No I was just I was just thinking that they I assume they left it blank because the underwriters were out of practice. Scot: [8:10] Yeah no no they they are there waiting and that's a good point because when you go public the the companies that take you public in this context they're all investment banks on Wall Street. But they they filled this role of Underwriters and basically what they're doing is they're acting as market makers they're going to cover your stock when it's public and they're also going to be basically pounding the pavement to sell your stock to buy side by side analysts and firms on Wall Street. Which there's two buckets of there's mutual funds and hedge funds there's also retail that I guess there's three buckets, retail would be you log into Schwab or Robin Hood and the diet of the IPO you try to buy some chairs that's retail and they all allocate a little bit of that for the IPO so they like retail to come in and get a little taste. [9:04] A lot of folks that if you're an accredited investor at an institution and you have a wealth manager, sometimes you can get a little bit of access to an IPO before it prices you don't get a special price or anything but you can if you're really excited and you're a retail customer you and you're in this kind of wealthy bucket then you can you can get some allocated shares I think is what they call it these call this friends and family they don't call that, that anymore that's called a allocated shares but what's important about the underwriters is there's actually a signal there several signals here and I didn't know this time went through the process. First of all they have lined up a who's who of investors so even before you get to Underwriters they have this really interesting note right before right underneath before they get in the underwriters and they say oh by the way we have lined up these investors already that have committed to buying and they have committed Asterix and then they kind of like take away the committed but. [10:05] I think that's a legality I think I think it's a pretty hard commitment is my reading of them and they basically say these guys are already these guys have lined up to buy at least 400 million in this offering. Regardless of the price and there's some big names in there there what I would call. Public-private so they have invested in instacart already as a private entity and then they have another side of there. Firm that invest in public entities and they have said that side is going to support the private side and that's nor just Bank tcv. [10:38] Sequoia and a couple others this is very unusual but I think it's an interesting play because it basically says to the market. Hey you don't have to worry about this thing you know taking on the first day because we're going to were signaling to you we're going to place a chunk of this with these folks that are long-term holders and they're going to backstop this thing I think of it as a adding a floor to the IPO basically saying we know it's been a while we know there's risk out there we're going to have a floor on this so so there's built-in demand for this IPO so that's quite unusual and this is the first time I've ever seen anything like that sometimes you'll see tiro price is a big one a big mutual fund that likes to do this or they'll have a private-public and they'll say you know they'll kind of suggests that, they're interested in buying more and they'll come out and say they don't plan to sell or they've accepted a lock up for a year or something like that I've never seen such a strong message as this one so I thought that was interesting. Okay then we move to the bottom of the cover and that's where you have the list of the underwriters and what's really interesting is the way this works is the bigger your font the bigger a role you play in the IPO so on this one the biggest font is Goldman Sachs and JP Morgan and you know they have I don't know what would you say Jason like a 40 Point font. Your. Jason: [12:03] Yeah I had to read it with my my PDF zoomed way up so I feel like I yeah but it was a big font. Scot: [12:11] Yeah yeah so those guys get like a you know they're kind of really big and then what's also interesting is where you show up on the page is important so your importance starts at the left and goes down to the right so the most important what we would call the vernacular is the lead left which is the biggest font on the left side of the cover is the lead Investment Bank and as Goldman Sachs and they're they're The Bluest of Blue Chips everyone wants Goldman Sachs if they come out. [12:37] And then usually you want either JP Morgan or Morgan Stanley now JPMorgan has increased greatly and stature over the last three years because they have weathered coded and they have basically absorbed most of Silicon Valley Bank's deposits and a lot of these other riskier Banks and their CEO is pretty famous Jamie dimon so they've this is kind of you know two blue tips on the top of the book here which is pretty interesting and then, then you kind of go down a bit and you end up with 18 more Underwriters and there's like three levels of them there's like the font gets smaller so you go from 40 point to 20 point then you go to like kind of like 15 point and you go to seven point and you know what's interesting is I have never seen this many Underwriters either so they basically have said we want everyone on Wall Street lined to go and help us sell this we will turn no Rock no Rock will be unturned looking for buyers of instacart stock with the institutional investors. There's some International Players so they've basically if you kind of said if you if you. [13:53] Few War Room doubt what are some things a company could do 2D risk an IPO they have done things I've never seen before times like three and then the last thing that's interesting is the economics each of these Banks gets kind of depends on where they are on the page so you know if it all this gets him to like, there's all this Machinery but these guys do it because they make money so Goldman will make their kind of highest percentage and then JPMorgan and so on and so on based on how much they contribute to the book and all this kind of calculus that goes on behind the scenes so I thought that was kind of a really interesting just on the cover some things that were very unusual from other IPOs I've seen Jason anything that you found on the cover that was riveting. Jason: [14:43] We'll know I did. I have a question for you though I got I guess I when I saw all of those Underwriters I kind of and perhaps erroneously assumed that part of what was going on here is, it's been a while since there were in any IPOs that went through an underwriter and that all of the underwriters are out there. Desperate for four deals and that therefore. Instacart had more more leverage to get more Underwriters like is it. Is it literally instacart just agreed to pay more for these two more Underwriters 2D risk the IPO is that. Scot: [15:23] Yeah I think. So human nature is that the lead laughed and Lead right want to absorb a lot of the deal and don't want to share too much so so typically there's some friction there right so they'll be like yeah you could add a couple and they use this tearing language I don't you know this is just kind of how I don't know who how they know what who's what dear, but tier one is Goldman Morgan and JP Morgan Morgan Stanley and then tier 2 is you get kind of Stiefel, a couple others in there then you go tier 3 and then you kind of have like an international kind of tearing as well so usually you get like two from Tier 1 Maybe two or three from tier 2 and then that's kind of it and then if you've if the company feels strongly like another consideration is when you go public one of the things that helps you long term is to have analysts that follow your stock and we've had many of these analysts on our show Mark mahaney Collin Sebastian these are and then Scott Devitt he was at stifel and he's moved on to another shop these are these are famous people in the internet marketing world so you want take Mark sets, I wasn't even as Fern was he ever green but that's not it. [16:40] Ever Quorum so so you as the company can say the Goldman hey I know you guys want to keep a lot of Economics but I want mahaney on this and we got to get ever Cora so some of those on the bottom are probably International distribution retail or something the company wanted kind of specific to add them on and you know that was all pre-negotiated with Goldman getting lead left they had they kind of had to acquiesce to having a bit of a large number of Underwriters on there so I don't yeah I don't think I'm sure they all wanted to be to your point like there certainly wasn't even saying no to being invited to this and they probably you know you just bake off in this was I came to imagine if they ended up with 18 like, mr. started with 80 I don't know it's crazy that was probably like a. Six week bake off just to hear from all the bankers so yes I think there's more around the analyst going on with with the large number on some of those. Jason: [17:39] Got it and then I want to hear your speculation about where the price might come in but I'm trying to remember the details there's been a lot of interesting things going on with the private placements before we got to this point right so I think the some of the valuations of the private placements were at some point disclosed and then I want to say instacart reset there. Their valuation at a lower number while they were still private like presumably to make the equity appealing for employees. Scot: [18:17] Yeah the sequence of events and this is all you know they don't disclose all this in this one because it's kind of like. Jason: [18:25] Sure I'm just trying to get the the Run. Scot: [18:27] The Whispers And if you read some of these you know I subscribe to a lot of things that talk about some of this kind of rumors and so take it with a grain of salt but there was some sequins like they were chugging along and then Covent hit and it was like Off to the Races vertical and I think the wheels kind of came off the bus and they started to lose money because the unit economics weren't weren't ready for for like a surge like that and then right around 21 they replace the CEO and they had to kind of emergency raise some Capital which is kind of like one of the worst times to do it because even though their revenue was surging the rest of the market was in the toilet basically so I think they had to do a Down Round And what I've heard is their bed raised money as high as 39 billion and then they took this haircut at with this new CEO in this kind of re leaning down the company at about 13 billion so. [19:19] So I think that's kind of like the watermark is kind of where they've last raised money and if you look at their revenue that's actually not that's a very reasonable Place given where you know they've grown since then but now what's the revenue like four billion ish yeah so they're like 3 billion and 22 in revs so that's like a four times Revenue which is pretty reasonable for a company growing the way they are with with good profitability so I would be I would not be surprised we don't we won't know this per share price until we see the denominator and they didn't have the denominator which is market cap divided by number of shares equals share price we don't know the number of shares so I would I would suspect. I'll guess, four billion I'm gonna guess 20 billion would be a low like I think it will price they're on the low end and it could go as high as 25 30 depends on you know. Retail and how much momentum it gets with with buyers. Jason: [20:26] And part of the art here is you don't you don't want to price it too low because that means you you have money on the table when you sold your Equity but you also don't want to price too high and have the, the stock like go down from the offering price and get below water right away right so. Scot: [20:49] Yeah it's very common we kind of had this situation at Channel visor we went public right after you know cortical right after in a longer time window of 08 09 and you know they strongly we had golden lead left and they strongly encouraged us to think long-term and not get obsessed about that pricing and leave a little bit of money on the table and yeah and then over time you could do a secondary at a higher price and you really want to you don't want to tank especially in a tepid market so I'm sure this was all part of the um you know Goldman would counter negotiate this to be lead left and say look we we need your commitment that your yep part of the pitch is they give you what they think it's worth and how it's going to price and they also discuss the strategy and that's part of the selection processes and you would think it would be. Okay whoever says they're gonna give me the highest price but you actually kind of they really stand out a lot because the Goldman people can talk about Dave, they've got like a lot of data to back up their strategy and you know there's like Watson there that that are. It would make your head spin and so they do a really good job of talking about why it makes sense to price the way they think and how how they see it over a longer Arc of time. Jason: [22:12] Gotcha so the guys with all the money have really good justification for why you shouldn't worry so much about the money. Scot: [22:18] And then the other thing to know though is what typically happens is you are not sharing you're not selling any one shares so the company so as part of this IPO the company will issue new shares so so you as the founder and the other investors you still have your shares you're not actually selling them at this moment so you know in a way now you get diluted right so the flip of that is your percent ownership goes down but you know it's kind of the would you take a little bit smaller. Of that and long term when you can sell your shares as the investor and the founder and the team and the people that bet on you now you know can you execute and deliver and then earn your way into a higher price and then that's when you can kind of like get some equipment sir. Jason: [23:08] Do you want a little bit of a grapefruit or all of a grape. Scot: [23:11] Yes exactly yep that is a good description. [23:17] Okay so here's here's the other part of the quick and dirty guide to reading the S1 you can take so that's cover is really good and then you take the literally the next let's see what is it. 100 pages and you can toss them so this is where the lawyers come in and they love to make sure you understand all the risk factors you know a meteor could hit the Earth people could stop needing groceries cybersecurity I could be no one wants to shop for them it could be they'll compete with a bunch of people Amazon is always a risk factor Google Microsoft. So all that really doesn't add value and then there's a little bit of financial stuff but it's it's pretty dry and it's kind of like from the Auditors almost so it's like super drive so it always do is you skip to the part of this one we're finally the lawyers have earned their large fees and they vomited forth 100 pages of risk you know stuff. And then you get to write your story and that's called the Management's discussion and Analysis in the industry it's called the md&a. [24:27] It's confusing I thought for a long time it was md&a because Aaron says mdna really fast and they're saying the word A and D and it sounds like an end to me and I kept saying what the heck does md&a stand for they're like what do you mean what's up what are you saying. It's like a who's I first got a thing but it's md&a so Management's discussion and Analysis and this is where you. Jason: [24:49] Because I read all 100 pages and and I'm super depressed and one of the risk factors is the way I could become sentient and take over the Earth. Scot: [25:00] Mmm yep that is a risk factor and then it will bring our groceries to us I guess as we are batteries for its consumption. Jason: [25:08] The computers won't eat. Scot: [25:10] So if you really want you know so what you can do is you can get the gist of 95% of this by printing out the s-1 pages 1012 124 that's it's only 23 pages and it's really dense but it is actually this is actually a very good read they did a very good job of making this so you know. It's very approachable and they go into a level of detail that's really handy into problem so we're going to give you some of the highlights from that but if you want to go deep on your own we will give you all you need to go to the next level just by looking at those 23 pages. Okay so what did you see and them DNA and that got your attention. Jason: [25:55] Well I mean a number of things so maybe just super high level what's exciting to me like obviously a lot of this information about the business was not, publicly available so in the process of going public in issuing S1 they suddenly reveal a lot of things and they reveal things about. Their own business but they also have to paint a pretty good picture of what they think is happening and could happen in the digital grocery business so it's kind of like getting a whole class of really smart people to sort of, write a thesis about the the digital grocery business that we get to read and interpret and you know we they reveal things that we didn't know like how valuable customers are over time and how much consumers spend on a given order at instacart and what percent share of wallet they think digital gets versus brick and mortar and all these sorts of things and we'll get into a bunch of them in the in the individual sessions but my my takeaway from the beginning of that management discussion was that it's a. [27:08] A pretty robust business that the aggregate amount of. GTV that they that they have is pretty significant its twenty eight point eight billion dollars in groceries that they sold in 2022. Scot: [27:27] Yeah and GTV is gross transaction volume so instacart it's basically a Marketplace like eBay or Amazon where parts of parts of Amazon all of you back where you have in the marketplace of product Marketplace use GMB a lot of payment systems like PayPal use tpv gross merchandising value total payment volume they have chosen to use this term for the gross figure of GTV and at first I thought it was going to be groceries to do but it's gross transaction value I thought for sure it was like grocery, I was trying to decode it without looking it up and I was like that can't be grocery because then I don't know what a TV is doing there and you know so then their revenue is a derivative of that meaning of some percentage then of that big number Falls to them as Revenue after they pay the grocer The Shopper and then instacart the business has the leftovers and which ends up, we'll go through the unique and I'll mix it ends up being being pretty small because the grocery business does not have huge merchants. Jason: [28:26] Yeah so kind of looking at those business fundamentals that you know in 2022 they sold 28.8, billion dollars worth of stuff which for them generated 2.5 billion dollars in revenue and they were profitable on that Revenue they they net 428. Million dollars which like back in the a couple years ago when there were more IPOs happening there were there were IPOs in the space they were happening with companies that still weren't profitable so so that was interesting that they they were meaningfully profitable and then the, you know you're super interested in what the growth trajectory is and. [29:13] 20:19 was a very small year so going from 2019 to 2020 you know and then the pandemic app in the middle 2020 and urban was ordering groceries from, from instacart so the growth in 2020 was astronomical like 300% or something like that. But then the growth in 2021 over 2020 was 24%. On revenue and the growth in 2022 over 2021 was 39% in Revenue so. The revenue growth is Meaningful and accelerating. Which would be exciting they were not profitable in 2020 or 2021 so 2022 is the First full year that they were profitable. The GTD is a little different though they had significant growth three hundred percent in 2020 20 percent in 20 21 and 16 percent in 2022 so, well they have a track record of growth it's the top on GTV growth is decelerating. And then of course we're halfway through 2023 so they have to disclose. [30:23] How the well they've done in the first six months of this year and they compared to that to last year and the revenue and GTV are both essentially flat in the first six months of this year. Versus last year so I don't know you'll have to tell me but I look at that and you go man there's some robust stuff here there's a great growth story. I should have mentioned that that's on an annual basis on a quarterly basis they have five consecutive quarters of profitability which also seems. Impressive him pretty favorable but it's probably a slight worry that the. A lot of that growth seems like it's it's leveling off in 2023 I don't know if. That the most recent performance gets gets over weighted or underweighted and sort of evaluating the the prospects for the company. Scot: [31:19] Yeah the buyers will you know what every everyone has a different way they value things and they they're going to build their own models and the company will give them some guidance that's some of the stuff we did it we're not going to go over and but you have to be careful because you don't want to make forward-looking statements so this is this weird dance you do of you. You try to get people excited by not saying anything about the future which is which is a little tricky so you know what I imagine instacart s' just reading the tea leaves again they talked a lot about how they don't really do much sales and marketing which I kind of read to say, look we really hunkered down on our unique economic sand we've got it dialed in right now and spoiler will get to adds a lot of a lot of that has come from this ad piece. And I think now. [32:07] Because investor and I was the bullish scenario is you know they're going to raise at least 400 million they'll probably raise a lot of money from this they could start doing some advertising and you pick up some new customers that again I'm going to kind of hope they look at the cohorts those cohorts look like with what this in the here and they have at least the same unique anomic so if not better and I'm going to look at this growth accelerating wow what Wall Street loves their favorite favorite favorite kind of the top quadrant is accelerating Revenue growth an accelerating profitability and you know I could see a scenario the light has to go their way but I could see a scenario where that works here you know if they could if they could start spending some really careful sales and marketing dollars building the brand where they've been kind of under the radar for the most part and then. That works those cohorts stick and then they can work on the economics because that's gonna bring more advertisers per order because the more average more orders and more. GTV is going to bring more cpgs in that want to advertise against that then you could argue accelerating Revenue growth accelerating profitable unit economics. So I think that's the bull case the bear case is they've hit saturation they've got all the stores. 4% is anemic and nowhere to go but down. So that's the end of it is it is going to be interesting to see there's a little bit of A Tale of Two Cities in those possible outcomes. Jason: [33:36] Yeah what else jumped out at you in the management discussion. Scot: [33:43] They made a big point of talking about they have 7.7 million monthly active users which is a good number but they point out that in the u.s. there's 330 million consumers or I guess population so they use that and this is kind of one of those hints I was talking about the basically said hey we're. We've done good to get here but these are like the early adopters we still have a long way to go there's a lot of people you know I don't think they'll get all of them and I'll talk about that in a second but there's a lot more people that you should be using our service that aren't is so they kind of paint that 7.7 million and say that's teeny tiny compared to where we should be. And then you know the other thing they talked about that I thought was interesting I wanted to get your opinion on is they talk about, per user per month they get three hundred and Seventeen dollars and I was wondering I know you probably know this off the top of your head. What is if you look at the average US consumer and you probably look at the. Population of the convenience store that's like a kind of probably like that 100K and up household you know what is their monthly and is this like half of it a quarter what is your spidey sense tells you on that. Jason: [35:00] Yeah so real rough numbers the average American family and you know people shop for groceries in households versus people so it's almost better to talk in household so there's like 131 million households in the US and sin they've got. Seven million of them as customers the average household shops for groceries 1.6 times a week and they spend a hundred dollars per visit so you kind of you know rough that up and you get. Get what is that I'll have the intern do in turn do the math one point six times. 100 times, 4.5 is 720 total grocery spin which I don't have the census numbers in front of me but but that passes the smell test that so. Households are spending six seven hundred bucks a month and instacart saying that they're getting less than half of that. Scot: [36:12] Yeah and I saw some people speculate on this that, what their inferring is Davin they have an average order of 110 so this is like 2.6 instacart some month instacart orders per user per month that's another kind of interesting metric and then people are speculating in the saying the pattern is probably people are doing a big shop once a month and they're kind of going and getting you know, a lot of like maybe canned goods and things like that and then they supplement it with two or three instacart has to bring maybe a refresh of the the replenishable is like the cheese the milk the veggies and the fruits kind of thing. Again this is everyone just kind of like taking data and kind of going out for data point so the cone of uncertainty is pretty big out there but it kind of passed my sniff test that's how we've used it before, at our house with exception of wizard a lot at work to fill our snack area at work and we're probably like we're probably like top one quartile of this whole thing that's the number of snacks we get from Instagram. There's a deep does that that analysis of the one big shop yourself and then supplement does that. Jason: [37:26] No exact yeah I mean I think the Grocer's talk and I hesitate to bring this up because I don't think I remember I'll for off the top my head but there's like four typical types of shopping missions right so there is that like Pantry stocking shop there's like a weekly shop there's a. Occasion Bay shop where your your it's date night or it's Christmas or whatever and you make a special shop and then there's those, top off shops and I think it's generally agreed like there's not a big cohort of consumers that have just said I'm never using a grocery store again then I'm exclusive we gonna, I have all of my my calories show up at my doorstep so digital grocery ends up being one of the tools in the family's tool kit for, procuring their their calories and so it makes. Total sense that they would have a share that one of the ways they could grow is to increase that share presumably by. Being the best choice for more of those different kinds of missions. Scot: [38:34] Yeah and then the md&a they talk a lot about how they have these new offerings where you can get a weekly Monday thing and they're definitely poking around at this experimenting on how to grow the sand again they're kind of signaling we think we've got some room to go on this we can get that. [38:51] Bridge order up and we can get the ma use way up the second thing I noticed was you know they use this they use this phrase, several times you can tell it's kind of like must be tied to company values and they talk about we believe people want selection quality value and convenience if that sounds familiar to you the this is infamously brought up in the Amazon Jeff Bezos first shareholder letter in 1997 where he talks about the mark you know what Amazon believes and they believe that a multi-decade trend is people will not get tired of selection quality value and when value he uses kind of free shipping like versus product value is pretty specific on it and then convenience and then what got me thinking about this is. [39:38] Value inconvenience her you know they're often in conflict and this is the whole point of we've had, Casey on the show from the Lloyd there bifurcation kind of model which shows this was this I think a lot about this because this is the whole one of the whole reasons I started spiffy and we decided early on if we're going to be convenient we can't be the cheapest and I don't think people look at instacart as the cheapest you know whenever we use it it's kind of like, holy cow this is this is a pretty expensive treat in you know I really kind of need to be able to justify this to myself that I can't just pop over the grocery store and do this myself it needs to be yeah some some reason I'm going to miss a kid event or something that I'm getting a really good bang for the buck here so I thought that was interesting that at some point I wonder do they value part kind of struggle with you know how. Jason: [40:31] I think they have to have a. A more liberal definition of value because I think you're exactly right right and obviously you know value means different things to different people like they disclosed later in the S1 that they not surprisingly that they skew disproportionately to households that make over 100,000 a year compared to a traditional retail and particularly a traditional grocer like give I've no idea what it looked like when they actually did it but when Kroger went public or certainly when Walmart went public they would have talked about the top of their tree that we think the consumer really values price and and Walmart probably said price not value and you know they built a business around very aggressively maintaining those low prices because they thought that was the beginning of their flywheel and and you know Amazon talked about value but they when they said value a lot of what they meant was and we're going to you know have the very competitive or the lowest price on a lot of these goods and, the the business model of instacart makes it unlikely that that can be their positioning so they have to kind of, find a a valid but alternative definition of value to hang their hat on. Scot: [41:50] Yeah and I thought was interesting they put convenience a lot you know last you may say oh you're reading too much into it but you know I've been in rooms you spend so much time on every word there's a purpose to this order of selection quality value and convenience and and they mentioned this exact phrase like several times so this is a this seems to be an yeah a pretty important phrase in their their world to I just thought that was I want to get your take on you know at some point they may cross this road where they have to pick a lane and it'll be if it ain't going to be the value late you know I don't see a path there but you know maybe they think they can and you know they also talked about selling to the grocer some software so maybe that's kind of like how they're squeaking that in I don't know. Jason: [42:36] Yeah yeah and there's I think we'll talk about this and in our final conclusion but the there's multiple ways you could see this going over time and depending on which path it took like value could mean something different. So what will come back to that. I heard you like dissected all of the the disclose data and put together unit economic model for for instacart. Scot: [43:07] Yeah so it starts at the top so the GTV per order so every order that comes in they get the GTV as $110 and then there here's how they slice the onion so the biggest chunk goes to the grocer for the groceries and they get 83 percent which is $91 so right off the top we're left with $19 but now the grocer they have to go make all their money so instacart is that's what you would basically get I think if you and I went to the grocery store you know maybe they're getting a little bit of a discount but they're they're taking that $91 and they're adding $19 on top of it and this is all X tip there's a there's there is a delivery fee and what not so then the Shopper gets 8.2% or nine dollars in order and that's in that delivery fee and then they get the tips. Jason: [43:58] Clarification on shopper because like in most contact Shopper would mean the consumer that's buying the goods The Shopper in this case is is a instacart gig worker that goes to the store and gets Aggregates the order for the customer. Scot: [44:14] Exactly the gig worker is the Shopper so they get nine dollars and they get 100% of the tip so whenever you you know whenever you what what they don't say some of these gay places in this bothers me because we fell out on this they say the gig worker gets 100% but then they take a transaction fee of 3%, now I can't find they say 100% I can't see any little asterisks that says there's going to skim 3% or something so. [44:44] So to the hopefully they're being super up front and they the gig worker does get 100% of the tips but the tips aren't in the economic the kind of sit over on the side to go to kind of bypass instacart all together and they go straight to the shopper. Who also gets nine dollars from instacart so if you gave a 20 dollar tip the the Shoppers going to get 20 plus 9 or 22, then at this point we are finally at instacart Revenue which is ten dollars and that's into pieces seven dollars is the transaction revenue and three is ads. So almost half their margin you know so 30% I guess yeah. I say half because the line is going so fast it will become half probably by 2024 you know half the. Profit the margin the revenue that they get and probably disproportionate part of margin is from the ad piece which we're going to talk about in detail so that is. That's pretty important to this whole enchilada and until they figure that out this didn't really work I do. [45:48] So they get so 110 dollar order $91 goes the grocer that leaves us with 19 Shopper gets nine we're left with 10 7 of that, is the transaction Revenue three is ADS then their costs come out they have three dollars of cost per order. And this is this is things like you know their entire some allocation of all their website hosting the engineering team developed the app. I don't know if they would put sales and marketing in there and they weren't very specific about what they do and don't put in cogs so that was a question mark. And they're left with seven dollars of gross profit for that order. My bet is marketing is not in there and they kind of take that up later but again the didn't really. Disclose that I saw what all was and not in Cox so basically that 110 boils down to seven dollars a profit from them and if we looked at it you know. I bet that three of that seven is basically from the ads and you know because there's almost no cost to serve an ad and so so I thought that was pretty interesting that like you know around half of the Prophet basically is from the ad system. Jason: [47:00] Yeah I think I think it's for sure interesting and like you know two possibilities there there there, average value of an order is 110 bucks traditional brick-and-mortar grocer is a hundred bucks and so one question like did instacart wasn't totally clear I mean they tried to take credit for having a higher order value but it wasn't clear like do we think. There's something unique about our experience that causes people to spend more or. Is our service just more expensive and so therefore you know if I got the same 60 items from from Walmart it would cost me $100 but if I got it from instacart Cassandra and ten dollars. But if it's the latter and I'm sure the real answer somewhere in between but but if it's the latter then you go you know all of the, The Profit that instacart is potentially taking is kind of from the. The convenient spread where they're you know getting consumers to pay more for the extra convenience of this grocery delivery. Scot: [48:08] So that was the unique nanak's what did you discover from the cohorts. Jason: [48:12] Yeah well I think we both we both noticed that they had a pretty detailed cohort analysis in the s-1 and by cohort analysis what we mean is they. They break down all the revenue they get from every. Group of customers on the first year they acquire those customers and then they track the spending for that group of customers in each, subsequent year and so you have a cohort that you acquired in 2017 you have a cohort you acquired in 2018, so on and so forth through this 20:22 cohort and there's. Other dimensions you could do Court analysis on but this this tenure cohort is most common and loyal listeners of the show will know we've certainly talked about it before no most notably with a guest Professor Dan McCarthy. From Emory University who spends a lot of time. [49:13] Talking about and thinking about cohort analysis so I my first thought when I saw this cohort analysis is I'll bet you Dan McCarthy's really happy right now and is probably. Deep deep into these numbers and he has a phrase that he calls a super annuities which is for the circumstances. The older cohorts get more valuable over time and keep contributing more Revenue to your business which is, you know that if you think about it that's that's the ideal state right you want those kind of six-year-old cohorts to be. [49:51] Growing and be your most valuable and if they're you know significantly tailing off over time then like you know you start to question the core value proposition of the business like maybe customers get fatigued with your business or decide it's not a good value in the long run or something else so um the the big takeaway for me of the cohort analysis is the cohorts grow over time the if you look at like the year one value of this cohort it averages $226 and then it goes up 33 percent in year two to three hundred dollars and then up 16%, to 350 dollars in year three and then another up another 16% to 4:00 in your for and then up 10% $445 in year 5 and up another 8% to 480 dollars in year 6 and so like fundamentally. That is a very good picture of. The value of the cohorts and I'm certain why they chose to include the cohort analysis in there as one because I don't believe there's any. Any filing requirement to do that and certainly lots of companies don't include any cohort cohort analysis but then my kind of secondary take is. [51:12] You know not every year is the same and so some of those cohorts like started before Cove it and then they're their behavior, was slightly impacted by their maturity but also impacted by covet and some of these cohorts started after Cove ID and so one of the things you would look for in that cohort analysis is did these guys just get a big spike from Cova da, when people are afraid to go to grocery stores and you know has that worn off right and that's kind of a comment common narrative out there like I argue. [51:45] It's mostly misunderstood when people give that narrative about digital but it's. It's even more likely that is misunderstood if you have that narrative and grocery because grocery appears like on the surface to be the one category where hey we're at three percent e-commerce penetration before covet and now we're 12% e-commerce penetration and so this, these cohort analysis if if there was a spike that dip back down you would expect to see some of the later cohorts underperforming versus the the precoded cohorts and we don't see that right that like all the cohorts grow and they grow over time the rate of growth slows down over time which is like I think pretty pretty typical and not surprising um so all that was super favorable the one thing and one will have to have Dan on the show but the one thing that I think wasn't in here that you'd really want to understand how valuable the customer bases and and again guys like Dan kind of pioneered this idea of how you value a company based on their customer base. [52:53] And kind of set the price based on on this type of data but I think they would also want to see some churn data and understand. How many people are each in each of these cohorts and whether there's the same people or lots of defectors and new people coming and all those sorts of things and none of that was was disclosed and assess. Scot: [53:22] Yeah you're right the I think they're making the argument that the swamps turn but because they don't disclose it you kind of. You have to trust him and he would he would want that data because you know the whole Begin Again the the bull case here is all right if you got super annuities than spending ad dollars to bring super annuities in this smart right because everyone you bring in the door is going to follow this cohort and start of it you know you and I looking at a table that the says you're one they start at 2:26 and then by year 60 at 500 bucks so they they double over their life cycle in their GTV so over six years so if you know if you can go buy them for a hundred bucks a pop then you would just go and, and spend all that money in it should be we have a super annuity on one side you can spend a lot of money acquiring customers on the other. Jason: [54:15] For sure true what. Scot: [54:17] You turn there's something that they could hide in there. Jason: [54:19] Yeah so you have to worry about that you also side note like a thing that drives CFOs crazy about marketers is you also have to have this argument about correlation and causation right that like if I went out and bought a bunch of customers would they maintain this the same level of performance or with those those. Purchase customers through higher advertising and through greater sales and marketing a activities be less oil less valuable customers by. The answer varies depending on the business. Scot: [54:53] Yeah that's where I this kind of come back to that bifurcation thinks I think would you say 120 million households. Jason: [54:59] Yeah 131. Scot: [55:00] Yeah so there's probably I think it's probably a pretty evenly split between convenience and value so call it 60 and they've got 7.7 so there's actually good I think they've got a 10% share of, what does the actual dress for Market because I don't think they're going to get any of the value or in a consumers because yeah the valuing consumer does not pay for convenience they'll just go to grocery store. Jason: [55:23] Yeah and again in the bottom quartile a lot of people are shopping for for groceries with government assistance and I don't actually think instacart should double-check this but I don't believe instacart has a way to accept Snap payments. Scot: [55:36] Yeah I don't think the government is going to subsidize the food delivered. Jason: [55:39] Well they just you know they do in other great white white guy like you can order groceries online from Walmart and pay with SNAP but I don't think you can with instacart. Scot: [55:49] Yes that's another factor and then at some point yeah I'm sure you'll bring this up but the. The if you're if you're a grocer you know a lot of ours opt out of the sand to themselves and they like we have a Harris Teeter that they don't accept instacart yeah they're not on there and they want to do their own they want to own the customer themselves. Jason: [56:12] Yeah I save that discussion for other but I think that's a super important one. Scot: [56:16] Forget I said that that's a teaser that's it's a teaser was what we call a tease. Jason: [56:19] Excellent teaser yeah because I feel like we've gone to the add segment of the breakdown of is there anything else you wanted to cover before that Scott. Scot: [56:28] No I'm on the edge of my seat to hear what you thought about that specific. Jason: [56:31] Yeah so it turns out instacart sanad Essence and probably shouldn't surprise anyone you know Scott you alluded to the change in CEO the the current CEO for this IPO is fidge Asuma Seema who formerly was VP of advertising at Facebook so they brought in a Facebook. Exact to run this business and shoot I should have looked up what episode he was on but Seth Dallaire was a past guest on this show when he was the chief Revenue officer. For instacart which was right around the time that that fidget joined. [57:19] Instacart so we actually had a discussion about their aspirations to become an advertising business and spoiler alert, it worked at instacart which we're going to break into and that guess set the layer subsequently was hired as the chief Revenue officer at Walmart where he's. Building Walmart connect which is also working so turns out ads are becoming an increasingly important part of the ecosystem for retailers but the basic ad math at instacart is that in 2022 the last full year of data instacart generated 470 million dollars in ads so 470 million on 28 billion in GTV, means that that's about 2.6 percent of the spin. That went to ads it's thirty percent of their revenue today and. [58:20] It's growing at 29 percent so it went up 29% from 2022 to from 21 to 20 22. Um it's grown another twenty four percent in the first months of six months of 2023 so, a lot of the unit economics of their transactions have kind of stabilized and are flat the one thing that's still growing at a very fast double-digit pace, is the ad business and at seven and twenty million dollars it's already reasonably robust and they don't. Ads are not a line item on the income statement that they included like you know and presumably like it's not. You could argue it's not Material against the three billion in in Revenue. But the so we don't we don't really know exactly how profitable, Those ads are but in general we would call these ads or retail media Network and the you know people argue about how profitable these retail media networks are people particularly argue about Amazon's but kind of the middle of the range when people estimate how what how profitable these things are is that they're about 75 percent gross right so in theory they should be near 99% gross margin because like you don't have to make anything to sell an ad. [59:46] You know you do need some technology you need an ad server you need Administration and salespeople you need brand safety people you know there is. Some infrastructure some of which has to scale with the ad business and so the the kind of. Most common estimate that that I see out there is like 75% of that revenue from ad business is profit. So that implies that the ad business contributed seven 555 million to the. To the income statement for 2022. Um and they were only profitable 428 million in 2022 so that the ad business contribute like by that sort of slice the ad business contributed. [1:00:33] You know covered all of their losses and and was essentially all of their their profit. In in 2022 and it's growing faster than anything else so it's very clear that the ad business is a key. Tenant of this instacart model and they in the management can section they it was kind of funny working for a big, advertising agency because they had to spend a fair amount of time like justifying that ads are valuable good thing and that people are spending money on ads so they kind of you know paint paint this picture that consumer packaged Goods companies which are you know most of the goods that instacart cells that. [1:01:20] Cpgs in the u.s. spend about 200 billion dollars a year on advertising and currently about a quarter of that is digital. And so the. The you know a typical cpg spends like about thirty percent of their gross sales on advertising and you know at the moment instacart is collecting about less than three percent of its sales in advertising so I think they're saying like hey. Advertising is super effective it's an important part of our economic model and there's a ton of. Of potential growth for us in this market and that cpgs need us and they amongst their claims about the size of their business, there are 50 500 brands that are advertising on instacart today and those are. At the moment all brands that sell. [1:02:18] Whose Goods get sold on instacart so we call that endemic advertisers right so it's it's Mondelez selling cookies and folks like that a lot of advertising companies. Sell ads to people that aren't necessarily selling through the. The the platform we call those non-endemic advertisers and we I don't think there are any non-endemic advertisers on instacart as of yet. But so at the Top Line like these are these are solid fundamentals for an ad business you like. [1:02:54] From my perspective retail media networks are super important evolution in the space they are very important I actually think for a lot of smaller retailers they get overhyped and that there's a problem with scale with a lot of these but instacart appears to be one of the companies. That has enough scale to build a real. A real business around this there is a unique problem that instacart has with ads that you know I think they've only been partially able to remediate so far who's paying for the ads. [1:03:25] Right so they talked about the brands paying for the ad right it's Procter & Gamble about the ad but there's a lot of stakeholders with budgets at Procter & Gamble, there's Mark Pritchard that buys Super Bowl ads and tries to build the brand and make people love tied but there are also account teams, that are trying to Goose the sales at their account so there's a Walmart account team and a Kroger account team and an Albertsons account team and all of those guys have an ad budget, that they want to use to sell more stuff at Walmart Kroger and Albertsons respectively. And so the big problem you have with instacart is you spend that ad dollar with instacart and you don't actually know. Which retailer it's going to impact. Right and so it's kind of like it has to come out of the top of funnel ad budget but it's bottom of the funnel Performance Marketing, type ads mostly search ads and so not saying that model can't work but it's. [1:04:33] The the guys with budgets that are used to buying ads are used to a slightly different structure so I will say that at the moment instacart causes a lot of consternation because it's a it's an unusual Beast that people don't exactly know how to budget for or how to spend their money on and you know I would assume if instacart wants to grow a lot they have to make that, easier for for the brands to do. Scot: [1:05:00] Yeah so what do you think. They're so this is a relatively good chunk of Revenue where do you think they're getting it from is it online going offline I mean offline going online are they taking it from Google are they taking it from couponing or. Two Brands even do like newspaper inserts are still a thing like I know that back in the day. Jason: [1:05:22] So I know I yeah I think. Brands are pretty pretty rapidly shifting their their dollars to digital vehicles and so two things like there's you know traditional kind of, newspaper magazine advertising that's atrophying and and the brands are replacing that with digital there's a slight misnomer the whole privacy thing and Facebook is a real thing but you know who wasn't buying a huge amounts of Facebook ads are like National cpgs with huge brand recall so so you know those tended to be smaller Brands and longer tail things so it's less like oh. [1:06:05] The these guys are shifting from Facebook it's more they're shifting from old-school marketing and over are television to to these digital vehicles but a big chunk of it is still coming out of these trade budgets right and so there may have been a pool of money that was allocated to spend at Kroger and it used to get spend on newspaper circulars that were like Kroger ads that fell out of the newspaper and that's an increasingly ineffective vehicle or maybe they even got spent on floor decals in the aisle at Kroger right you know like Shopper marketing tactics or trade tactics and so increasingly the retail media networks are getting a chunk of those trade dollars and I do think instacart is getting some of those even though it's trickier to do because you know it's not allocated exactly 21 specific retailer at the moment. Scot: [1:07:07] Yeah the so what did the ad formats I've seen is I always get this one that's like you through some Quaker Oats granola bars in there if you add these six things will give you a five bucks or something I've seen a coupon and I've seen a you know an upsell hey you've previously bought this or you may like this are there those are the three main add units or am I missing something. Jason: [1:07:33] Yeah so I am not going to speak specifically about the variation in ad units but as a general rule like probably I'm assuming the most predominant ads on the platform are search ads right so people search for products like always and you know above all the organic results are a bunch of sponsored ads right and so off very often those don't have a special offer in them they're just premium. [1:08:00] And so a big chunk is probably those those search ads you know then they're there are like Banner type ads that that land either on like the homepage of a particular retailer or on a category page or subcategory page and more often those are likely to have some call-to-action offer in them so they might have a promotion or a discount of some kind and then in the digital space um there's a lot of what we call like top off and impulse ads which are what you were just talking about right and you know one of the big problems we have with digital grocery is when you go shopping at the grocery store your wife sends you to the store with a list of 10 items and you buy all those 10 items but then you walk by the ice cream aisle on your way to the cash wrap and you add ice cream even though you didn't plan to buy ice cream and then when you're standing in the cash wrap, you're sneering at that Snickers bar or that Wrigley gum and you add that to the car and maybe a cold Coke to drink on the way home from the grocery store so a big chunk of a traditional grocer sales are all these unplanned impulse purchases and that. [1:09:16] By default happens a lot less in digital Grocery and so a lot of these ad formats are kind of are, our Industries early efforts to try to reinvent digital impulse and I would I would call it pretty imperfect at the moment. Scot: [1:09:35] Don't you get a nursing inside about gum or something like because self-checkout smelled the gum that serendipity. Jason: [1:09:42] Yeah the the that that cash wrap used to be the most valuable real estate in a grocery store like the most Revenue per square foot was that what we call the cash wrap which is the. The conveyor belt that you stand in line and actually the first thing that killed the cash wrap was not any of this digital shopping or any of these things it was. Facebook and the mobile phone and simply because you now had something else to do when you are standing

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    EP308 - Amazon Q2 Earnings

    Play Episode Listen Later Aug 4, 2023 42:40

    EP308 - Amazon Q2 Earnings Amazon reported a strong quarter across the board for Q2, soundly exceeding analyst expectations and retail industry averages. In this episode we break down the 1p and 3p retail performance, AWS, and the Ads. We go into depth around Amazon disruption reorganization (to a regional model), Amazon's newest efforts in grocery, and health care. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 308 of the Jason & Scot show was recorded on Thursday, August 4, 2023. Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode a 308 being recorded on Thursday August 3rd 2023 that's a lot of Threes I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:40] Hey Jason and welcome back Jason and Scott showed listeners well Jason today is one of my four favorite days of the year it is Amazon earnings day. Jason: [0:51] I was going to guess it's the 4th Halloween okay. Scot: [0:54] Nope good guess and today was a real doozy so we have a lot to talk about and of course it wouldn't be a Jason and Scot show without. Jason: [1:05] Amazon news your margin is there opportunity. Scot: [1:18] That's right sometimes I hear from listeners why do you guys spend so much time talking about Amazon well my rationale is a it's one of my favorite subjects did be not only is Amazon the biggest retailer but it represents over half of e-commerce and for our listeners I think their data is pretty much the standard compared to even anything like comscore or adobe, just by definition of them having so much data that it is the basically the best source for what's going on and then given our macro environment we're at the tail end of the last show you were talking about how it's setting up for kind of a bad holiday so we're heading into this it's a critical quarter and for me Q to see what Amazon is done really sets us up for the back half of the year. And especially holiday. So kind of a canary in the coal mine and right now there's all this confusing data coming out about the consumer you see things that sentiment is down travel to starting to tip over housing is slowing so there's some negative but yet credit card spend is going pretty well and so this is probably the best read we're going to get on the consumer heading into holiday. [2:39] So I think of it as Scott foreshadowing the whole industry that's why we like to spend a lot of time on it, so the other thing I'll point out is it's been kind of a rough period for Amazon the last, probably 6/4 a day that things have slowed down post covid they've struggled they've done some layoffs but having watched Amazon if we zoom zoom out having followed them since 97 they're really good at reading the room and if the market and the externalities are saying you're free to invest they will invest like crazy and you know and by saying that I mean they'll focus on Revenue growth implementing infrastructure but then when the macro turns - and they can move to harvest pretty quickly so, a lot of that kind of goes as good as Wall Street so Wall Street will love them and give them a lot of rope and they'll invest invest invest and then while she starts to worry they're like oh my gosh this is scary your spending so much things are doing this and then they will turn very quickly and can then get into Harvest mode and produce results that's a really a big theme for this quarter so that's part of the set of the other part of the setup is we have some eCommerce data coming into this what is that, what are those tea leaves tell us before we jump into Amazon. Jason: [4:00] Yeah so we have data from the US Department of Commerce through June and it is a really complicated story so that the top line is a little bit of a worrisome sign so year-to-date January through June of this year retail sales are 1.9 percent higher than they were during that same period last year so time now to put that in perspective in the 10 years leading up to covid we average retail growth of 4% a year so so far this year the growth is less than half of the industry average and then the last three years of growth the last 3 years of Cook post covid were the biggest three years of retail growth in the history of retail so we had these three monster years and now for the first time we have a six month period That's, well off the average and, Q2 was worse than q1 now you know people always say well what about inflation in these numbers if you adjust all these numbers back to 2019 dollars to sort of take inflation out of it, retail sales this year are actually down 2.8 percent from last year so so. [5:15] All of the Mir growth we have this year is really due to its unusually high inflation now big caveat there, the information news is actually pretty solid in inflation in June is only up three percent year over year which. [5:32] You know before all this inflation stuff started the Fed was always trying to keep inflation between two point two and three percent so. [5:39] Information down and three percent if it if it stays down there is pretty encouraging but from a retail standpoint, you have this weird thing you have the macroeconomics getting better there's a lot more economists saying we're not going into a recession we somehow managed a soft Landing you've got the inflation numbers coming way down all the wages and employment numbers have continued to be robust so you're all these favorable macroeconomics and now the consumer has stopped spending and you hear every retail are talking about how, consumers are trading down a cheaper Goods they're buying more needs and less wants and all of these sorts of things and so. If you if you kind of look at the retail industry average. There are two retailers that have hit consistently been outperforming the industry average and those two retailers are Walmart and Amazon which are the two, largest retailers in the United States of America. Um there's some controversy over who's actually bigger but we'll leave that for another show if the bottom line is if the two biggest retailers in the market are both outperforming the industry average. That's a bad sign for the rest of the retailers. Scot: [6:54] Someone's losing share. Jason: [6:55] Exactly exactly and I would note we don't talk about it a ton on the show but then there's two Chinese companies that are. Dramatically grabbing share really quick so she and and and Tim ooh so you know outside of those four. It's not looking super up to Mystic for, for retail so I was super curious to hear not only how Amazon did but what they're what guidance they gave for Q3 and what they were seeing in terms of consumer spending because we do have this weird paradox. Macroeconomics getting better, but retail spending getting worse so that being said like what what did Amazon report Scott. Scot: [7:40] Well it's an interesting quarter because again for like the last six quarters are 18 months it's been kind of using Wall Street language Wall Street always comes in with expectations and then you either meet those beat them or miss them and or sometimes I'll call it in line if you meet their expectations well this was this was pretty much an unprecedented four-way beat with a raise and that's that last part is what about next quarter so the current quarter is did you how did you do and then did you for future Revenue expectations did you stay in line with those or did you raise them so this was kind of like one of the best quarters you can have using all the Wall Street language and I say a four way beat so number one is earnings per share, while she was expecting 35 cents and they handily beat that at 65 cents so that's the first one the second one is revenue revenue came in at 134 billion versus 131a clear beat. [8:41] AWS Revenue there was a lot of worry around this because Microsoft was really showing their first of all Microsoft had to break out as your separately for the first time and it used to be all clumped in together in this kind of cloud bucket, where they could kind of have office they're hiding what was going on with Azure so now that Microsoft had to call, carve out Azure it has been slowing down very dramatically so everyone was very worried about that a WS beat the expectation was 21.8 and they came in at 22. I will talk a little bit more about the growth things and some other color there third-party exceeded expectation the only thing that was really kind of in line is online store Revenue but the margin improvements if you can't go back to that EPS were so dramatic that everyone was fine with Alan being I think it was like. [9:30] Point two percent miss or something it was like basically in line so that was the only piece that didn't beat and everyone was fine with that because all these other things really swamped the outcome there and then to cap that off the midpoint we'll talk about it but this represents about 11% growth all in for this quarter and the next quarter they guide for growth for 11 to 13 so they're basically saying hey we beat your expectations this quarter and things are accelerating into Q3 so and then they also on the bottom line that guided up for next quarter as well so that went really really well um and that was a pretty amazing so let's peel the onion and see what we can learn you want to take us through the retail business. Jason: [10:18] Yeah for sure so the the retail business globally grew 11% so that last year this in this quarter they grew nine percent so accelerated growth, North America grew 11 per sent an international grew ten percent International really struggle this time last year they actually had a 12% decline last year and so so in general pretty robust growth now, these are the revenue numbers which returned mine everyone Amazons and Marketplace they don't report all of their sales as Revenue they only report, one piece sales and then the fees they earn on 3-piece sales so it's not it's not a perfect. [11:09] Now match to to the sort of Industry retail data I said but it's a close approximation so, on average retail grows four percent a quarter the last two quarters retails grown you know less than half of that and Amazon comes in at 10 or 11 percent growth. So that's you know a pretty healthy outperforming that the industry average is and, you're essentially taking share from the rest of retail now often just a side note. Obviously the vast majority of Amazon sales are online traditionally online grows much faster than. [11:48] Brick and mortar so historically we would see ten to fifteen percent online sales but post pandemic that's actually slowed down quite a bit and so, online sales this year are probably averaging around. Seven and a half our eight percent and so Amazon's growth not only did it beat brick-and-mortar it actually beat the industry average, even for e-commerce so that that is very robust, they spent a lot of time both in their their press release and also in their earnings call talking about their focus on efficiencies, and you know the all the work and efficiencies reorganization of their supply chain you know changing of Labor models, that those others efficiencies are starting to bear fruit because, the profitability was significantly up for. [12:52] For the retail business for this segment so I want to say no for North America they ended up earning like 3.2 billion and earn income. So you know some quarters they don't learn any so 3.2 is a healthy number. [13:10] For their growth and for people that aren't following it. Part of these efficiencies is a super interesting story essentially what Amazon has decided and what they now seem to have successfully executed is that having a national Supply. [13:27] Chain and a national order fulfillment network is not the right way to structure themselves so in the old world they had one order fulfillment system that covered the whole nation you could really want some, delicious Green Tea Oreos you know that are only in the warehouse in California and you order those and Amazon figures out had a, get those Oreos to you in 2 days from the warehouse in California, and increasingly what Amazon said is you know customers really want speed we have to get faster in most cases where promising next day or same day to day is. Is you know a promise from 10 years ago and in order to do that efficiency efficiently and save money, we have to have those Green Tea Oreos really close to Scott to start things off and so we're going to drop a bomb on our own industry-leading fulfillment Network and we're going to redesign it as a set of regional networks so that the vast majority of good Scott orders come from a much shorter distance and so one of the, the impressive results of that effort today is this quarter Amazon said that like despite all this growth and increasing order volumes that they actually drove 20% less miles than they did this quarter last year. [14:42] So they're very successfully getting the goods, closer to the consumer and to put you in put it in perspective how many Goods that is they announced that they now have over 300 million, items that are eligible for Amazon Prime and over fifty percent of those items get delivered same day or next day. Scot: [15:07] Yeah I thought that part was pretty amazing and what they've done is they've split the country into eight regions they actually were pretty and the call to get into some pretty interesting detail on this end and I thought that was interesting because I usually pretty pretty tight-lipped on this so then so they've taken their National optimization you talked about and they're almost running each region has its own country so they're doing more of the load balancing inside of there so in addition to the 20 percent fewer miles there touching the packages 20% less and you now get 76 percent of the units are in the union are in the region and just a while ago it was 66. [15:50] And then what he's what he's basically saying is that's a big efficiency and then within there another efficiency is they're leveraging the same day where houses so things used to go from these really big distribution centers to the smaller ones and now we're going to these much smaller ones and they can now inject things in there and he said those are streamlined and they can get an item from the order coming in to delivery in as little as 11 minutes and those are even closer to the consumer so that it's almost he didn't say this but I kind of envisioned as eight regions are split up into eight more regions almost with these tiny you know within points being some of these other ones they basically said this is working so well we're going to double the number of these small last-mile fulfillment centers so that was I don't think Wall Street heard that because that's you know whenever Amazon says double that's a big number because they have like 200 ish of the big fulfillment centers I don't know how many small ones are but Amazon doubling anything is Nan. [16:55] Trivial number of dollars they're going to invest you didn't say over what time period you want your when ordering covid they said they were double and they went from like 120 fulfillment centers took to actually literally doubled those pretty quickly so it's going to be interesting to watch that build-out I haven't seen one of those I've seen them Beck's I haven't been in one of been on the back end of one to watch the flex drivers that that's kind of what they used to do for Flex drivers so be interesting to see how they scale that and I would like to go got a visit one I don't I don't know if any of the dsps which spend a lot of time with dsps here at spiffy so I've got to see this side of the world a lot more than I did in the software e-commerce world and there at the big fulfillment centers at these delivery stations that are called bolted on the side haven't seen how they pick up from some of these but I'm making it a mission. Learn more about this. Jason: [17:48] Dsps are the third party delivery services that Amazon uses yeah. Scot: [17:52] Delivery service professionals yeah so that was interesting. Jason: [17:57] And a reminder for the big fulfillment centers Amazon actually offers tours you can sign up and get a tour I don't think they haven't seen them ever offer tours on any of the other formats but there are some bootleg videos out on the internet if you know where to look I'll see if I can find some for the show notes that that show like like one of the general contractors that builds these facilities put some videos on their website of, of the finished facilities before they open. Scot: [18:28] Yep so that's kind of the retail business let's mix it up usually I cover third party but let's kick it over you to run through them. Jason: [18:37] Yeah are you okay with me talking about marketplaces I feel like as a Hall of Fame member you you this is like when mess a wet the other guy take the penalty kick. Scot: [18:45] I'm an auto guy now I don't know what this what is a 3 P3 what are the three p's. Jason: [18:51] Yeah so another milestone for Amazon's Marketplace. They hit a new high for the percentage of their total sales that came from third parties so the mix is now 60% third parties 40% first party so that that's continuing along long-standing trend. The third party is continuing to grow and being the most important part of the. The assortment makes at Amazon I don't have the number in front of me but my memory is that the. The growth in 3p Services was actually faster than the retail growth as well so sort of implies that the volume went up but also Amazons. Doing even better at collecting more fees from all those three p providers so that the marketplace continues to be robust and important. You know one that always gets a lot of the energy on these earnings calls is a WS and there's kind of an interesting story going going on so so first of all, the the Wall Street expectation was for AWS to grow eight percent this quarter and they announced that a WS grew 12% so. Massive beat from that perspective. Um and so then you go well is 12% good growth well a year ago they were growing at like 33 percent so twelve percent doesn't sound all that impressive compared to 33 percent. But what you have to remember is. [20:20] The rate of growth has been significantly slowing down quarter after quarter and last quarter q1. [20:27] That growth was 16 percent and when they announced that growth was 16%, they really put dosed a bunch of cold water on investors because they said and we already have a month of data since the end of that quarter and it's slowed down more since then so I think that really is what spooked. The the investor community and that's where that sort of 8% expectation came from so 12 percent growth is kind of an indication that the growth rate although you know swelling down is stabilizing. Um and I think they're they don't give guidance on these individual segments but they. Made a nod to the fact that we're probably not going to see the growth rate slowed down dramatically from this, they do pay a lot of lip service to the fact that, it's a very big number and you can't grow in double digits anymore by just getting organic growth that like in order to, continue to grow double digits you need to acquire a lot of net new customers and you need to acquire a lot of net new workloads, but the good news is you know they have a very robust narrative about why there are a lot of customers and additional workloads to acquire and spoiler alert. You know a huge amount of them are related to generative Ai and a large language models where. [21:54] Amazon is investing a lot in things a lot of the future is going to be in these these three hosted layers of AI services that companies use to build AI Solutions on top. [22:06] So so you know I think their sales focus is going to be is less about getting more money from existing customers and more about getting. New customers and new workloads on a go-forward basis for a WS, um I do want to say you add up the numbers for AWS and it's 88 billion dollar a year business that's the Run rate right now. And they make about 25 percent gross margin on that business so that that 88 billion dollar business is spinning off 21 billion dollars a year in profit. And everyone always talks about how AWS is by far the most profitable business at Amazon so keep that 21 billion dollar number in the back of your head because the next segment that Amazon talked about is ads, and while AWS is growing at 12% they announced that the ad business is growing at 22 percent. Um so that puts, the the ad business at like a 41 42 billion dollar run rate. And that the speculation is that the ad business is about a 75% gross margin. Business and so if they're at a 41 billion dollar run rate that means they're spinning off 30 billion dollars in profit. [23:25] For the ads business so Thirty 1 billion dollars in earning come from ads versus 22 billion dollars in. Or 21 billion dollars in profit from AWS so. Quit talking about a WS being the most profitable business than Amazon ads is the most profitable business and is growing almost twice as fast. And there's another of my favorite facts about that ad business is. You know so again they're selling 44 billion dollars worth of ads you know where they get all the eyeballs that they they have to sell those ads. [24:03] Buy them from Google for 20 billion dollars. So so here's like an awesome business, the Amazon is one of the largest advertisers in the world they spend twenty billion dollars I'm sorry 22 billion dollars on ads to get people to come to all their services, and consume them for profit right so, so you run ads and you get people to buy stuff on Amazon you run ads and you get people to sign up for AWS you run ads and you get people to sign up for Amazon Prime Those ads do all this heavy lifting for all these different business units and then after you've monetize that, that a dollar you then sell that ad dollar back for a profit through this ad business so you want to talk about the network effect and how powerful it is this to me is just an an awesome example of business engineering and you know I think. Often misunderstood aspect of the Amazon profit machine. Scot: [25:01] Yes pretty amazing quarter for ads the they're just really Trout's snap used to be in the conversation and Twitter and it's really just Facebook Google and it was on it. Jason: [25:11] I mean Amazon's a much bigger ad business than Microsoft and Bing. Scot: [25:15] Absolutely another tidbit from the call we had talked about this and if you remember we had we had a guest on from Guardian baseball and he was talking about this was right one by with prime came out and you were super skeptical that anyone would adopt. Jason: [25:35] Yeah and what should you do anytime I'm skeptical about a new idea. Scot: [25:39] Go long on it go. Jason: [25:40] Invest in it. Scot: [25:41] Yeah. So first of all I saw a tweet earlier and this is from everyone's favorite follow bearded egg F ba and a couple other people had similar tweets but he actually had used the software that scrapes all these websites, and he reported there's over 2,200 sites that now have by with Prime and then jassi's comments he said quote, merchants in early trials use by both Prime saw their Shopper conversion increased 25% on average which makes a real difference in their business Merchants who participated in Prime Day activities, experience 10x increase in Daily by with prime orders, so there was a knock on effect that if you had by the Prime on your website then people found you and and rattled over and you saw a really nice kind of ripple effect from the prime day efforts I thought that was an interesting tidbit so they're like like everything Amazon and I haven't followed the features but I'm sure if you remember Matt was complaining that you couldn't turn it on and off for certain excuse there was some feedback he had and maybe it didn't work with attributes like a parent-child skews I'm sure they fix all that or else it wouldn't be on this mini website so it sounds like that's really getting some some traction. Jason: [27:00] Yeah I do I still think. To cite Lira but my double down on my earlier skepticism there still are some rough edges to the customer experience right so it still is a purse Q experience which is a little weird like you know some products on the on the website you can get fast shipping for and some, some products you can't and it's hard to know what they are until you put them in your cart so that's kind of the the old shop Runner. [27:32] For if you will but I do want to say two things both Amazon and Shopify are leaning into these, conversion rates way better when you have by with Prime on your website or when you have shop pay on your website and you know you have to ask yourself what they're comparing that to write because, it should surprise no one that conversion rate when the customer has stored payment information available is much higher than when they don't have stored payment information so the magic question is if you already had shop, pay and PayPal on your site and then you added by with prime did by with prime perform 25% better than PayPal. Um or are they only saying by with prime prefer performs better than nothing because performing better than nothing isn't, quite as impressive in my book and I do want to say well well they are making progress with by with Prime and the 2500, Merchants is impressive just a reminder there's 2.5 million merchants on Amazon so the fact that 2,500 of them are using it you know does not exactly mean it's caught fire. Scot: [28:44] So still skeptical. Jason: [28:46] Yes so again what should you do go double down on the go along. Scot: [28:49] Short Amazon Jason you short Amazon I'll go alone. Jason: [28:54] Yeah that. Scot: [28:55] Prime is not going to work thesis and I'll go on. Jason: [28:58] Yes I don't I don't think you're giving me helpful investment advice. So that was all the main stuff I saw in the earnings calls was there anything else you wanted to cover because I think there is a few other tidbits of Amazon news. Scot: [29:15] I saw Grocery and I had a feeling that your ears were too perked up I I fell asleep during that part so I'll kick it over to you. Jason: [29:21] Oh my god do you not eat. Scot: [29:23] I do but groceries is everyone's least favorite chore. Jason: [29:28] Scot doesn't want to say it but he has people that get his groceries for him that's what's going on here he hasn't been to a grocery store in like 10 years. Scot: [29:35] Every every meal is from Chick-fil-A so I don't have to go through. Jason: [29:37] That seems like it would be a pretty fun for a little while but I have a feeling that the there would wear off, so yes Scott you are right I'm super interested in grocery groceries 25 percent of all retail spending it's the biggest category of spending that Amazon hasn't won, I think it was about 40 years ago that they acquired Whole Foods do I have that right was it 40 years ago. Scot: [30:03] 49 Jason: [30:05] I'm exaggerating I was over 10 years ago now though. That they bought at Whole Foods and hopefully just kind of flat since they acquired them it really hasn't you know turned in anything a reminder Whole Foods is very niche in the grocery space like Whole Foods doesn't sell Coke they don't sell Fritos, um and they're only in a handful of big cities so there the the industry leader in organic produce but they're not a mainstream. And one of the things so Amazon made a bunch of announcements that they were retooling their grocery experience and changing some of their offerings. Two days before the earnings call. And I'll come back to what those announcements were but on the earnings call Andy answered some questions about Grocery and he kind of admitted something interesting, Amazon is doing very well at what Amazon usually calls everyday essentials. And I think the Brian the CFO call that non-climate controlled Goods right so all these shelf-stable things that you tend to buy from a grocery store but you don't actually eat. Um Amazon's pretty good at selling and growing fast and they have a big chunk of that business they are not good at selling. [31:21] Perishables they're not good at Selling climate-controlled Stuff they're not good at selling fresh food online. Um and what Andy said in answer to one of the analysts questions was, to really meaningfully capture sharing grocery you have to have a broad offering in all the areas of grocery not just the everyday essentials and we don't believe you can win. With a broad assortment of groceries without a national footprint of stores. [31:53] So you know he kind of conceded that the Fulfillment center model and the multi-tiered regional Warehouse model that Amazon is building out. Is not particularly well suited for the grocery mix and so he said so you know we need to figure out a grocery, and we kind of concluded what we've rolled out over the last few years at Amazon Fresh is not a winning grocery concept so we put we put a hold on growth, we went back to the drawing board we invented a bunch of new experiences and now we're testing those new experiences to see if they are, more appealing to Consumers so the First Market to get these new experiences is Chicago so they just remodeled the the Amazon Fresh stores here in Chicago I'm going to go visit one soon. But they've essentially they've changed the assortment quite a bit they've added more private label and they've added more National brands for a grocery store Amazon Fresh doors were really kind of a limited assortment grocery store and so it sounds like. [32:56] They're moving they didn't say numbers but in my mind, they were like a twelve thousand SQ grocer and Kroger is like a 20,000 SQ grocer so they're there it sounds like they're moving up to that 20,000 skus. [33:10] And they're testing a bunch of new amenities, and one of the big problems you have in grocery especially when consumers are being really cost-conscious is consumers walk into a grocery store with a budget and they want to make sure they don't overspend that budget. And just walk out grocery stores you actually don't find out how much you spent until 15 minutes after you've left the store. [33:35] Which is an awful experience if you're trying to make sure you stay under 100 dollars. And so one of the amenities they've rolled out is on these Dash cards these digital cards that they let you use in the store they now have a real time running total of what's in your cart so for the first time you can see. [33:53] You know how much you spent so there's a bunch of experiences like that I'll get a better feel for what the new ones are. When I go visit but they're starting to Pilot new grocery Concepts and they're you know they've kind of conceded that they need to scale one of these brick-and-mortar Concepts nationally before they can really be a. A meaningful winner in the digital grocery space. But they made a couple other big changes in grocery to one of the biggest complaints and one of the stupidest things about Amazon's grocery is before you shop for groceries in Amazon you need to get an org chart and understand how Amazon's organized because, you have to decide in advance if you're shopping online at Whole Foods or Amazon Fresh and guess what most customers don't understand the distinction between those two things, and so they had separate carts you actually have three cards on the Amazon website you have a general merchandise Encarta gross Amazon Fresh cart and a Whole Foods car, and it can be really confusing because you just click add to cart on a bunch of stuff and then you go look at your cart and it's not there because it's in one of the other car. So they announced that they're moving to a universal cart. I haven't seen it yet so I can't speak to exactly what it looks like I have a few a name mean a universal grocery cart I don't think they're actually going to mix it in with general merchandise but. [35:11] Will be eager to see that and then the other announcement they made that is I'm not I mean I just don't think it's as big a deal is, um they have opened up grocery delivery from Amazon Fresh to non-prime members so so prior to this week you had to be a prompt Amazon prime number to order from from Amazon Fresh. And this is kind of interesting because this is a further erosion of Amazon Prime benefits you used to get free delivery, um with Amazon Prime for groceries and about a year ago Amazon caved to try to get more profit, and they added a delivery fee even if you're a Prime member but they said you can only get delivery of your Prime member now they're they're taking that benefit off the scale and I just point that out because. Amazon's ordinarily so good at adding new benefits to Prime is kind of rare to see them taking benefits away from Prime so I think that's interesting in the. The grocery space anything else that I missed or the jumped out at you about grocery Scott. Scot: [36:13] No I thought it was you know. A lot of people would expect him to throw in the towel because they've closed some of these physical store experiments and Jesse did that but they still seem committed to grocery at least the four star or what was that start. Jason: [36:30] Yeah five star. Scot: [36:31] Faster that is the closed all those right. And the trimming back the just walk out stores so it's interesting to see that there they they see something in grocery or it's just such a big tan they feel like they have to obviously they have Whole Foods but. Jason: [36:50] Yeah I do think it's one of one of their big bets and it was interesting like in some of the narrative Andy kind of he threw something at the grocery teams under the bus. You know like a lot of his complaints about the Amazon Fresh stores is he's like we just weren't good grocery operators that like are. Our inputs as he called it just weren't good like the the inventory turns the, you know the inventory waste the labor cost that you know all those things weren't where they needed to be to be a competitive grocery store and there's I'm sure a lot of traditional grocers that were listening to this call going amen Andy we told you groceries are really brutal, difficult Cutthroat business and you won't find it as easy as some of the other businesses you've dominated so, I still want to bet against Amazon I still think they're ultimately going to be a big player in grocery but. [37:53] And then one other to me really interesting tidbit is Healthcare that Amazon announced last week a new National Healthcare offering which is telemedicine. Um service and that's attached to Amazon Pharmacy. Um so this used to be an in-house experiment that they use to provide health benefits to a bunch of Amazon employees but and then they started offering it to. You know a few other employers that they had Healthcare agreements with, but now they've made it a national authoring that's available to everyone so you know if you if you need some prescription or you need some some medical advice and you don't want to go in and see a doctor you can't get an appointment. You can you do now use this Amazon Health Service to get a fast and easy. Um Health Care visit so you know we know Amazon has been kind of. Kicking the tires on the healthcare industry and they've had a couple initiatives they had some Partnerships that they walked away from, but there's another one where it seems like they haven't given up on the space and they're still you know rolling out and trying new things. Scot: [39:08] Yeah and I hope they nail this because my my experience with the physical drugstores always terrible. Jason: [39:17] Yeah I am not bullish on physical drug stores so again. You you know oil listeners now know what they should do for the investment there but like. You know the drug business used to be a retail business you walked into a pharmacy and you got all your prescriptions today the insurance companies mostly try to force you to use mail order. Pharmacy said the main reason people had to go to. Pharmacies has kind of gone away and as a retailer if you don't have to go there to get a farm prescription filled. The retail drug stores are awful retailers like they, you know they don't have a good assortment they don't have a good prize they're they're deficient in digital in and if you watch all the moves they're making, the thing that every retail drugstore is trying to do more than anything else is get out of retail and become a Healthcare company and own an insurance. So you know a lot of the CEOs of these companies now come from the insurance sides of the business and it it just doesn't seem like. The long-term future of us retail is to have you know multiple big National drug stores because the model is kind of waning. Scot: [40:28] Yeah yeah we'll I'll shut a small tear when they all go out of business and I can get things more efficient. Jason: [40:36] Yeah I think at least one is going to have to survive because there are a lot of impromptu emergency get it right now kind of kind of needs but you know maybe down the road we'll do a grocery in Pharmacy Deep dive. Scot: [40:50] Or Amazon will have things so close to you can get it in 15 minutes so you won't miss it. Jason: [40:55] Yeah you know one thing I will say like I thought you were going to say I won't feel bad if Amazon sells this because Healthcare in America. Royally screwed and a lot of people you know don't have in can't afford access to it so certainly it would be good if they fix that I will say Amazon rule that a service similar to a Walmart service which is really beneficial, they're now offering generic versions of most chronic prescriptions for a flat five dollar fee and so one thing that has approved a lot in the United States in the last two years. Between Walmart and Amazon and actually like a big startup that Mark Cuban is running is a lot of these. You know prescriptions that were Out Of Reach for a lot of low-income people are becoming more affordable which is certainly a good thing. Scot: [41:40] Yeah yeah we'll take care of them but I'd need my experience you better too. Jason: [41:44] See how I found a way to end the show on a happy note. Scot: [41:47] Yeah World Peace. Jason: [41:50] Yeah and that you know last week we had a slightly shorter show and listeners told this they loved getting a little bit less of us and so miraculously we have done it again we brought in a voluminous Amazon earnings call in a pithy 41 minutes, so if you'd like to reward us for our brevity the best way to do that would be to jump on iTunes and give us that five-star review. Scot: [42:14] Thanks everyone we hope you enjoyed this Amazon Q2 earnings results and until next time. Jason: [42:21] Happy Commercing.

    Amazon Prime Day, Commerce Next, and NRF Nexus Recaps

    Play Episode Listen Later Jul 26, 2023 44:45

    EP307 - PrimeDay, NRF Nexus, Commerce Next  Amazon Prime Day 2023 occurred over June 11 and 12th. Adobe says total sales were up 6% over 2022. Discount levels were much more conservative than holiday. We give a complete breakdown. Commerce Next 2023 was held in New York City June 20-21st. NRF Nexus 2023 was held at the Terranea Resort in Southern California July 10-12. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 307 of the Jason & Scot show was recorded on Sunday, July 23rd 2023. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 307 being recorded on Sunday July 23rd, 20:23 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:39] Hey Jason and welcome back Jason and Scot show listeners, Jason it's been a minute since we recorded a pod as the kids would say we've had a series of feels like the universe doesn't want us to podcast either I'm out of town or you're out of town in a place where we don't have Wi-Fi or a mic and then I had a little kid drama and we had to reboot and but here we are we're finally getting the pot in them. Jason: [1:07] Thank goodness and we're I think we're going to talk about this in a minute but I've been to several events and people are starting to get on me they're mad, that we fallen off of our regular recording. Pace in so I feel like I hope we will get credit for recording a rare Sunday night show and I'm looking for even extra credit, I'm actually recording this on vacation at an upper Lake Michigan lake house sitting in my car stealing the neighbors Airbnb Wi-Fi. Scot: [1:42] Yeah I give you 100 extra points on that one yeah definitely definitely some kind of new Ninja level podcasting that you're doing there. Jason: [1:51] I feel like that alone deserves a five star review on iTunes. Scot: [1:55] Yeah I feel like at some point the police are going to tap on your window and it's going to be fun to listen to that when it happens here you hear you explaining what you're doing in that that foggy car there. Jason: [2:05] Exactly I promise to keep the bike running if that does happen. Scot: [2:09] Maybe some post-show editing we'll call you've been a busy on the road retailgeek so I know you went to Commerce next and NRF Nexus which sound kind of relatively somewhere they both got that NEX in there, I was not able to make those and we purposely haven't really talked about it so I'm excited to hear your take on the State of the Union that you've been at to trade shows. Jason: [2:36] Yeah yeah I think Commerce next might have been shortly after our last recorded show so it happened June 20th in New York City in Manhattan at the the Midtown Hilton and this is a show, I don't know what year it is it's been going for a while but this is put on Friends of the show Scot Silverman who's been on several episodes and his Partners Veronica and Alan, and you know they they sold the show so as to raise some money last year so the show is getting, more serious they're hiring more staff they hired another friend of the show Jill Dvorak from the in our EFT, to manage content and it was you know bigger and better than previous in our interests Commerce next shows which were already good so I thought it was a good show in New York. [3:33] Two days one track of content for the most part on the main stage so you know you got to see most of the main speakers, there were like lunches and breakout sessions I did a session on sort of the evolving art of platform selection and you know this kind of shift from monoliths to, to these sort of mock based headless platforms and the pros and cons of, in picking the Best in Class vendors for each little Point solution versus all-in-one sweets from one vendor and, we had we had some good dialogue about the relative merits of all those approaches and sort of the evolution of the technology platform. [4:19] Which I used to talk about and work with clients all the time and I feel like. Kind of I've lost some of my muscle on that like it it comes up less often and I think part of the reason is all this stuff is getting, somewhat commoditized and it's just easier and safer to pick a solution and and you know get into the e-commerce business than it used to be. Scot: [4:43] Yeah the Pod we've talked a lot about headless and then there's that whole acronym of what they do which escaped to be just as internet yeah mock then you work on them and not the best branding is that this till the very much, you know what folks are looking at or are you just kind of walk them through the 30,000-foot layer of you know and on-prem open source SAS and then headless or her like what's. Jason: [5:13] Yeah so it's yeah so it's mostly Cloud it's headless it's it's you know multi-tenant Cloud headless. You know what Gardner calls compostable Commerce so you know 8 micro services or you know efficient apis or however you want to look at it but often it's like. [5:39] Rolling your own UI or buying a you I versus getting a you know pre can you I from. What they the funny term for the old Legacy Solutions is monolith so I guess AP Oracle and IBM now HCL are these like mono. Monolith Solutions and like Commerce next and fabric I'm Commerce tools are kind of the more modern architecture is for the actual platform. You know once on an interesting you know Shopify there's headless version of Salesforce you know Bigcommerce they're all kind of playing in this space and the interesting thing is it used to be a huge game-changing decision what you picked and. In many ways it just is less important it's a less critical decision to your overall business because they're all like pretty good and somewhat interchangeable today with any of them the sort of modern ones it's you know the folks that are. Kind of still trying to feed the servers under their desk and keep the the you know sort of on-prem, proprietary Stacks going you know are the are the folks that are usually behind. [6:57] Also and I know even, Wes about the specific nuances event of individual vendors but the there was a robust Exhibit Hall at Commerce next and by far the most common vendor is a all-in-one, AI based marketing Suite so you know all these tools that have like a CD P email server SMS server personalization engine like all of these sort of. Out marketing Outreach Tools in a single vendor driven by Ai and I have great empathy for anyone that needs to buy one of these things because there's like, 30 of them and they all have the exact same words on their Booth the same same Basic Value prop so it's a crowded space right now. Scot: [7:46] Yeah yeah that was gonna be my next question the AI Buzz is sweeping through every company and I'm sure I'm sure our e-commerce vendors Are Not Alone. Jason: [7:54] Yeah yeah and there were a number of sessions at both shows, switching per second from Commerce next which was June in New York to Nexus which was July in California so interrupt Nexus is kind of the spiritual successor. Before in a ref acquired shop dot-org we used to have this great shop dot-org show but we have another great show the shop dot-org merchandising Summit that was a smaller show in California there was a little more sort of tactical Hands-On type stuff, and in some ways this interact Nexus is the spiritual successor to that it's like four or five hundred person conference. At beautiful Resort the Tara no resort in Southern California on the beach. [8:47] One track of content great networking and just you know a nice week to spend with, many of your co-workers and, I was vastly Overexposed at this show I feel like they spent their whole Budget on the venue so so they had me do way too much content so the first night the big keynote was an interview with Kara Swisher so I got to interview. Kara Swisher who you know famous Tech journalists started New York Times started the code conference so I interviewed Steve Jobs Mark Zuckerberg Jeff Bezos you on mosque like all those guys multiple times and so you know very famous interviewer, here's the brutal part of this the most common thing that happens to me at these shows is people recognize my voice from this podcast. And they're super excited and then the first thing they say is oh it's great to meet you but where is Scott. Because everyone is way more excited about you than me which kind of hurts so then like now I've made the big time I'm on the big stage interviewing Kara swisher and what do you think everyone says to me. Scot: [10:10] We're Scott. Jason: [10:12] Yeah because she does a podcast with Scott Galloway. Scot: [10:15] Galloway. Jason: [10:16] Exactly and so if they're not disappointed. Scot: [10:18] The big dog. Jason: [10:19] Yeah yeah that it's me instead of you they're disappointed that it's, it's a me instead of Scott Galloway and I did mention probably on stage that we both did podcast with egotistical co-host named Scott, but I also alleged that my Scott was way better than her Scott and she agreed even though I don't think she knows who you are. Scot: [10:43] No no lies detected. Jason: [10:45] No exactly. Exactly no but we had a pretty good conversation she's. David very opinionated and outspoken but she's also pretty well informed so we got pretty deep into Ai and some of the pros and cons and some of the, the near term and far term use cases around AI we talked a lot about social commerce and why it's, hasn't caught on here yet and it you know has has more legs in China she's very psyched and in favor of autonomous vehicles I thought you would. You like that and so I feel like we had a pretty wide-ranging conversation that got pretty good reviews I got good feedback that I didn't blow it. [11:32] And then we're that not enough I also had my own keynote onstage right kind of recap the state of Commerce and you know did one of my data pukes and I spent a fair amount of my keynote talking about the emergence of these Chinese juggernauts particularly Sheehan and Tim ooh, and I showed a chart that was pretty eye-opening to the audience of web traffic like a lot there's a lot of charts footing around about mobile app downloads particularly of ten Moon how quickly they've gotten, you know to be the top downloaded shopping app on the US app stores but I showed. Amazon Walmart Target Tim ooh Incheon. Monthly web visits and you know, for people that aren't following it closely she has been around for 10 years they've been kind of in the u.s. in their current form for at least five years Tim has brand-new just launching last November and. Shion is. Almost it is about 80% as much traffic as Target, Tim ooh past Target for when monthly web visitors in January of 2023 and is now sort of halfway between Target and Walmart. Scot: [12:56] Yeah it's amazing. I spend a fair amount of time with 16 to 25 year old young ladies and it's all she and all the time they don't ever mention team and they call it Shy and I tell them retailgeek says it she in and they say they don't care. Jason: [13:13] Yeah she's an Insider. Scot: [13:14] Call It Shine they say everyone calls it Shine so sorry. Jason: [13:19] They started out selling wedding dresses. And yeah the they also are doing well you know we haven't talked a lot about them lately but they've expanded from a apparel retailer to a broad set of categories including consumer electronics and they've launched a third-party Marketplace on the US. Scot: [13:37] Wow. Jason: [13:39] So both Tim ooh and she and are now third-party marketplaces kind of competing with a very similar assortment and yeah both both are capturing. Pretty pretty significant attention of us consumers. Scot: [13:57] The did you get booed off the stage or they were like you. Jason: [14:03] No not theirs I think people are were I suspect people are slightly less informed than they should be on them and I feel like people are interested in we're taking note and then I did a third session for the CMO marketing Council on, generative AI there are a bunch of other sessions on AI as well but I kind of did a deep dive on some of the Commerce use cases and I'm, particularly interested there is a lot of new I mean there's new stuff every week and there's a general stuff that you can imagine, being applied to Commerce but like Google launched a new generative AI feature for apparel try on, that's remarkable like so you upload a picture of yourself and you pick any of these garments and it shows you that garment on you and it's not. [14:58] Some stupid rendering where it's like you know a gif on top of you. Or you know some distorted thing like the garments flow on your body type but in a very realistic way and this is a functionality that a few websites have offered for a while with really complicated 3D models and really expensive. Product detail Pages because they have to scan all the apparel and have to get you to take a picture of your body to scan your body and it's like a cool experience but it's a lot of work to get there in this Google thing just does it with a couple of flat images and it's. [15:35] It's really pretty remarkable so I you know I definitely think the the future of a Peril shopping and a bunch of visual categories. Is going to be you know seeing this stuff on a realistic representation of you. And they have another feature coming out soon that they call scene Explorer which is kind of the, the augmented reality hold your camera up to the Shelf at the store and overlay all the products it sees on the Shelf with all the digital product detail from, from the Google catalog which is interesting. Scot: [16:09] I was gonna ask you about the Google thing because when it was announced there was some confusion where it looks like you could say it had like somebody types some Matrix of 256 body types and you could say that's me and you could see the body type not you but you're saying you can actually upload your own picture. Jason: [16:27] Yeah so the the confusion is understandable because they launched a feature with a predetermined set of models. There was kind of a proof of concept and so you could like pick a model and they had models with different body types and so you know and ethnicity so you could see kind of your ethnicity with your body shape and then three weeks later they said and here's how you upload your own picture. And so they're technically two different products but they happen in such close proximity you're like I wonder why they launched the first one. And In fairness the first one is a like in available to use API that Commerce sites can use now the second one is kind of a science. Like proof of Technology concept that they've released to the academic Community but I don't think they've released it for commercial use yet. Scot: [17:21] Ian timing-wise I don't know if this was before after your show there but Shopify has their new kind of like co-pilot kind of like, a eyepiece it's really more at the store level though. And you got a lot of buzz but I looked at it it just seemed like a fancier wizard for setting up stuff but God it didn't seem as game-changing as some of the Google stuff. Jason: [17:46] Yeah yeah although it is interesting that just everybody's building that Rai into every product right like you know I think someone said recently like. Like every text box on the Internet is going to get a large language model. Scot: [18:02] Yep the expectation is you can just like talk to these things and having to do stuff for you so it's going to be. Jason: [18:06] Exactly yeah yeah so it's interesting and that was for sure a Commerce it interrupts Nexus that was probably like 80 or 90 percent of the conversation was AI base so it was kind of. It was fun for me to talk about a few things that weren't a i based because it was getting getting a little tiresome and fun fact. Nexus if you recognize those dates July 10th through the 12th it's because it was during Amazon Prime day. Scot: [18:33] Yeah yeah and anything else before I move on. Jason: [18:39] No I think those those were the big things you know two shows that are well worth attending for for folks that are looking for Commerce events and I'd say you know congratulations to both for. For putting on a good growing robust events in a in a semi challenging climate to get people's attention. Scot: [19:01] So you know there's always the what you talked about in the front of the hall and then the back room chatter what's what's the back room chatter what's top of Mind are people worried about and by people I mean people in our industry are they worried about the recessionary headwinds and inflation or do they you know they feeling pretty good about. Holiday this year what's kind of the scoop. Jason: [19:26] So I don't know I might even say there's two tears there's like what's the normal conversation in the hallway and I do think there's a lot of conversation about. What's going on in the industry right now from a momentum standpoint and and I think that the. The sort of Top Line there is it's complicated like it's really weird like there's, there's economic indexes that are becoming more favorable I mean we're seeing like the inflation numbers come down, you know there's still some data to suggest that the US consumer is in like pretty good Financial shape All Things Considered, but there's a lot of indications that consumer spending is slowing down and, you know we're just coming into kind of Q2 earnings season I think Amazon is going to report next week and so obviously we'll do a show about that but, you know a lot of retailers have kind of reported soft q2's and even more alarming they're lowering their guidance for the back half of the year so you kind of simultaneously have some like. [20:31] Decent economic news and Pew no more economists are starting to say hey a soft Landing is possible and maybe we're going to avoid a recession which you know I feel like. The majority of economists earlier in the year we're pretty convinced that we were going to end up in a recession and so that would feel favorable but then at the same time, customers feel like they're cutting back and you know a lot of growth indexes are kind of slowing so I feel like there are variations of what the heck is going on with all of that when I like privately talk to people and get into a lot more specifics, I have to say I am not optimistic for a robust holiday I feel like a lot of people. Are gearing up for a pretty challenging holiday with pretty deep discounts, like there already is a Slowdown in sales and so people are worried that they're going to be in a bad inventory position for holiday and they're just seeing. Consumers in continue to trade down there seeing, sort of elective category product categories really start to take a dip and you know more consumer budget going to Necessities versus wants and so. It is increasingly sounding like it's going to be a challenging holiday especially from a margin. But I hope we're all wrong. Scot: [21:57] Is that shared by folks or that's kind of like what the big gun on the elephant in the room is base. Jason: [22:03] No that's I when I talk to retailers about like what they're bracing for and you know what their their Play books are for holiday and you know people are talking about expecting to see deeper discounts. More competition on discounts which than roads margins and you know some some traditionally stalwart categories being soft and stuff like that. Scot: [22:26] Cool well you mentioned primeday and it wouldn't be a Jason and Scot show without some. [22:46] That's right so unfortunately Amazon doesn't announce their second quarter results until Q3 and then we'll get the real well July they won't really talk about primeday but we do have some Amazon news coming and we'll do you doing a show if the universe aligns for us around those results but until then we can talk about primeday first of all did you end up buying anything this year. Jason: [23:10] I did I feel like I talked in the show every year about, over buying on like cables and chargers and I did do all of that again, the other I bought some I think I mentioned on the show before that I moved from a condo to a house in the last year and so we have this new thing that we didn't use to have called patio furniture so I bought some. Like Furniture to hold the covers when it rains in Chicago some weird weird outdoor stuff. Scot: [23:45] Up getting some accessories one of my anchor multi-headed. Octopus things died and this is frustrating I thought I was buying another one and I specifically was searching on anchor I was on my phone and I was having to go fast and the thing showed up and it was like a no-name it wasn't an anchor device and it's already acting wonky so kind of. You know how they can advertise and like really get this is kind of the negative side of some of the Amazon experience these days I was pretty sure I was in an anchor only mode but but a non anchor product snuck into my cart I end up getting up. But it was cheap so there you and it doesn't work so yeah that was a bummer. Jason: [24:29] Yeah if you want to buy like cheap no-name stuff you should buy it from Tim oh it'll be like 99 cents. Scot: [24:36] Yeah no like wish does it take six months to show up her. Jason: [24:39] No it's you know so Tim who is seven to ten days and they offer you a shipping guarantee so you get like store credit if it doesn't arrive in 10 days. Scot: [24:54] That's good cool well what did you see on Amazon Prime day I'll do a little Wall Street piece but I thought you may hit some of the high notes. Jason: [25:04] Yeah so a you know primeday is important just because it's primeday but also a lot of people use it as sort of kind of a first indicator of what the second half of the year is going to look like so this year was on the 11th and 12th it's been 2 days for, for a number of years now and you know Amazon doesn't really report anything very useful about primeday it's everything's a record. [25:29] They did more than they did last year which they're always going to do more than they were last year, but they don't give you any real numbers so Adobe is the most commonly cited, some estimate of primeday an adobe estimates twelve point seven billion dollars were sold on primeday which is up 6.1 percent year over year, now A Wrinkle In These third-party estimates is none of them are just estimates of Amazon. They all you know talk about this phenomenon of other retailers doing sales on primeday and so they're actually measuring, e-commerce sales on the primeday is not just Amazon sales so they're saying industry-wide, 12 point 7 billion in sales up 6.1 percent year over year, which is robust there were people that were forecasting would be bigger than that the other forecast I've seen was emarketer emarketer with same ballpark they estimated thirteen point five billion, they said about eight of the billion would happen on Amazon and 5.5 billion of that was going to happen off Amazon, both of those are us estimates so that would you know be decent growth it would be a deceleration from, from the last few years of primeday growth. Scot: [26:50] Yeah the so one of my favorite reports was from Colin Sebastian who's a friend of the Pod and he's from Baird and he basically said that they thought it was an acceleration so meaningful, so Amazon reports items sold and then they take that and some proprietary data and they're saying it was a 20 to 25% you're over your rent increase and they ended up increasing Q 3 is estimates based on them so it'll be interesting to see you know, where it's going to fall on that so that seems like the bookends we're hearing are six percent and 25% that's a pretty big big range to see where it's going to fall into the will never disclose, Axel primeday results but, we'll know when they announce Q3 if they beat her exceed that that it was kind of towards the high end and if they come in on the lower end of the range well no it's more like that six percent. Jason: [27:51] Yeah yeah and that'll be interesting 25% in the current climate would be pretty darn impressive not saying it's not true but you know you look at like the last couple quarters of Amazon's growth they weren't that high you know you look at the end retail Industries growth, not near that I so like if they're driving 20-25 percent that would be big, yeah and I guess we'll never win we'll never know for sure did anything else jump out at you in The Baird report. Scot: [28:20] That was the meat of it they were just really focused on that a little little things in there like last year there was a lot of supply chain issues and lot of reports product not getting to people it does seem like this year they things work a little bit more flawlessly so there was some, some just Optical stuff like that. Jason: [28:39] Yeah I really didn't hear the many glitches in this year's primeday which you know it's one of the sort of like highest demand is the year so you know it is a day when you would uncover glitches I saw a bunch of other a smattering of other interesting data points about Prime from various folks Adobe and it is in addition estimating sales they showed category growth and so they call that out like appliances was the big category growth with 45%. Up year-over-year household products were up 28 percent year-over-year Electronics were up 18% year-over-year apparel up 17% and then the big winner is Office Products which is up 76 percent, and at first that might surprise people but one thing to know about Office Products is they always do phenomenally well on primeday because primeday tends to fall right at the beginning of back-to-school shopping. [29:35] So it's kind of a perfect perfect storm there, yeah and then they also Adobe reports discount rates and here's where it starts getting interesting they said that on average Electronics were 14 percent off, apparel and toys were twelve percent off and that those were the deepest discounts and to put that in perspective on holiday of 2022, toys were 22% off consumer electronics were twenty-three percent off and a pair of was 14 percent off so that data would imply that the discounts have Prime were. Not as significant as the discounts, that we you know Tennessee over holiday period another does that surprise you at all. Scot: [30:24] No I dunno you know so since we're in the this kind of economic situation I think the consumer is really. Not getting off the dime unless they have deeper discounts and I think they probably had a pretty good data science reason for the. Jason: [30:43] Yeah so then one interesting thing which also says something about the consumers Health the. Buy now pay later use was up 20% on primeday and represented 6.5 percent of all sales. So that you know quite that's been a growing payment type for a while but I would argue it's kind of plateaued and so it's interesting to see that big big step up on prey. Scot: [31:08] That's a firm right there married to a firm set. Jason: [31:12] Well so on Amazon but again all these debts are this kind of like, everybody is primeday and so I think that does include like Target and Walmart sales which are not a firm so so it's all those guys karna and affirm and, and there's too many to name these days but then to me some of the interesting things were like who participated in primeday and so you know a. A digital marketing agency Acadia that tracks this stuff pretty close and that Q Masters works for who who I think is one of the really smart voices on Amazon sellers they reported, this year eighty percent of all Amazon sellers participated in primeday in some way and from their methodology last year 69 percent participated so it's. [32:12] The participation levels continuing to increase in its nearing 100 percent of all Amazon sellers participating in primeday which, isn't super surprising it seems like primeday is a pretty successful important thing to participate in, they also said in general that primeday that's ours had to spend fourteen percent of their total revenue on primeday on Amazon digital marketing so that came from momentum Commerce that estimated that so that's a, pretty high, on top of the take right you know that's that's just all the Amazon marketing services and then a particularly interesting take was from our friends Joe it Marketplace pulse he reported that, 150 Brands were promoting by with Prime on their own websites, on primeday which would be up 10x from last year where there were like 15 Brands using by with primeday. [33:17] So you know just interesting how it's all playing out with kind of Amazon expanding off-site like all these other retailers getting in the market I feel like the vibe, there have been other years when a lot of other retailers more directly counter programmed against primeday in this year. There were a lot of sales on primeday for sure but it almost felt like more retailers did like Fourth of July sales and almost tried to. Preamp primed a little bit as opposed to completely focus on. Scot: [33:48] Yeah I guess we won't know until the data comes out windows so we won't have that. Jason: [33:55] Yeah so the. Scot: [33:56] While. Jason: [33:56] The Debbie Downer. Scot: [33:58] Anyone. Jason: [33:59] This is you know primeday is actually in Q3 right so we're we're just going to start getting cute to data here like the US Department of Commerce Q2 data for e-commerce will come out in mid August, Amazon report Q2 next week and then a bunch of other retailers in the next couple of weeks but that'll all be Q2 data in this primeday stuff is all cute 3 so it's it's going to be you know four months down the road before we have. Have more clarity on that and will be you know well into holiday when we get that clarity. Scot: [34:32] Yeah well speaking of data I saw you had a tweet where you went through some of the new Commerce data what are you seeing there. Jason: [34:41] Yeah so obviously we talked about the US Commerce data every month so last week just after interrupt Nexus on July 18th there's Department of Commerce released its June data and, this is one of those it's complicated these results don't seem that that favorable kind of stories June retail sales overall were up six percent from June of last year which is a pretty meager, growth rate and a significant deceleration so if you go year to date January through June sales this year are only up 1.9 percent, versus last year and again like normal retail years sales tend to go up about 4% a year the last three years you know largely impacted by the pandemic we've had the three highest growth rates in the history of retail so they're all much higher than four percent so only being up 1.9 percent year-to-date is a, pretty disappointing place to be it's still. Healthy amount from before the pandemic so year-to-date we're up bike 35% from before the pandemic, you know what everyone immediately asks when you talk about these numbers is well what does inflation due to them and if you adjust those numbers from PlayStation year-to-date we're down 2.8% and we're only up 14% from before the pandemic so. [36:10] You know that reflects you know a consumer that's being pretty conservative with their spending. And that you know is a worried sign going in a holiday if we only grew you know less than 2% or you know on a real adjusted basis We Shrunk three percent from last year. We don't get great monthly data for e-commerce we get better quarterly data so the monthly data we get is this thing called non-store sales which is kind of like. Cattle catalogs and e-commerce and it's a little bit of a broader catalog but it was up. [36:46] Nine point nine percent in June which means year-to-date we are up 7.9% for, non store sales and so that's reflecting kind of a return to typical e-commerce growth rates like before the pandemic e-commerce would grow 10 to 15 percent. Year-over-year in brick-and-mortar with grow 4 percent. At one point during the pandemic we had an inversion where retail is actually growing faster than brick-and-mortar than e-commerce and e-commerce has over the last couple quarters been kind of, flipping the script and kind of going back to normal and so at the moment we have this thing where e-commerce growth is back to its normal, eight to ten percent level and brick-and-mortar is well under it's normal for percent level. Um so that's kind of the Commerce story and again will get better e-commerce data because will get the Q 2. E-commerce data next month. I did have one funny story I didn't mention when we're talking about the Tim ooh and she in stuff Tim ooh and she and are now suing each other. Scot: [37:59] They're in their Chinese companies room. Jason: [38:01] Yeah so Bo for Chinese companies Sheehan has a US headquarters in Boston I don't think Tim who has a US headquarters that I'm aware of, so she in which again has been around for a while is suing newcomer Tim ooh, by saying that Tim has been impersonating Sheehan on social commerce platforms including Twitter, where you know of course the verified system has been kind of, put in flocks and so Tim who is accusing Sheehan of creating a bunch of fake social media accounts to undermine. [38:42] She in and, Tim ooh is counter sewer not countersuing their separate suits Tim who sued Sheehan in US court for violating us antitrust laws because what Tim who is saying is that she and is trying to walk up all the factories in China and get all these factories to sign exclusive trade agreements to only sell products through Sheehan and explicitly to not sell through Tim ooh, and so Tim was trying to use us us antitrust wada sort of, who have all the playing field so you know and it just addition to being too fast growing sites that are winning winning consumers and and you know taking as a meaningful share of retail sales there now both be coming, jobs programs for lawyers just like every other retailer in America. Scot: [39:34] Yeah the I just don't think that's going to work I don't think the US courts are really going to find you like. Jason: [39:41] Yeah so definitely not it. Scot: [39:43] Hi going to say your evil Chinese company. Jason: [39:46] Yeah so I don't know I doubt it I doubt know so I think they all have standing to Sue and they're all obligated to follow us law so I think the suits will go through I do think there is a. All right Leah wrong there is a sort of anti-chinese sentiment in the US but I doubt that carries through to the courts I think that's a lot bigger deal for. Potential regulation against some of the things these companies are doing and there is a. [40:14] There's a complicated thing that both TNT Moon she and her getting partly accused of violating like, there's a a a cap, on Customs that shipments have to be worth over 800 dollars in order order for you to have to pay tariffs and you know meet all these import obligations so if you ship a container of clothes from China to the US you're going to pay tariffs on the import of those clothes and you're gonna have to comply with a bunch of laws like that the, clothes were made at a factory you know in a region of China that's known to violate human rights and all these things and there's this loophole that if your sale if your shipment is under 8:00 in value. [41:04] You don't have to do any of that and so when she and started they were shipping a lot of stuff straight from China and and it was all under this 800 our threshold and timbu is still shipping everything straight from China XI and has built a few warehouses in the u.s. so there, probably Blended but like there's a lot of talk on Washington about changing our trade treaties and lowering that minimum, to because there's a significant amount of shipments coming from China to the us that are. They're now under that threshold and taking advantage of that to not not be you know incur all these costs that the bigger companies are having to do. Scot: [41:46] Michael we will see it'll be funny to watch that one rattle through the courts and see who wins. Jason: [41:51] Yeah yeah yeah it's a you know it's all if you don't have a huge financial interest in it it's fun to grab some popcorn and just just follow the drama of all of it. Scot: [42:02] Cool any other exciting news you want to go into. Jason: [42:05] No I think that is everything on my list for for the this month I'm going to be, interested to see how Amazon earnings play out next year again there's a weird thing like, you know in general growth is decelerating the industry average is decelerating and our friends at Amazon and Walmart which are the two largest retailers in the US by a significant margin, Arbor of grow have historically been growing faster than the industry average which kind of means. There's not a lot of growth for the rest of the industry and so it'll be interesting to see whether that Trend continues, in with this Q2 data or whether you know the law of large numbers starts to kick in with these guys. Scot: [42:53] Yeah and if you have these fast Growers out here like these upstarts the Sheehan and the team is who are they taken care from that's that's always the ultimate question that we ask. Jason: [43:04] Yeah absolutely so we're going to have to continue watch and more data becomes available. Scot: [43:10] Cool so do you have any trips coming up that people need to be worth any appearance. Jason: [43:14] I'm all vacations all the time now so. Scot: [43:17] Having done three Keynotes you're burned out. Jason: [43:20] I am not of course I'll be at every show so I think next up for me is eat a least in Boston so if any talks are planning on attending that or in the Boston area, drop me a line and we can meet for a Starbucks coffee and you can give me a hard time about why you wish Scott was there and not me. Scot: [43:40] Cool and then on our docket we have August 3rd as Amazon earnings will try to get a show out pretty close to that one and then we've been promising folks a deep dive I get notes all the time and now that you've done a talk on one that will that should be helpful because now you've hopefully got some slides that we can use as an anchor it so we'll have to get that in the can once we get back to a more normal schedule here. Jason: [44:04] Yeah and that's a deep dive on generative a I assume you're talking about. Scot: [44:07] Yeah yeah yeah I do too cool. Jason: [44:10] I love it well we'll give back some time to users so if you appreciate this nominally shorter episode feel free to give us a five star review and encourage us to be briefed more often. Scot: [44:24] And until next time. Jason: [44:26] Happy commercing.

    EP306 - Apple WWDC announcement, Generative AI, and Holiday First Look

    Play Episode Listen Later Jun 12, 2023 58:20

    EP306 - Apple WWDC announcement, Generative AI, and Holiday First Look  Apple previewed a new mixed reality headset called the Apple Vision Pro at it's Worldwide Developers Conference (WWDC) this month. Apple calls the new category spatial computing and we speculate about how it may or may not be a big deal. We also discuss the latest Echo hardware from Amazon, which is mostly disappointing. We discuss the rapidly evolving generative AI space and some of the commerce use-cases. And we take a first look at Holiday 2023. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 306 of the Jason & Scot show was recorded on Thursday, June 8th 2023. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 306 being recorded on Thursday June 8 2023 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:38] Hey Jason and welcome back Jason Scott show listeners well it's been about a month our weekly pot has become a monthly cut pod because our lives have gotten pretty busy here in this postcode world I know you've been traveling a lot what else is new with you. Jason: [0:57] Yeah yeah it's finally feels like summer which I'm very grateful for, a lot of interesting stuff going on in the world of Commerce that keeps me engaged but I feel like the main reason our podcast is slow down is because you are an entrepreneurial mogul. Scot: [1:15] I don't know about mobile but I'll take the entrepreneur piece yeah the day job is a occupying 100 or 99 point, eight percent of my time and I used to be able to use speed like 97 and I could squeeze in more time so I podcast start button but got a there's a lot of cars out there to take care of and we're doing our best to get to all of them. Jason: [1:35] And we are grateful for it I feel like I'm I'm going back in time about six months because we've been on such a leg but I feel remiss. There was a huge accomplishment like six months ago you were named one of the founding members of the. Marketplace Hall of Fame. Scot: [1:57] I saw that yeah yeah. Jason: [2:01] Here's the thing I'm going to say about that I didn't know that much about it and I don't think anyone would be surprised to hear you're a founding member but like. Don't like five names and it was like Jeff Bezos Mar Quarry. And you and Jack Ma I'm like I'm like man you are going to be the best looking dude on that Mount Rushmore. Scot: [2:24] Yeah usually I'm I'm kind of Groucho Marx not sure I want to be in the club but this is one I was very happy to be being is like me and like three or four other billionaires all I'll take I'll take being included in that group. Jason: [2:39] Yeah yeah you don't want to be the fanciest house on the Block so. Scot: [2:42] Yeah I got a yeah I'm I'm excited I'm punching way above my weight on that list for sure. Jason: [2:48] Yeah well so anyway congratulations on that for sure I know and westerners would appreciate it and then while I'm thrilled for summer I've been a little down about one bit of news. Scot: [3:00] What is it Jason. Jason: [3:01] Disney click closed the Star Wars Hotel before you and I got to go there. Scot: [3:08] Yeah I know we could have done a live stream when this thing was announced I was excited and then I saw the price and then I saw the promo video and then I saw the reviews and you could just tell they had totally the totally whiffed on the whole thing it was. It was it wasn't just kind of a hotel you stayed at you had to just do that thing alone you didn't have to but it was so expensive. You're paying like two or three thousand dollars a night which I don't know this gonna be some. Someone in California makes these decisions I guess I don't understand the the tolls of the everyday American or even the higher in Star Wars hand that's a that's a big ask and you know I'm not in the cosplay so I think they had this if we kind of put on our marketing hats they had death by a Thousand Cuts so you had to be a Star Wars fan number one number two you had to be willing to spend 5K on this fancy hotel experience number three had to be in the cause playing and then number for the experiences that people that try to gave it you know at best a. Jason: [4:11] Yeah mediocre. Scot: [4:12] Yeah it felt very Star Trek e which is definitely a problem for Star Wars fans and you know it had a lot of kind of fun Spacey kind of vibe but like not enough Star Wars so yeah but you know. I'll say kudos to them for trying but it was an expensive mistake and I'm sure they can repurpose the real estate it's not like they're gonna I'm not shedding a tear. Jason: [4:36] Real estate has been depreciated I'm sure. Scot: [4:38] I think they'll be okay but yeah you know it is bummer because I was kind of hoping it would work, I've done some other Star Wars experience you'll stuff that was really fun there was there's this group in the UK and they go create movie scenes and industrial areas it's really weird the way it's described is called like underground movies or something like that they did a Star Wars experience that was like amazing where they had a Cantina I guess galaxies Edge is kind of like yeah. As when I mean I haven't been yet but I'm actually going to go this summer so I'm excited about that all. Jason: [5:11] Yeah it's really good you should. Scot: [5:12] Yeah everyone says it's good so that's on my list. Jason: [5:15] Yeah I'm in the same boat like it I don't feel like I'm disappointed that I missed it because I feel like. It sounds poorly executed in poorly conceived but the high-level concept of a. Experiential Star Wars Hotel experience I was super excited about and I hope the fact that this does didn't work isn't going. Like slow down future future ideas on that space because it could have been cool if they did it really well. Scot: [5:44] Yeah yeah I don't put salt down. Jason: [5:47] Onto something more reliable Apple announcements. Scot: [5:51] Yeah this was exciting so I'd love to get your take on the Apple Vision Pro so first of all the the earlier announcements I was kind of like I was getting a little concerned because they're like you know coming up the biggest new feature in Mac OS is a really cool screen saver and then the phone had a new sleep display mode I'm like, we've kind of jumped the shark if this is the big new OS features there were some other ones and I'm being a little bit facetious but there were there were to say there were minor tweaks which is kind of a Fair assessment I think. [6:24] And then they finally gave us that one more thing that we've been waiting for and I went and our crack staff of interns went into the Jason and Scot show vault and you and I and 2016 gave a talk at an in our F / shop dot-org event where we were asked to talk about the future of retail and in there I remember I pulled up the presentation we talked about drones and 3D printing and then we talk about a rvr and at that point in time Facebook they're used to this company called Facebook now you may know them as meta they they had just acquired Oculus and we were speculating would Apple enter the game and turns out we were right but like many of our predictions we were maybe a little early if I've done the math on this right we were about seven years ahead, but I think the wait has been worth it because they definitely swung for the fences on this one and you know the the feature sets and the user interface no one none of us have experience to have read the reviews of folks that have sounds like it I can't wait to get my hands on one and I'm definitely ordering one so excited to hear what you think. Jason: [7:37] Yeah yeah so maybe half a step back Apple tends to do two big events a year they and they do as software announcement and they do a hardware announcement this is normally the software announcement where they detail all the. New releases of the various operating systems for all the devices and they do sometimes, launch devices at this which they did again they launched a number of new configurations of Max and then in like September they announced. The hardware which is up you know generally includes a new phone for October. So you don't necessarily expect a huge new hardware product at this announcement and I was I was kind of with you most of the OS and announcements were very incremental the new. Computers were all like like very very incremental there is like. [8:35] The new 15-inch the the MacBook Air is now a 15 inch. So that's maybe going to be an appealing laptop for people that want to pretty powerful laptop that's super light. But I will say there's a number of small enhancements in the OS has that I'm looking forward to like they their incremental but they did you know call out a number of sort of pain points where like. The autocorrect on the keyboard can often be very annoying and they're going to use a large language model too. Um what you keep your curse words and proprietary language a lot easier and, a few little bits like that and then yeah to your point like at the end they go and one more thing and as I assume most of our listeners know that's magic language at Apple, that's that's the language Steve Jobs used before he pulled the first iPhone out of his jeans pocket or the first MacBook Air out of the manila envelope and you know that language has been used to introduce a lot of apples game-changing products and it frankly hasn't been used very much. In the in the modern era so the mere fact that they started the innocent reduction with an one more thing tells you that Apple thinks this is a. In extra big deal and. I'm with you like I will I'm embarrassed to say somewhere in some ways I will probably buy one I think there's a bunch of. [10:03] Cool things about it like the the hardware achievement is is pretty impressive so this is a. They would be pissed at me describing it this way they invented a new term they call this spatial Computing but it's a it's an AR VR headset and it kind of looks like ski goggles. And you know a lot of people had predicted this and their renderings that weren't too far off but the hardware is beautiful as you would expect from Apple it has a bunch of Premium finishes it is not an accessory that talks to a computer a phone it's a. Computer that you wear in your face and in fact I think it has to M2 chips in it. And in the specs are really high each eye has more than a 4K screen so very high resolution VR headset and the latency, it has this Mode called pass-through mode which means there's cameras in front of it and it can feel like a transparent visor because. The the cameras see outside and then you know project that onto these two 4K screen so it makes it feel like you're seeing through the visor and it's in full color at 4K with less than 12 millisecond latency which is. [11:20] Other VR headsets have a pass-through mode like the Oculus has a black-and-white pass-through mode but the latency is. As much there's a lot more lag and so that creates like all these like motion artifacts and stuff. That this is all very premium high-end Hardware which seems, pretty cool and so the experiences seem cool everyone I've read you know just got to actually try it thanks though I. On your face experience was vastly better than any other a rvr. They had experienced and then they also you know brought in Bob Iger from Disney and who announced that they were doing a bunch of proprietary content for the platform which is a. Another exciting thing right because the these headsets are only as good as the. The content you have for them so all that to me was super favorable the things that they're rightly getting knocked on is you just talked about the price of the Disney hotel being unrealistic they didn't really even mention the price in this announcement but they released it afterwards and it's the base price is going to be over 3500 bucks and if you're blind like I am you're going to have to then buy some prescriptions Iceland's is that screw into it. And so it's an expensive device. [12:43] It also has kind of mirror battery life like the there's a small battery on the device but in order to get a two-hour battery they make you put a battery pack the size of an iPhone in your pocket and connect it via a cable, to the headset and that gets you two hours which frankly isn't even enough time to watch a lot of movies that are out these days. People have talked a lot about it being really heavy. On your face because of all this like you know metal hardware and premium materials that it feels pretty pretty meaningful on your face and then the biggest weird thing to me. In the announcement they made multiple they took multiple occasions to talk about. [13:28] How important what they called presences right so they talked like there's a lot of new features and all the OSS around FaceTime. And making it a more useful meeting thing and and all of those features were around making you feel like you were. More together with the people you are FaceTiming with and when they first show this, this apple Vision Pro experience the first thing they show is video conferencing with other real people and how their faces are floating right in front of you and it you know it's this great presence experience. Except for anyone wearing. This bloody device because guess what you don't get is a picture of the person wearing the device wait what what you get is a. Uncanny valley like semi-realistic Avatar of the person. [14:18] And it just feels like very incongruity us that they're both saying presents a super important and then they're partitioning, anyone wearing this device sort of away from real people and so I that to me is worrisome I got to be honest when I add up all the pros and the cons it feels like people like you and I will buy it, but I kind of suspect that this is going to be more like an apple Lisa than the first Macintosh. Scot: [14:44] It you know but you gotta start somewhere and this is by setting the goalposts hi it's easier to go down than up so you know I can imagine several iterations and maybe it'll take another seven years but at some point I think they'll solve all those things and they'll get the cost way down but. Jason: [15:00] 100% if you look at this as like the entree into a new form of computing I'm totally with you right and and I get I wish I owned one of the a police's but and it did pave the way for the Macintosh so so I'm all down for it I don't think, if you're a retailer at home and you're going like hey do I have to invent some new Commerce experience for the. For the Apple Vision Pro like the answer is no right like and what like unless maybe your Louis Vuitton and you want to get a good press release about being a first mover you know it's unlikely that there's going to be 100 million people sitting in their house wearing this thing on their face all day and wanting to shop on it. Scot: [15:42] Yeah I saw so to last comments on this one I saw One reviewer who's really into a rvr and it was interesting framing he basically said Facebook is going down this path of VR is a social experience and you're using it for meetings and for meeting people which aligns since their social network right and that's part of their DNA where's apples kind of more saying we're heading into a world where we're more alone and you'll you know your increasingly you'll be working for home alone and remote and your you'll you know you'll be interacting with your family with this mask on it's kind of a I don't buy this framing but it's kind of an interesting you know the way it's set up today is very different view of things and then you know then the conclusion was you know for society I hope it's the Facebook silly should be good or else we're all going to be ready player one like sitting in little tiny you know compartments never interacting with each other at a human level and. Jason: [16:38] Yeah no I agree and then ironically like apples Imaging everyone sitting at home except for Apple employees who will get fired and they said. Scot: [16:46] Yeah. Jason: [16:48] Yeah another framing I heard which makes some sense is like they talked about meta really thinking of their device as a gaming platform and it's kind of priced at parity with gaming platforms and the, Partnerships that are leaning into a really gaming Partnerships and it comes with very sort of gaming friendly controllers and things like that and apple is really thinking of this as a compute platform and I think on an implied in their announcement is they Envision a future when. You know we don't we don't own clamshell devices with keyboards that we used hitter. Get our work done and that we're more likely to sit in a comfortable chair with one of these things on our face and be much more productive. Scot: [17:28] Yeah another thing that was interesting this got obscured by the announcement was I've heard a fair amount of Buzz about this roller coaster experience in Japan and I think it's a Nintendo theme park and what you yes. Jason: [17:39] Super Mario Kart and I think they did they just did it in. Scot: [17:43] Yeah. Jason: [17:44] Universal Studios in Los Angeles I believe may not have it. Scot: [17:48] Okay well Apple acquired the company that built this experience for Nintendo and. Yeah so you know kind of putting that together you see all right you got Bob Iger on stage and that was like content on the device but think about this killer you know imagine you go to your next Generation Galaxy Edge experience in your writing some kind of a ride and now they throw some AR part on top of that experience that that would be pretty cool. Jason: [18:14] Yeah I guess so to other random things I thought were mildly interesting normally apple is pretty good about dropping these announcements and then having like. Pretty quick of the ability thereafter and so one weird thing they're announcing this and June and it's not going to be available in told 2024. Um which I you know that feels a little unusual for me and then not surprising at all but like very noticeable. Three words that were not mentioned ever in this announcement were artificial intelligence VR or the metaverse. So they kind of invented their own terms and I think they very intentionally avoided. A variety of stigmas that are attached to some of those those other terms and then I guess the last thing in my head you know there's this company and I think they still exist and they have raised billions of dollars. On a lot of hype around a really high-end AR headset it's this company called magically. And I think like if there's any loser in this whole Space. [19:26] Like if there was any hope of magically surviving think I think this you know this seems like a better product in every way than what magically was promising and wasn't able to deliver. [19:46] Yeah I'm sure there's some IP that's that's interesting to someone I hope so they spent a fortune. Scot: [19:48] Yeah I think they're done they yeah they missed their window and they had these really cool early demos but. Jason: [19:55] Yeah I actually got one we're like literally the it was kind of like old-school Oculus like there's a you know a refrigerator size computer that was Tethered to the. To the screen but it definitely it was not 4K with 12 second latency. Scot: [20:10] Nothing yep and so this is where Apple wins because they can they built their own silk and they built a chip for that latency it's called the R1 or something and so they basically said alright we need to create Hardware that can have this under eight millisecond latency and they just did it and you know that's not everyone can do that. Jason: [20:28] Not many yeah so I thought that was interesting again like you and I will be able to have our little Avatar meetings after this maybe we'll be able to record the podcast in it. Scot: [20:38] Yeah people can watch us look at each other with goggles. Jason: [20:42] I feel like if there's two people that would whose attractiveness would be improved by the goggles and might be us we have faces for podcasting. Scot: [20:47] Yeah yeah I can yeah I'm kind of wondering can you change your eyes you know so those are all simulated so. Jason: [20:54] You have to be able to write like if I can buy blue contacts why can't I have yeah because that that is true for those that didn't see the announcement it can look like the glasses are clear because you can see the where's eyes through the glasses but it's because, there's cameras inside the glasses and there's always screens on the outside of the glasses and so they're they're renderings of your eyes. Scot: [21:16] Yeah I want to I'm going to do a Terminator ice that's what I'm going for. Jason: [21:20] Yeah I'm extra weary about Terminator references in our current AI climb. Scot: [21:25] That's a good Segway. Jason: [21:28] Nice I like it. Yeah so there's lots of AI news like we could do a month of AI shows it feels like the only thing I talk about it work but there's one particular subset of all this AI That's often called generative Ai and I'm going to even say focusing very specifically on the image generation Ai and there's tons of cool stuff that I think you and I have both been playing with. Scot: [21:58] Yeah I'm big into mid-journey and then everyone's done chat G PT but then the big the big thing that's helped me is once it became where you could do the links I've been able to I do a lot of writing and I've been able to accumulate all my writing in a file and then feed it in and say Here's my style analyze this so that it goes to, then I taught to start writing in my style and then that has been a huge game-changer for me that's the first one gives you like a decent draft and then you're kind of find yourself editing a lot but like having it where you can now upload new information either from the web or in a file or a PDF is a been a big game changer for me it's it gets it more like you know 95% weather. Jason: [22:47] Oh yeah I think I've mentioned this before but like there's a small subset of the writing I do that I get to partner with a copywriter so I'll like, give outlines or dictate things to a copywriter in the draft I get back is almost always will written but not remotely in my voice and so it takes me a long time to edit it and give I give the same raw inputs to chechi BT that that I've trained. To know my writing style what I get back is is way closer to use them. Scot: [23:19] Does your copywriter listen to this podcast. Jason: [23:23] Hopefully she does not. Scot: [23:25] Okay good. Jason: [23:27] Yeah yeah no I you know again there's a whole we again we could do another podcast about whether AI is gonna create or destroy jobs or both but I think like a lot of things there are things that we used to pay people to do that are it's going to be harder to make a living doing, but there's going to be lots of new jobs to write and those copywriters like ought to be the first ones learning how to write good prompts for these for these things, the image ones I've been playing with image generators to I use mid Journey, you know there's an open source one that you can kind of run on your local hardware stable diffusion, that has a lot less constraints it's not quite as high quality of rendering is mid-journey but I'll tell you the new thing that's been fun for me is Adobe announced a generative AI model called Firefly and they already built it in one of their products so the the if you own Photoshop CC you can download a Photoshop beta and it has this feature that they call. [24:28] Excuse me generative Phil and, generative Phil is a legitimate Game Changer there's a bunch of use cases that used to be super time-consuming for designers that that this beta version already like. Makes Child's Play and one of the sort of unfortunate thing mid-journey generates really beautiful images the one thing it doesn't do is, trademark images or copyright images or text right so very often you might generate an image in mid Journey but then you had you'd have to hand it to a good Photoshop artist to put the spiffy logo in it or to put you know and actual image of Scot Wingo in it or something like that. And Adobe Firefly is really good at that use case so like I've actually done a bunch of kind of Blended image where I made an image in mid journey and then, I refined it in the Photoshop beta and it's, it's super fun but man like you know if I'm any kind of designer or graphic artist like I want to get good at this stuff right away because it, I'm not saying is going to eliminate jobs but it's going to change the kind of jobs people need to be good at. Scot: [25:43] Yeah there's been a lot of really cool use cases of the generative AI feature in Photoshop where people would start like with them Nirvana cover you know the little baby swimming naked and then expand it ever bigger than you can like see the rest of the scene what the computer imagines and they're starting to it with memes to it's pretty wild to watch some output of that it's it's like it's a little scary wow it could be, how real it is it feels like it is it's not real obviously because no one knows what's in that rest of that frame. Jason: [26:15] Yeah there's a real world use case where Nike and Tiffany announced a collab product and everyone saw it and thought it was awful. Right like that it just like is just a very like not inspiring combination of Nike shoes with Tiffany branding and a bunch of people then you know went and use these generative AI models to create. Way better looking shit Tiffany Nike shoes and that really happened and then last night I actually watched the Nike are movie which is the movie about the. [26:50] Both of the Air Jordans with them. Matt Damon and Ben Affleck in it awesome movie by the way especially if you grew up in the 80s like there was a lot of fun nostalgia. But in this movie The they get a meeting with young Michael Jordan and his family who are going to come to Beaverton to talk about. In doing a Nike endorsement and and Nikes though Dark Horse like Jordans not interested in Nike and so the the the team after they booked this meeting on Friday afternoon they go to the the one Nike designer in the basement and they say Hey by Monday I need a prototype and a rendering of the world's greatest basketball shoe and this, this guy had a weekend to invent the Air Jordan which he did right and and history is made like you know it made 40 billion dollars for Phil Knight and a couple billion dollars for Michael Jordan so great success but you imagine that if that kind of thing were to happen today, um there'd be a team rendering, a hundred different concepts in these generative AI models and that it have like a way wider variation of interesting ideas to consider. Scot: [28:10] Yeah very cool. Jason: [28:12] So I will say we're starting to see some interesting Commerce use cases the I have seen a bunch of clients that are using generative AI to create or refine product images and in some cases they are literally saving millions of man hours now. You know so maybe you've got you know a huge catalog of products and they're all shot as lifestyle imagery or they're all sot on a particular background and then you now need to sell them in the new Marketplace at Sheehan that didn't exist a year ago. And there's a requirement for white backgrounds. Well you know you used to pay like an army of graphic designers to mask out all these images and change the backgrounds and now that these like generative things can do it. [29:02] Trivially and you imagine pretty quickly that all these images are going to be personalized right so instead of, you know seeing that that product around some you know model family like at some you know random persons Thanksgiving table, you're going to see that that that new food product. At your Thanksgiving table with your family sitting around it and all of these sorts of you know personalized cases as as the imagery the ability to generate imagery on the Fly gets really good, and I've actually never seen a couple of demos from Google of a product they first announced. Last year and then they announced that it's going to be released eminently last month, it's called Google seen exploration in this is a cool AR use case specifically for retail so this is walk into a store hold your phone with the camera on in front of an aisle and it recognizes all of the products on the Shelf using computer vision, and then it overlays all the products with Google ratings and reviews. [30:08] So like giving you a lot of this like valuable digital information that didn't used to exist on the shelf right and you you know they talk about all the use cases like you know you need to buy a highly rated nut free vegan chocolate bar and you're standing in the chocolate aisle and there's a you know a thousand chocolate bars there's no way to search by that right and and with this scene exploration you know you can now do that on the fly in a store and to me that seems like a, pretty cool use case and it's it's going to be built in the phones and then area of your in the OS in the very near future. Scot: [30:50] Yeah I saw a Salesforce they've been going at this very hard in within the Commerce Cloud they announced like 10 features they have one where it will auto-generate your pdp's for you they have one where it will it'll generate tags so like it'll search the description and come up with sizes and colors and and you know kind of like a variance and things out of a description to have another one, there was no actually go create product catalog for you so if you've you've this was a huge thing we had a challenge with it Channel visor is if you're selling if you're selling on Amazon and you're just matching to their Easter eysan you don't really have the rights to that product information so then you can't just copy that and then put on eBay or something like that or your own website so they've got this whole way that you can take that data your your properties which aren't, sentences create the description and then move it to other sections to a lot of really interesting things going on in the intersection of AI and e-commerce. Jason: [31:56] Yeah absolutely so exciting about that and there's going to be I have a feeling we're going to be talking about significant new capabilities on an ongoing basis for the foreseeable future. Scot: [32:06] I remember you'd walked internet retailer and there be ten vendors there that would take your product pictures and add a white background yeah. Jason: [32:15] And that win from like you know people in America doing that to people in India doing that and now it's it's an Nvidia chip doing it. Which side note like you know people keep asking who's winning the who's going to be the one to monetize a eyes are going to be open AI or meta all these small companies we also got the answer to that this quarter it's Invidia. Scot: [32:36] Yeah they're gonna win yes. Jason: [32:39] So for those that don't know nvidia's market cap Nvidia has a chip manufacturer famous for, these high-performance graphic chips that were originally used for gaming and still are and their chips have been extremely useful for training and doing refining training for all these these large language models in AI, and their market cap briefly passed a trillion dollars, um this month I think it dipped like just below a trillion dollars at the moment but to put that in perspective Intel's market cap is like 130 billion dollars. Like so Nvidia the game chip company is eight times more valuable than Intel at the. Scot: [33:25] It's crazy yeah who knows no one had that on their bingo card five years. Jason: [33:29] No I wish that was one of my year beginning predictions. Scot: [33:34] Yeah anything else on a iron. Jason: [33:38] No no did you Amazon 10 announcement last month you follow. Scot: [33:44] Yeah yeah well it wouldn't be a Jason Scott show without some. [34:00] That's right time for some Amazon news Amazon has been unexpectedly quiet so we've got a new CEO basis is out romping around wearing crazy shirts at festivals and living the high life with his girlfriend so, some of that out there other engage did not know that congratulations Jeff I know he listens to. Jason: [34:26] If you're playing bingo it was a 2.5 million dollar diamond. Scot: [34:29] Nice the one thing I saw just to highlight is a lot there's kind of a, this bit of an economic downturn has made many of the video providers get more serious about profitability so we saw both Netflix and Disney add an ad-supported tier and increase their prices and just as we're recording this Amazon announced they're going to do the same thing with prime so they're going to have an add to your 44 Prime but I know you follow the devices I totally slept on this because I was so eager for the Vision Pro tell me about the new devices. Jason: [35:07] Yeah yeah. I would characterize it as disappointing they want some new Echo devices at. The in the middle of May for release on May 31st and you know I have it. An embarrassing amount of these devices controlling smart home features throughout my house and they when I first got them like. [35:37] I seem very I felt very satisfied with them like the the accuracy of the speech recognition and stuff seemed adequate like based on my expectations at the time but I've grown to be very annoyed by them like they really struggle to know which room you're talking to and they're inconsistent about how semantically accurate you have to be like in in this world where Chad gbt is writing all my articles for me you know you just go I, man the speech recognition in this Hardware has to be better and so I was kind of eagerly looking for some new Echoes that have like an llm in them it seemed like Amazon was a first mover here, and so they did announce some new devices but they're pretty boring so they announced a new form factor called the echo pop which is. [36:27] I want by my count their fourth or fifth attempt to build a more premium speaker into an echo and this is like. A more affordable premium speaker which seems like a weird Niche so that wasn't that interesting I don't actually use the echoes. As speakers so much and then they launched a new Echo Show 5 which is. The the echo with the screen it's the smallest screen has 5 inch screen and then they announced some new Echo buds the echo built into the the earbuds which you and I both tried and I don't think we're very enamored by. The. The features are like oh the speaker sounds better than the old speaker the microphone is more accurate than the old microphone and it's 20% faster. [37:15] And so like I bought a couple of these new new Echoes to see if I you noticed a difference and it's. Like it's to me it's mostly imperceptible from the old Hardware so pretty disappointing. Um but app that announcement I will say Andy jassy said that hey the large language model for Echo is coming and you know there. It does feel like Amazon's a little behind and I don't know if this announcement was meant to apologize for that that. Status or whether there really is something that's going to be imminently announced but you know like he he doubled down on their effort to make this the, the most useful personal assistant on Earth and you know part of that is we're going to have a robust large language model that's you know on has a, a similar number of parameters to to open a I or bear door or Lama from from meta, that the Amazons going to release to make these these sneakers smarter so I hope he delivers on that promise. Scot: [38:23] Yeah the there if definitely feels like chat gbt started this new gear for Innovation and feels like apple even with their big announcement there was they worked some AI in there but it just feels like. There's a lot of people speculating do you really need a phone if we're going to head to a device where you can talk to it and these plugins at chat gbt now give it action so you can say hey book me a restaurant reservation the things you would do on your phone you're going to be almost able to do totally by voice soon therefore will you need a phone so there's a lot of you know that's a new would expect Amazon who was ahead on voice now feels like they're behind on a lot of this so it's be really interesting this next year to see who can kind of hang with this and you can't the R&D budgets are gonna go through the roof that's for sure. Jason: [39:14] Yeah and the irony is you know you go back in time and you know all the retailers in America where happily you know shipping two weeks after you place an order in Amazon you know disrupted Everybody by saying like hey you should get your stuff in two days and then one day and then same day right and they they raised the expectations for everyone else it feels like open AI is doing that to Apple and Amazon right now on the on the natural language models. Scot: [39:43] The to the pop did not pop. Jason: [39:46] It did it did not I did that in full disclosure I did not buy a pop because again like I don't I don't so much by them for their speaker Fidelity I mostly buy them to control my lights and stuff. But yeah I like I still have to repeat myself multiple times and some rooms to just turn stuff on and it's frustrating. Scot: [40:06] Yeah so this one was one I wanted to bounce off of you I'm a CNBC junkie and I was watching the other day and Target stock had a big Miss and the folks on, Talking Heads were saying that in their earnings release they really called out this shoplifting as a. [40:24] A problem and they took a one right off of something like 500 million dollars so I'm sure everyone has seen the videos where you know this is just new organized crime kind of wave going on especially in big cities where you'll see. 20 people go in a store and just run out with arm full of stuff it's happening to starting to kind of luxury then then you saw a little lemon and it happens in Apple Stores and now you're starting to see it in every day department stores and drug stores, so I thought that was you know as e-commerce person I was thinking huh that's interesting you know I wonder if and kind of hi Pro some high-profile store closures have followed from the so Nordstrom closed a store and like San Francisco and that's kind of thing so I was thinking is e-commerce person I was kinda thinking well this is interesting this is gonna this is going to benefit Amazon pretty immensely because as the stores have to close due to this crime wave it's going to benefit e-commerce and then Amazon like 60% of e-commerce so they'll just get they'll just absorb a lot of that that that so that the crime is going to have this unintended consequence of getting rid of stores which is bad for for the local environment and then it'll yeah I don't, yeah I don't think they really want to benefit Amazon but they will so I wanted to get your hot take on them. Jason: [41:40] Well first of all just to complete your thought the the brick-and-mortar retailers and the national retail Federation would actually say Amazon's double-dipping on that benefit because they're both. Selling stuff when the the stores closed in the big cities but also most of the Retailer's blame the organized crime on Amazon. [41:59] So the The Narrative is basically that like you know people here's who used to steal from stores, people that needed something and couldn't afford it for whatever reason right so they. Stalled food for their family or you know items they could afford to buy that was individual shoplifting and, employees told stuff employee shrink and there now is this much higher occurrence of organized crime for profit where where people are stealing you know every bottle of shampoo in the Walgreens and one of the reasons these big retailers say that this kind of crime is much larger now is it's way easier to monetize that stuff after you steal it, and the reason they say it's easier to monetize it is you can go sell all of this this still the merchandise pretty easily on Amazon and eBay. Um so that's controversial like the marketplace is due a lot to sort of avoid selling, um song Goods but that one of the premises why there's more organized crime is because. It is easier to fence and monetize this stuff. But here's the thing that's super interesting about that like there for sure is this new kind of crime and it's. [43:22] It's much more newsworthy so when someone drives a truck through the front of an Apple store and then steals all the phones that's going to be on the local news when someone shoplifts pound of cheese, that's not going to be on the local news right or when an employed as a fake return to embezzle 60 dollars from a shirt like that's not as often on the local news so all of these organized crimes get put on the news and on YouTube and things like that more and and a huge problem is. Like it's much more violent people are getting hurt employees and in a few cases the perpetrators are are getting hurt or even killed and so like there is a way higher human cost to this kind of crime and so we have heard a bunch of. Retail CEOs, you know raising the alarm bells and they say two things like oh man our losses are going up this is having a material economic effect on our business we're closing stores partly because of this and you know we're having to change how we do do store operations and and you know all these things they're also saying that police forces are underfunded and you know don't have enough resources to retailers with this problem so they're there in many cases you know asking for more more Municipal support here's the thing though. [44:51] People have always stolen stuff from retailers there's always been a line item on every retards p&l for shrink and for most public companies that's that's a publicly disclosed number and usually, for most retailers and it varies by the type of retailer and the the geography but usually it's one to two percent of Revenue is lost in shrink and so. [45:19] Target's announcement was hey we lost we potentially could lose 500 million dollars in profit this year. And their stock partly went down from because of it like I would argue their their stock also went down for some, PR missteps they made and then also because their revenue is just soft compared to some of their competitors, they probably went down for that shrink because 500 million dollars in profit sounds like a big deal but if you gross up 500 million dollars in profit to product costs, that's one point six billion dollars in shrink at Target in 2022 and they're saying it could be as high as two billion dollars in shrink in 2023 that means that shrink is 1.5 to 1.9 percent of targets Revenue which is below industry averages Walgreens, has made all of these same complaints and last year the Walgreen CFO like in the earnings call said hey this is a huge deal like our shrink could potentially be up 52 percent from before the pandemic. Um and then he did his swing 22 year in earnings and Shrink was lower then then the last two years and he literally had to say like maybe we cried too much. [46:40] So I do think there is this new crime it's very serious like it is a problem and you know I have great empathy for retailers in addressing that and they shrink should be zero like a butt. It's a little bit of a fallacy to say hey there's this new material economic impact from this shrink that didn't exist before because the employee shrink is way down because the the surveillance and the the big data and in the business process has evolved eliminated a lot of that and so the net shrink for a lot of retailers, really isn't as significant now it might be more significant in particular stores and so some of the the closing of these stores, seems at least partially legitimate I will say there's even controversy about that like when, Walgreens has hey we're closing a store in San Francisco because there's too much crime, the San Francisco Police Department rides in and goes that's weird because we got way less complaints from from Walgreens last year than we did three years ago or whatever so there's there's. Room for disputes about all this stuff but organized crime, is definitely an increasingly serious thing that retailers have to deal with but don't immediately by all the hype that it's. That it's some you know New Economic strain that retailers have never seen before. Scot: [48:04] I wonder if there's a bit of a narrative around this shrink number like I you know I'm sure they're reporting it correctly but so I wonder if it has the same store sales effect like let's say Walgreens has to closed in ten stores because the shrink is so bad. That comes out of the numbers right because it's probably a seems to work kind of metric so they probably you know now gold number would improve dramatically but. They've shrunk their footprint like it's probably not capturing that you. Jason: [48:33] Yeah no agreed, all as a Wayne huizenga taught me 30 years ago like it any good healthy retailers should be closing and opening stores every year why there's like you can't if you had the perfect realist real estate in one year it would not be perfect the next year right and so in many cases like they're closing stores in economically you know unfriendly climates for them and that improves their same-store sales numbers and improves their cops right and you know whether they did that for purely economic reasons or they did it because there was more organized crime or to put protect employees or whatever like, um it's not wrong for these retailers to curate their, they're fully in an economic downturn that might mean having fewer stores than last year historically the challenge with that is investors always expect you to grow. And so infect investors don't like the story of what of closing underperforming stores and having better comps if you if your overall Revenue goes down so, you know this is yet another kind of excuse for them to reset expectations with investors I think I think that's totally fair. [49:44] In some cases I will tell you retailers are closing iconic stores that just feels kind of sad like the the, Nordstrom flagship store in San Francisco is has always been a big deal that's closing I lived in Portland Oregon and they had a beautiful REI in the Pearl District which was, like a great super friendly place to live and they're closing that store and they said partly because they didn't feel they could protect employees like. That there is something happening that feels like a bummer and there's a lot of big cities that it feels a lot less fun to go shopping. Than it did a few years ago which which is I do think a legitimate concern. Scot: [50:26] Yeah so I know you're the king of all e-commerce and commerce data what are you seeing in the the reports that have come out since our last pot. Jason: [50:36] Yeah well we've slowed down a little bit on the frequency the podcast so kind of just super brief recap US Department of Commerce data comes out every month so we we have the May report which has data through April next week we'll get the, the May data so January through April sales for all of retail are up 2.4% from last year that, that is down a little bit from historical averages pre-pandemic you'd expect retail to be up about 4% a year so 2.4%. [51:11] Is concerning if you look at it from before the pandemic retail sales are up year-to-date, three thirty six percent from 2019 for example so still by historic standards that's very high but this year feels like a meaningful slowdown in sales from last year and of course as soon as you start talking about this people go well what about inflation so if I normalize this data for inflation year-to-date sales this year are down three percent from last year, which historically doesn't happen even with inflation so that, that is a real concern like it it feels very legitimate that we're seeing a Slowdown in in consumer spending and particularly in inflation-adjusted dollars so I mentioned retail sales since the pandemic are up 36% if you adjust that for inflation there up about 14% so less than half of all our sales growth since the pend or more than half of our sales growth since the pandemic, has been a direct result of unusual inflation more than typical inflation and then you know people always ask us in particular about the e-commerce numbers again before the pandemic the. [52:25] Over the last 20 years e-commerce would average around 12 to 15 percent growth a year retail would average three to four percent growth a year there was a weird transposition in the middle of the pandemic when people you know finally went back to stores for the first time and slow down their e-commerce bending so like for the only time in my lifetime, 20:22 size. Retail sales growing faster than e-commerce briefly that trend has reversed e-commerce is back on top of retail but it's not back to Historic standards so e-commerce year-to-date is up about 7.4% verses 2022 still, you know, you remember in the pandemic people are talking about e-commerce spiking and then regressing to the mean just want to remind our listeners that's not true the US Department of Commerce revised some numbers and e-commerce growth. Has ended up being much more robust than like the Wall Street Journal reported in in in a famous article in 2022 so e-commerce is up about 89 percent since, since 2019 and that means. [53:29] Above and beyond the traditional growth that I would have forecasted for e-commerce we've sold an extra six hundred and seventy five billion dollars since the pandemic started so e-commerce still is the biggest winner in this kind of. Pandemic accelerated spending and it's you know we'll get the cue to e-commerce data and about two months it's going to be interesting to see, how it plays out and whether you know the consumer slowdown persist through the end of the year and holiday or whether we start to get a bounce. Scot: [54:01] Yeah and I know it's June and but you get paid to think about this more than I do so what when clients are saying Jason what are you thinking about holiday 23 Woody tongue. Jason: [54:14] I think on the aggregate I'm not expecting it to be an awesome holiday I think there's even if, the the economy listens up there's it's going to take awhile for consumer spending to come back and I think the overall consumer spending is going to be you know modest there will be growth but it'll be low growth and because inflation will still be unusually high like profitability is going to really be, be strain for this holiday that being said we are likely to see some clear winners and losers so like not everyone's going to kind of match the industry average and we've already had a couple bankruptcies Bed Bath & Beyond used to sell a lot of holiday Goods so retailers are going to fight over you know who wins that customer this holiday and so I do think. You can expect to see some retailers have a really good holiday and you know, I hate to say this for all the small retailers out there but like at the moment the the likely narrative is the biggest best retailers in the ecosystem are likely that too. Disproportionately win holiday so like if I had to guess I would guess Amazon and Walmart are going to have a pretty good holiday at the expense of the rest of retailgeek. Scot: [55:32] Got it well you're a Grinch. Jason: [55:37] Yeah I want to be wrong I want to be wrong on that I want to be right on all my year beginning forecast which I can't even remember what they were. Scot: [55:44] Yeah I'm just kidding you get paid to tell the real. Jason: [55:49] I'd rather I would rather be prepared for soft holiday and then be pleasantly surprised. I almost hesitate to even bring this up because it kind of feels like it always happens but there there are now some potential new supply chain challenges. Perking up so there's there's some labor disputes our friends the teamsters the unload all the boats on the west coast of America like are threatening work stoppages and, you know any disruption in there like has a meaningful impact on how much Goods we have available for holiday and then one I've never heard before in my lifetime, the worldwide drought is having a material impact on the supply chain what there is not is enough water in the Panama Canal. [56:39] And so it turns out the way the locks work they have to pour a bunch of water into the canal to lift the boats and there's less water available so the water costs more so it is more expensive to take a heavy boat through the Panama Canal today than it was a month ago. Because of the price of water which. It makes sense when you hear it but it's not something you would I would have thought of and so at the moment the supply-chain wonks are are talking about like you know we might have some unanticipated, supply chain cost as you know people have to pay for the constrain amount of tonnage that they can lift through the Panama Canal. Scot: [57:23] Wow learn something everyday and I can check that off my box in it. Jason: [57:26] Nice well that's probably a perfect place to end it because we have used up our allotted time but even though we've been a little less frequent than usual, I always look forward to catching up with you and it's been great to chat but I look forward to hearing how our listeners are doing. Scot: [57:44] Yeah and you know what listeners could do to help us out leave a review we would always love your feedback let us know how we're doing and if there's any topics you want to cover and we appreciate you giving us a listen. Jason: [57:57] Scot that's a great idea and until next time happy Commercing.

    EP305 - Amazon and Shopify Q1 2023 Earnings

    Play Episode Listen Later May 9, 2023 39:00

    EP305 - Amazon and Shopify Q1 2023 earnings  Amazon and Shopify both reported their Q1 2023 earnings last week. Amazon had a strong first quarter, slightly over-shadowed by it's slowing AWS growth. Shopify also had strong Q1 2023 earnings although it did not achieve profitability. Shopify also announced a second reduction of headcount and announced that they were selling all of the recently acquired logistic assets. Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes. Episode 305 of the Jason & Scot show was recorded on Thursday, May 4th 2023. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing. Transcript Jason: [0:23] Welcome to the Jason and Scot show, this is episode 305 being recorded on Thursday May 4th May the 4th be with you I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:39] Hey Jason and welcome back Jason Scott showed listeners Happy Star Wars Day May the 4th be with you hope everyone had a great Star Wars Day Jason people can't see you but you are wearing your Jar Jar Binks cosplay. Jason: [0:53] I kind of assumed people just assume I'm always wearing that. Scot: [0:57] You should do the whole episode and jar jar speak well said Jason what's a new at the Amazon what. Jason: [1:10] I feel like people don't get the jar jar one I did I did do an act during covid-19 doing all this pitch theater online I did a pitch on Halloween in a Darth Vader mask. And we won the pitch so I feel like I should be doing costumes more. Scot: [1:28] Awesome you guys intimidate them and it's called the Darth Vader intimidation closed when you wear the Vader the Vader suit. Jason: [1:34] Exactly exactly and it had the voice changing thing and so it is. Scot: [1:38] Honest I find your lack of faith yeah there's a lot of death lot of lot of puts you can use in a pitch. Jason: [1:48] Yes unfortunately not a large enough chunk of the total addressable Market are Geeks. If you like is wrong I know how I got in this like funky like creative advertising world with all these I kept custody clients like I totally don't fit in. Scot: [2:09] Yeah been a misfit toy my whole life so sir not going to stop anytime soon embrace it Jason. Jason: [2:15] Yeah it was announced today that we won a big new client lvmh and so I like went on LinkedIn and joke that like it was largely thanks to my my stature is a luxury influencer. Scot: [2:29] Nice congrats your tick-tocks on luxury have one the death. Jason: [2:32] I know I know for a long time people were like why are you wasting your time with that and now they know. Scot: [2:38] Who will we have it's been a while since we dropped a pod because we both had spring breaks and then you've been traveling a bit so it's great to be back. Jason: [2:49] Yeah it's super fun to catch up with you and with the audience. I feel like the last show we did was right after shoptalk so I did get to see a bunch of folks and now you know it's a treat your season is starting to heat up so I have a bunch of upcoming trips so. If listeners are going to any of these shows make sure you make a point to catch up with me and you could see the jar jar costume. In person so I'm actually doing this show from. The famous Mayflower Hotel in Washington d.c. because I'm in town for the. Home and Commercial products Association I'm doing the keynote for their annual conference tomorrow morning. And then I'm going to sap Sapphire which is their big customer show in Orlando in on May 15th if you like. There's a fair amount of our listeners that go to that show and then to fun ones that are you know core Commerce shows after that we have Commerce next by our friends Scott Silverman is in New York in June so June 20th. And I'll be doing some fun stuff stuff on stage there and then in RFC you know has their kind of future looking executive digital Summit. [4:07] On the beach it Tara no in Rancho Palos Verdes it's called the inner F Nexus on July 10 and all both be giving a keynote and I will also be interviewing Kara Swisher so I feel like. I'm going to spend an hour just making fun of Scott Galloway with her. Scot: [4:25] Nice yeah that's good the dog dog is off the porch whoo. Jason: [4:30] Exactly I was thinking about like maybe bring a mask I've already you know I have audio collection of a lot of my favorite Scott Galloway predictions meaning which didn't come true. Scot: [4:43] Macy's Woodberry Amazon and apparel. Jason: [4:47] But I feel like this is. Scot: [4:48] Amazon to be Roadkill. Jason: [4:50] Like Freaky Friday like so like Cara is this like super famous interviewer and I am interviewing her and we're doing it at Tara know where she started code conference so it's very topsy-turvy. Scot: [5:03] Yeah yeah just bring red tears without her trademark thing. Jason: [5:07] I assume she just travels with one of her own yeah that Herman Miller red chair yeah. Scot: [5:09] BYO RC okay. Jason: [5:15] I actually think she's not with Vox anymore so I don't know you know she may be in withdrawn not she may have said said goodbye to the red chairs will have to ask her. Scot: [5:24] Look that's that's question number one. Jason: [5:26] Yeah but besides all of that we are just getting started on q1 earnings season and you know of course for most of our listeners one of the most important earnings calls happened last week. Scot: [5:39] Yeah it wouldn't be a Jason and Scot show if we didn't have some Amazon news. So on April 27th which was last Thursday when we're recording this Amazon had their earnings it was what Wall Street would call a clear beat meaning both top and the bottom line where a beat this is welcome news because Amazon's earnings have been kind of like not not mrs. but not amazing. [6:07] So revenues came in two percent above consensus which is a slight beat but what got Wall Street very excited was operating income came in 57 percent above and longtime listeners will know I usually cover the retail portion of Amazon and Jason covers the cloud or a WS part, we're going to mix it up because I read all the reports and what was most interesting right now in kind of the world of Internet stocks the whole world has been turned upside down by chat GPT which is put out by open AI Sam Altman startup who is partially owned and supported by Microsoft there and investor and the hole, infrastructure runs on Azure their cloud computing, platform this has been a huge win for Microsoft because it's enabled them to add a chat gbt like component to Bing. [7:02] And you know the buzz is that, search is dead a lot of people are even speculating maybe even apps will be dead you know maybe maybe you don't really need apps on a phone if you could just talk to your phone and say hey book me restaurant reservation as 6:30 at the one of these three restaurants why do you need a nap if an AI can go to that room so there's there's a lot of people in the Wall Street and Tech world are, I would say there's like this wall of worry around this new innovation and this is real so chat GPT was the fastest product to 100 million users what was it Jason like four weeks or something. [7:42] Like an egg yeah if you see a chart it's like this a vertical wall whereas like Facebook and some of those kinds of things were previous record holders for this and it took, you know years and so-so. Jason: [7:54] Two months to a billion or 4 months to a billion users. Scot: [7:58] Yeah so it's just this crazy adoption curve unlike anything we've ever seen before so you know there's, this was top of mind when this came out so the so while streets pretty obsessed with what's going on with the cloud also Amazon's Cloud division has been slowing their growth it was the you know the darling of the Amazon portfolio and now it's been slowing because as we head into this recessionary period, also another concern is we cover this a little bit last time but Silicon Valley Bank failed we've had all this kind of startup craziness and a lot of those startups use cloud computing and Amazon so, so that was what all eyes were on and you know what we saw was the growth did slow to 11 and a half percent which was less bad than what people were thinking so is kind of viewed as positive which is always one of these counter, Wall Street all about expectations not like the real absolute numbers but 11.5 percent growth is this is this part we've been covering this for for. [9:04] Years of this point five years and it's always growing north of 50% but this time it really slowed down and they're even projecting for next quarter or slow 2011 Amazon did Jesse did talk a lot about AI there they've talked about how they're going to do a lot of people the other problem with Chad gbt is it looks the prior to the prior a I think we all spend a lot of time with which was Alexa now feels wildly inferior because you're having these really robust conversations with chat gvt and Alexis can do like, yeah it's not really like at that level of conversational AI you can get some weather maybe play a song and a couple other little things add something it'll talk to you about do you want to reorder your dog food and yeah that's about it right so very, Barry and then you know that used to be cool and now in a world where we're chatty be teeing it feels inferior so Amazon like Google is a little bit on their heels from this and they basically came out and said we're going to do a lot around Alexa here and it will we're dedicated that being by far the best voice assistant, and we'll be adding chats ubt like capabilities but then for AWS they basically said look there's all these language models out there and we're going to be neutral will have all kinds of different flavors kind of thing so whatever you want we'll have. [10:30] And the one of the concerns is these large language models use a ton of gpus and those are expensive. Azure is adding a ton of workloads from this and their conference call they went so far as to say. It's like accelerated growth dramatically at Azure they're getting all these loads that they would have never seen before thanks to their relationship and, they're scaling up this gpus and so it kind of feels early and Aang's like maybe Microsoft has got like this. Bit of an advantage over both Google and they WS so, so you know it was interesting because I'm saying all that because what happened is they announced their up a little bit that day and then they announced and they were down and they've been kind of sideways since then so and what was clear be quarter with AWS not as bad as you would think it would be you had the numbers would say oh the stock should go up 5 to 10% but they didn't because I don't think everyone really liked, body language around you know what's going on chat gbt and Amazon's response. [11:40] So that was a that was a long part but that was I thought it was kind of interesting. The whole world and like the last yeah six months has been turned upside down by this and it's always an option or that always gets my attention because this is where unique opportunities are created for disruption and all kinds of what happens is when my favorite books is the innovators dilemma when something new like this comes along, people that were previously the leaders have a really hard time adapting to it because they get baked into their business model so for example to pick on Google it's very hard for them to offer a chat interface on the core Google search because, every pixel of core Google search is like so highly optimized and them hitting their numbers relies on that that real estate. [12:28] Basically not changing that to change that real estate and experiment with something that is expensive and not monetized is. Almost impossible you know it's it will certainly make them lose mountains of Revenue and even worse on ibadah, so it's really kind of fascinating to Think Through the strategy here of what's everyone going to do and how do they adapt to this new world and to some extent Amazon not as bad as Google I would argue but that Amazon is a little bit of a in a pickle. Um it got even so bad also around the same time Jeff Bezos was at Coachella and he was just out there dancing and wearing this kind of fun butterfly shirt and everyone's kind of like you know it almost felt like fiddling while Rome burned so a lot of people are like and then you know so Disney's CEO has come back and a lot of people are projecting that maybe we'll see a day where like a Larry Page comes back to Google and a Bezos comes back to Amazon to it's going to be interesting to see what happens this next next three to six months are gonna be really fun to watch in the world of large trillion-dollar internet companies to see what's going down. Jason: [13:39] Oh for sure and I keep saying this but we're going to have to do another. Deep dive on AI and chechi because there are so many it's changing so, fast and there's this whole like shift from keywords to prompts and you know like all of you know Google's intrinsic strengths are suddenly becoming weaknesses there's this interesting battle, um between like these AI capabilities as destinations versus these AI capabilities as. Sort of infrastructure that that you add to any destination right and so you know the interesting thing about Chad gbt you can license the. The GPT for engine and build it in your own apps or your own website but 1.2 billion consumers a month, are going to chat. Open a so that's now a destination on the web that's bigger than Bing. [14:40] Like move more people last month went to their website opening eyes website then went to Bing and that's a, Game Changer I get it's feels like a huge missed opportunity side note that there's not ads on that website yet I'm sure I'm sure that that that is coming in Italy but so there are all these like super interesting changes. I kind of feel like even if all that wasn't playing out like just the the fact that AWS is decelerating a little bit. [15:10] Would be the news from this earning thing and it's what everyone's talking about and it's almost a shame because it's kind of masking what otherwise like is a pretty remarkable quarter compared to like what most of their peers are likely to do. Scot: [15:25] Yeah yeah walk us through some of the highlights that you saw in the non aw site. Jason: [15:30] Well so the first thing if you look at North American gmv it grew 13% in q1 so that that is a deceleration from, their Q4 growth but like to put that in comparison. Us retail sales grew four percent in the first quarter so so you know this is kind of back to pre-pandemic levels where Amazon's growing. Despite being you know the largest or second largest retailer in the US depending on how you count growing quite a bit of water faster than the industry, you don't normally we would we compare Amazon's growth to all retailers growth but also to all of e-commerce has growth, so the US Department of Commerce comes out with their Q2 growth numbers in a couple weeks so May 18th I think if you want to mark your calendars will do a show and talk about that but. Just kind of interpreting the data and extrapolating. [16:31] U.s. e-commerce and q1's likely to grow about 10% which is kind of a recovery for e-commerce but still, that means Amazon the largest e-commerce player out there is growing faster than the industry as a whole which is. You know typical for Amazon but you know not very typical in the rest of the world so the retail story was, was really strong and it was driven almost exclusively by your favorite part of the retail Echo System the marketplace right it was almost all. [17:00] 3p sales which I want to say grew 16 percent. Or fifteen percent for the quarter so so 3p continues to be a super important part, and you know I always like to talk about the ad business ads were up 21% which is a, a deceleration of the ads business as well just like AWS but a couple interesting things, there's a ton of headwinds, for traditional dip digital ads right now as the economy is getting a little more challenging you know a lot of brands are cutting back on their spinned because the privacy issues they're cutting back on a lot of the traditional digital channels, um so you look at like metas ad business in q1 it grew three percent Google's ad business grew to percent. [17:55] Pinterest was the leader of those kind of traditional platforms their ad business grew five percent, and Amazon which is has a bigger ad business than Pinterest Amazon grew 21% so that that growth you know continues to be remarkable, um I did a quick back of the napkin estimate and I, I know AWS generated about 5 billion dollars in earn income for the quarter the ad unit probably generated 7.1 billion dollars in earning come for the quarter so quite a bit more, profit to the bottom line coming from that ad business then coming from from AWS, and then you know Amazon you know as they always do they kind of pepper and some favorable stats so they talked about how. They they had 26 million customers for same-day delivery in q1 which is fifty percent growth year over year so you know you. You kind of you've seen a lot of other retailers that as the economy has gotten kind of tough they've kind of. [18:58] Ratcheted back their service level a little bit like you're seeing a lot of people starting to charge more for returns you're starting to see delivery promises get stretched out a little bit and you know Amazon is kind of. Adjusting their returns policy as well but like they're they're all in on that fast same day delivery. And it seems like consumers are continuing to embrace that. Um there's this kind of big strategic shift that they talked about Scott that I know you've been falling which is kind of the shift from a national fulfillment model to a regional fulfillment model. And this is all about getting more efficiency so the idea is you know in the old model you placed an order and you know they ship from whatever Warehouse fulfillment center had the goods in stock so often that. Are shipping things from pretty far away, and mold you know in a you know your your multicart order could have Goods coming from a lot of different fulfillment centers and you know this quarter the focus is really on redesigning the whole fulfillment center to optimize. [20:06] How many trips they have to make to your house and how many, how much of the goods can all come from the same fulfillment center so there's a laser focus on kind of getting the inventory in each fulfillment center right for the market that it's serving, um and the you know in their investor call the CFO was talking about how like they're starting to they're already starting to unlock. Um significant improvements in their operating margins as a result of cutting down on the amount of trips in order to serve the same amount of gmv and they think there's a lot of Headroom to continue improving math if you've been following that kind of, Regional shift it almost feels like the Reinventing the you know kind of against innovators dilemma they're Reinventing their whole fulfillment model despite the fact that they have the. The world's largest fulfillment model. Scot: [21:00] Yeah yeah I think this is really interesting and in some ways maybe the go Puffs the world kind of showed him how to do this ironically enough and you know and this surge of same-day delivery I think they're having. I think you know in the early days the same day delivery I remember Sebastian going ham he was SVP saying yes he was at our conference and he said something like we just put out there to see and we were surprised by how many people use it and then you know they had data that indicated this is like five years ago that it was addictive because you. [21:37] We have forget which of us going this is your zero friction addiction so once you have one of these low-friction experiences you're like yeah yeah you know of course I would like it yeah, I'm running this morning all like it the same day but that's making them for deploying a lot more of the product to be able to satisfy that demand but they have the data to do it the key is it's a you know there's, there's this you know something like 300 million skus out there in the cloud that you can buy a small portion of those percentage-wise large sales wise is in the network of FCS and then the system learned what to, put at the edge near you and that same day thing there's a set of skus and it's probably down to 10,000 at that point, that they know those are the most frequently Asked seemed a things it's going to be things like toilet replenishable toiletries, dog food for me all those types personal items Healthcare Beauty and you know it's not the it's not the Xbox or something that can kind of weight well I guess some of that could be but you know there's plenty of stuff people are happy to wait for so, that that edge Network allows them to Ford deploy 5 to 10,000 excuse and get them to you really fast. Jason: [22:56] Yeah and I think what's interesting is that it turns out that the. The those skews that are needed for same-day delivery in Raleigh are not the same as the skills that are needed in Chicago and AI is really helping them sort of optimize. Those fulfillment centers and the numbers are actually a little bigger than your you're saying there are now like 300,000 same day skus in the system and in some markets there they have over 100,000 skus available for same-day so it y you know there. [23:26] They're kind of expanding from the head in skews to you know at least the chunky middle scuze. On that same day delivery and it and it seems like that's continuing to work for them. I just think it's you know again a lot of people that had you know the huge infrastructure lead the Amazon had him fulfillment centers you know would. But I find it hard to disrupt that model and pivot to a new model and it seems like you know Tim zones credit they're they're not afraid to disrupt themselves and it feels like that's kind of what they're doing here. And it seems like it least pull narrowly it's working you know they're also. Over the covid time there have been some capacity constraints and they rolled out a lot of technology to help help third-party sellers better manage their own. Capacity and you know I'm hearing from third-party sellers that that is going better that they have you know are better able. [24:29] Predict the cost and the capacity that will be available for them and they're not getting as many unpleasant surprises as they as they kind of had had in the past of that that stuff is all interesting, I also think Amazon's big enough that they're they're you know kind of a. A good surrogate for for the actual consumer economies at this point and so is interesting you know they talked about the Americans can consumer and you know the North America was where a lot of Amazon's growth was. Um They they had a statement that they're continuing to see the US consumer is being conscious that she's definitely moderated her spending on discretionary categories, she's trading down to more value oriented eizan's. [25:16] You know there continues to be healthy demand for Staples and you know I think we heard similar things from other big retailers like Wal-Mart and Target so that kind of felt in line but what was interesting was Europe. The growth is much slower but it was a significantly higher beat versus expectations than North America was and they had kind of an interesting editorial on Europe they said that, European demand while cautious came in better than expected, we see customer confidence increasing with inflation tickling down in the EU and that's kind of at odds with a bunch of other retailers that that are competing in Europe that are still you know kind of talking about, the consumer Demand Being really repressed in Europe and the European consumer really struggling due to even higher inflation then then what consumers are experiencing here in North America so, um it either sounds like Amazon's having a better go of it than a lot of other retailers in Europe, or Amazon is being the first one to sort of see the economy turning a little more favorable in Europe so. I kind of found that interesting. [26:42] Yeah well again you know the. Historically like Europe is smaller than North America for Amazon but it you know because it's smaller it was growing faster but you know there have been more. Challenges supply chain disruptions there's more uncertainty in a lot of the European economies and so you know it's like for global companies I'm particularly brands that do business everywhere. Um that European softness has been a challenge the one outlier of all that is luxury so it does feel. Like kind of a bifurcated economy that like luxury can you know is actually kind of bounce back in Europe and is continuing to do pretty pretty well worldwide while. High inflation is hurting a lot more of the kind of staple Industries a lot more. Scot: [27:35] Having Survived the Great Recession of 08 and 09 at Chow buzzer the weird thing about the data was the luxury segment accelerated you have to have the the wealthy folks do find during economic downturns turns out. Jason: [27:50] Yeah this was a weird one in that like that's for that was for sure true where the demand was shifted in unusual ways because often you have a lot of. Really wealthy consumers are also tend to be really mobile consumer so you have, historical you'd have a lot of really wealthy people from China that would go to France and buy a lot of luxury goods and in covid of course nobody was going anywhere so there was this huge, spike in luxury goods in China so like the overall worldwide demand for luxury was very high but there were these weird mismatches where the demand was not coming from the markets that it typically came from and now it feels like it's. Reverting more it's starting to revert to more traditional. [28:37] So there was a another interesting earnings call this morning. Scot: [28:41] Yeah so Shopify came out with their earnings and they've had just kind of set the stage. In the during covid they were Off to the Races and they've had a really hard time in the last year kind of in that post covid era as they invested so much and then covid the e-commerce growth reverted to the mean as you've been, so good at pointing out and they thought it would just continue up into the right and so they did about a ten percent reduction in force I think is a year ago maybe a little longer, and so then this morning they came out and they beat Lowered Expectations to put this in perspective of their growth has slowed to 25% and they were consistently growing well north of 50% so they're they're definitely, this was good for a while there were kind of Contracting but now at least they're back to growth they are losing money but they should get back to profitability here in a quarter or two but the big surprise was you know if you recall they were going to take on Amazon and they started really building out some fulfillment and they bought a couple companies to do that and started building out this whole infrastructure called Shopify fulfillment Network or sfm. [30:00] So they announced on the call today that they're just basically abandoning that whole strategy and the assets they previously bought an aggregate for over two billion dollars they sold to a company called Flex port for a billion so that had to hurt so basically a billion dollar loss on the strategy and they basically said you know the future is AI and that's where we're going to put our effort, and then when they sell this unit there also some people go with that but they're also announced they're doing at 23% that would include some of those people it's not it's not entirely clear. [30:36] How many will be core Shopify versus the people leaving with the sfn I think it's. Relatively small you know I don't think that's happened was like this huge. People operation like you have an Amazon anyway so they're going to reduce headcount by 11,000 people 29k so from 11,000 29k, so about 23% reduction these things are always kind of. [31:06] Little tricky emotionally because you feel for those people that are losing their jobs and found out this morning that's going to be no fun, but then Wall Street loves a good reduction for us because that means more profits oh, the stock this is a huge win for the stock because Wall Street has hated hated hated this idea if you take this super high margin software business and you layer in a super low margin fulfillment business, so you know Wall Street this is part of the innovators dilemma, once you've baked your margins in at 85% or whatever you can't then go to Wall Street and say we're going to bring that down 15% 270 because we're going to be fulfillment and that's a, yeah 30% margin business your blend that in with our 85 you get us to 70 or whatever it is, so so Wall Street was very happy to see them abandoned us, it does raise the question one of the reasons they got in this is you and I talked a lot about Shopify versus Amazon and you know the same time. Amazon is raising the bar on e-commerce we just talked about this two same day, Shopify was going to arm the rebels so that they could at least keep up with two day now they're abandoning that you know there's gonna continue to be, yeah this could be a big moment in history where Shopify messes up and you know. [32:29] What's a I going to solve if you have this great product recommendation or something that doesn't show up for five days in Amazon eats the Shopify Merchants lunch because they just are better at Logistics so this is this is a big decision throwing in the towel and it's going to be interesting to see, if this is wise or not I obviously lean towards I don't think this is going to be a great in decision for him. Jason: [32:57] Yeah it is tricky. The you know I would also mention there's this so I you know scary service from Amazon looming on the Shopify Horizon that it's not clear Shopify his really declared what they want they're going to do with yet which is the. The by with prime service which is you know in in effect to use that really solid Amazon Fulfillment Network even when you sell stuff on Shopify. And so you know maybe they're they're dumping on the Shopify fulfillment Network stuff in there just gonna see the Fulfillment Amazon we'll have to see. Um I do I've decided to correct one thing you said like Shopify is huge on talking about e-commerce regress to the mean. That's actually not true right get when they talk about that they're talking about the ratio of e-commerce sales to retail sales and it's partly true for that. That you know we kind of went from 14 or 15 percent of all sales being online to 17 or 18 percent and we bounced back down to 15%. Um you know that that shape varied while we you know depending on the category so image digitally immature categories like Grocery and Automotive had kind of a permanent Spike whereas, like apparel you know had kind of a temporary bump. [34:23] In absolute dollars e-commerce is way bigger than before the pandemic e-commerce is 90% up from from 2019 and so when when they kind of use that. As an excuse for the layoffs I would say like don't buy it right like that. [34:41] There's a lot more demand for digital Goods than there were in 2019 and Shopify isn't laying people off because that demand has receded like throwing people off because they haven't perfectly figured out what the right business model is and from my standpoint. They're still a little dyslexic on who they're even trying to serve they still have all this language around you know serving the small Independent Business the mom-and-pop and arming the rebels and all that but like you know when you listen all the success stories in their earnings calls. It's it's Staples it's why it's it's you know it's it's bigger or midsize specialty retailers that are moving to the platform, it's not the rebels I, Kendall Jackson and Kendall Jenner and Staples are not the rebels and so I don't know like I think they like that that narrative but like I'm not sure they've come a perfectly aligned their product offering to the. The companies that are like driving the bulk of their gmv growth and when they you know do focus on the long tail Mom and Pops. It really makes that gmv number kind of office gated because there's so much churn over there right and they go or gmv went up 25%. Was that because like all your customers are thriving and they're all growing or is it because you just added way more companies that will have a nine-month mortality rate than you then you did the quarter before. [36:09] So I think it's like I definitely like there's a lot of strong, sort of advantages and and experiences still in the Shopify ecosystem and. Feel like shot pay is getting some traction the shop app has got a lot more traction than I originally predicted and now there are some legitimate. Marketplace features in there there's a lots of things going for them I certainly would not write them off but I do think. Like in the next couple of quarters we need to see some more clarity about like what they want to be and where their growth is really going to come. Scot: [36:46] Yeah yeah it's going to be we'll be tracking it closely on the show as we have them so it's going to be interesting to see I don't think either of us had this in our predictions though sadly. Jason: [36:57] Yeah no I mean I was definitely caught by I never thought this Acquisitions made sense but I certainly thought that you know they would hold on to him longer so I don't know I guess if you're an investor like. Like once you realize it was the wrong decision like there's probably something good about like cutting bait quickly instead of trying to. Drag it around drag it out longer just because you you don't want to own up to the mistake. So anyway that feels like a pretty good recap of the two big earnings there's a you know a bunch of the traditional retailers will be record reporting over the next four weeks and of course we'll have US Department of Commerce data, including q1 e-commerce. Later this month so lots of reasons to have another new show and I still do think we got to get that. That large language Model A I show on the on the books. Scot: [37:52] Yeah yeah we will we're through our vacation period and we should have some time to lay that down and Jason you've got a keynote tomorrow and you got some slides to work on buddy so we're going to make this a short one in the pantheon of Jason and Scot show lengthy episodes. Jason: [38:09] Yeah yeah we'll give it a few minutes back to our listeners and I will go write a keynote for tomorrow. Scot: [38:15] Awesome it's always good when you're up against deadlines so you're going to crush it. Jason: [38:20] I feel like the one thing I have going for me is the present the content will be very Timely. Scot: [38:26] Good yep fresh like. Jason: [38:30] Awesome Scott thinks every very much everyone for listening as always enjoyed the show we sure would love it if you jump on iTunes and give us that five star review and until next time happy commercing!