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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

    • Dec 1, 2021 LATEST EPISODE
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    • 283 EPISODES

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    EP282 - Cyberweek Recap with Salesforce's Rob Garf

    Play Episode Listen Later Dec 1, 2021 52:44

    EP282 - Cyberweek Recap with Salesforce's Rob Garf  Rob Garf (@retailrobgarf) is VP and GM, Retail at Salesforce. Rob returns to the show for the third time (EP249 and EP110) to talk about November, and especially cyber week e-commerce sales. The Salesforce shopping index combines data and holiday insights on the activity of more than a billion global shoppers across more than 54 countries powered by Commerce Cloud, billions of consumer engagements and millions of public social media conversations through Marketing Cloud, and customer service data powered by Service Cloud. We cover e-commerce sales in November 2021 vs 2020 and 2019. First mile issues, last mile issues, inflation, winning and losing categories, predictions for December. Episode 282 of the Jason & Scot show was recorded on Tuesday, November 30th, 2021 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: [0:24] Welcome to the Jason and Scot show this is episode 282 being recorded on Tuesday November 30th 20:21 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot: [0:39] Hey Jason and welcome back Jason Scott showed listeners well Jason we're in the thick of it we are recording this the day after Cyber Monday this is our favorite time of the year and who better to help us recap the turkey five than longtime friend of the show Rob Garf he is the VP and GM retailgeek at Salesforce and he is here to sling some hot data and some fresh takes welcome Rob. Rob: [1:06] Hey Scott Jason it's great to be here as always happy holidays. Jason: [1:12] Happy holidays to you Rob I feel like it wouldn't be holidays if I if we weren't recording a podcast with you it's kind of an annual tradition. Rob: [1:20] Absolutely look forward to it every year. Jason: [1:22] So before we jump into it remind our listeners who you are and what you do for Salesforce. Rob: [1:30] Yeah absolutely some VP and GM for retail so what that means is I oversee the industry product solution and insights and the insights portion is really what brings me here today we have a team whose Charter is really to stay out in the industry understand where. The retail space is going and that helps us really think about our products and solution but also have really interesting. And informative conversations with our customers as well and most of that data and Analysis is based on our shopping index are shopping index looks at all the data that flows through the Commerce Cloud platform we obviously bubble that up. We strip out all the pii data and it really becomes the de facto standard of what's happening in retail and this is our holiday it's our Super Bowl where we really allow the data to come to life and not only project where. The industry is going over the critical holiday time but report on it so it's been a couple of sleepless nights over the last week and really excited to be here today to crawl through the data and just have really good conversations with two good friends. Jason: [2:38] We are excited to do it and I'm extra excited because if I'm not mistaken it seems like you have a bigger scope than you did last time you were on the show did you get a promotion because of what a good job you did on the show. Rob: [2:52] I think it was exactly that and I appreciate it by the way your check is in the mail yeah you know certainly. It's important to Salesforce to look at Industries and industries as a practice within Salesforce has really then one of the focus one of the priority areas over the last couple years and so for retail taking a real close look at what products what Solutions we have to bring to Market across the entire supply chain obviously in Salesforce we grew up in the sales and service space grew to marketing Commerce now and analytics and data and collaboration but we want to look at it always through the industry lens and in this case that's retail so it's my Charter along with the insights that I talked about a minute ago to oversee our product and solution strategy so thanks for that help by the way. Jason: [3:43] It was well-earned and well-deserved so good props test Salesforce erect for recognizing talent and I want to call out I feel like you're famous for three things first for being on the Jason and Scot show. Second for all the great work you do foreign with your co-workers at Salesforce and then third you are the. Kind of egotistical center of the whole garfi movement. Rob: [4:11] Haha you know I miss that's one of the many things I miss about the pandemic is not being able to do live gar fees that I've been out on the road. Over the last I don't know how to say four to six weeks or so and it's been a highlight to get back at that a little bit so can you promise me gentlemen in a couple weeks hopefully knock on wood will be back in New York for NRF and we can get another garfi of us we can try it virtually here it's just not always the same so we can see how that plays out. Scot: [4:42] Yeah yeah we're always up for garfi and that's got several in my library. Jason: [4:46] So before we move on from that explain to our listeners what a garfi is. Rob: [4:51] Yeah of course so garfi obviously a play on selfie and you know I struggled for a long time trying to find my persona. Via social you know first was LinkedIn and you know what I realized is I spent a lot of time on the road and when I'm on the road I need a lot of awesome people and when I meet those people I get really inspired and so I just you know for no plan in particular started taking pictures with them and me whether it's one-on-one one you know a few of us or me up on stage and just turning around and doing I selfie with a bunch of people in the crowd and a much more creative person than I am. Salesforce's social media team all of a sudden one day said that's a garfi and then you know really where it came to life is over and our F that same person had a great idea to say hey why don't we make some money for a charity by. [5:53] Donating a certain amount of money. For every time somebody takes a selfie or a garfi with me and that I guess I don't know two or three years running we've connected and collaborated with the retail orphan initiative great music in friends and really raise money for kids in need and so it has a nice altruistic angle to it which of course is part of Salesforce and ar111 model and giving back really please really closely to our values so I'm able to do a couple of things, really share with those in the social sphere what I'm up to hopefully helping. Inspire them like it's expired inspired me and then finally raise some money in and around NRL so that's kind of I don't know if I've ever shared and not much detail the Genesis of it but it was fun doing it so thanks for asking. Jason: [6:49] Yeah and I also admire I feel like it's an underappreciated talent to take a good selfie I feel like I really struggled frame the photo well with my arm fully extended and hit the shutter and you I don't know if you started out doing it this easily but I feel like in more recent years it seems like you do it effortlessly so just hats off to you on your quality of your selfies. Rob: [7:12] I mean that's the best compliment I'll get all day or holiday I can tell you that right now I started I was really bad like really bad and now my family like I'm the go-to during holidays to be able to do it so yeah it's you know chin up don't go you know don't angle to I don't go to Le I mean I could write probably a social posts are a blogger I don't know there might be something in there. Jason: [7:36] Art of the the art of the garfi. Rob: [7:37] The art of the confit. Jason: [7:39] Yeah I strongly I strongly encourage that and then getting slightly closer to like topics that that our listeners came for I do want to caveat one thing we're going to be talking a lot about how holiday has played out and what the interesting Trends are and just I want to underscore the mainland's you're looking at this through is a online lens so I'm sure I'm sure the bulk of your clients are omni-channel and you get some some good insight into what's happening in stores but the actual data set is measuring how much consumers shop and buy on websites is that do I have that right. Rob: [8:16] Totally you got that right I mean if you think about it as I mentioned the shopping and X which we have throughout the year and we release it quarterly is really the backbone of it it's billions and billions of Shoppers digitally it's across thousands of sites across dozens and dozens of countries yeah like you said we do do primary research and we do have some instrumentation understand some of the things that show the intersection between online and digital but the short answer to your point Jason it is really primarily the digital shopping that we've seen. Scot: [8:53] We'll call let's that's really good backdrop and we should definitely dig into the garfi thing on another episode but the enough foreshadowing how are things going for the holiday season give us kind of the the big picture. Rob: [9:08] Yeah well you know coming into this sky the way we're looking at it even going back till June was you know if last year's headline with ship a gettin was all around a smile how and if products are going to get to the doorstep of the consumer this has been all about the first mile we've all heard about it I think you're going Supply pain right so it's more of the inbound Logistics the container stuck off the port of LA and trouble getting the containers off the vessels in through the domestic supply chain and that's really, kind of cast the context for the holiday and you know the headline in addition to the first Mile and the issues that retailers have been seeing is a pulling forward of holiday demand you know it's something that retailers have wished for four decades upon decades and this year it actually came to life I have a lot more to share on that you know I can keep on going but I can also pause as well to see if you have any. Follow up questions are just you know you can just fly me up I can tell you a little bit more of what we're seeing broadly in the holiday so far. Scot: [10:22] Yeah one of the theories was that you know the Press wasn't shy about the supply pain and consumers you know when my aunt ji is asking me about this stuff I was I know it's reached the zeitgeist. How do you say it pull it Forward are you talking like right even like before Halloween you saw unusual activity or like give us an idea of like how how much of the the oxygen move to the front of the balloon there. Rob: [10:47] Yeah yeah yeah well like that oxygen moved to the front of blue and I like that might have to borrow that Scott yeah so so what we saw is that. Real demand got pulled forward you know if you look at the first two weeks of November we saw an 18% year-over-year increase and that is significant last year we saw a bit, in October because Prime day if you remember got pulled into October and we had that halo effect so if you were named Amazon you were still you know getting some of that Halo of the demand and the buzz and the conditioning that happened but it really simmer down late October through. November until the week before cyberweek this year really you know again as I mentioned 18% year-over-year increase for the first two weeks of November you pull that out to the first three weeks in November we saw a 10% your of your increase so there actually was a pull forward and you know I want to. [11:48] Put this in context I mentioned retailers have been hoping and dreaming for this forever I call this discount chicken you might remember I reference this last year probably last couple years I've been on the show and this is this phenomena where retailers go into the holiday season with this amazing promotional calendar all the expertise all the data all the analysis and after the first week. They usually rip it up call an audible and they chased the discount and you know consumers have been conditioned to wait it out. Consumers typically win the game a discount chicken they wait until Black Friday they wait until Cyber Monday, for that last big deal and this year I have to say given what we've seen so far consumers aren't winning at that game. Retailers have really held their own on discounts and you combine that with like you mentioned the headlines that consumers were seeing around the supply chain and you know inflationary concerns as well and they were actually buying early and that did have an impact by the way spoil alert on cyberweek all you know all in. Jason: [13:06] Awesome will you open the door so let's dive in there so first of all you you call it cyberweek and so what what is that weak to you does that start Thursday Friday when does it. Marker 01 Rob: [13:17] Yeah good call so yeah we look at cyberweek from the Tuesday before American Thanksgiving through Cyber Monday it's the way we've been, reporting on it for the last bunch of years than just for like for like now analysis we've kept that I know there's the turkey five and the Cyber five that certainly are looked at for benchmarks and you know partly why we do that is we started to see early on a smoothing out of demand not just through the course of November as I just referenced before but over the course of the week and we wanted to represent that in a more holistic way so you know the short answer to your question we look at it from the Tuesday before Thanksgiving all the way through Cyber Monday. Jason: [14:01] Perfect and fun fact for our listeners Thanksgiving is obviously a North American holiday but Black Friday and cyber week our Global phenomenon which is interesting the holiday is not Global but the shopping is so how did cyberweek play out we're recording this a day after cyberweek so we're we up from. 20/20 and I'd also love to know how he did versus 2019. Rob: [14:24] Yeah absolutely so we wore up so for the course of cyberweek we were up four percent year-over-year and that represents about sixty two billion dollars with the be of digital revenue and you know you look at that number and you say wow that's kind of you know muted it's kind of leveling off and I can't lie it is because we saw such a significant Spike to your point from 2019 to 2020 so there's a whole new Baseline that's been set but to really replicate that seismic growth that we saw last year with non-essential retail closed people really focused on their health and their safety also looking at dealing with retailers that provided convenience and Trust. I see four percent year-over-year as as good as you know a retailer should hope right again because retailers should have seen brand should have seen that pulling forward of demand earlier in the season. Jason: [15:28] Yeah and then can you and part of it is last year was a monster year for digital so like do you do you have your like do you do it a two-year year-over-year or do you remember what the growth was last year for cyberweek just for frame for comparison. Rob: [15:44] You know I don't have that exact number in front of you what I can say for the holiday so November December was 50% year-over-year growth so you know you got to imagine suck cyberweek was way up there I could tell you that Force four. Black Friday in the u.s. because those are u.s. numbers just to remind you to sixty two billion at the four percent year-over-year we saw 20 percent growth. On Black Friday so that gives you a sense of what you saw throughout the year a lot of the growth last year actually came the week before. Cyberweek and in large part because the two of you everybody saw a ship again in like everybody right it made the Today Show. Large part really in the growth the for cyberweek last year we saw something like eighty percent year-over-year growth for the week before. Cyberweek because consumer saw the headline you know I was asked by a customer just recently in the specialty apparel space. Who worked for the wholesale division asking will this year. Consumers understand the issues that are happening in the inbound supply chain unlike last year where ship again was front and center I mean we all felt the Bermuda Triangle of packages being you know delayed significantly so as a consumer. [17:07] That kind of triggered you to think hey maybe I should buy early to make sure I get the product and also by the way maybe I should buy online and pick up in store so I know I can actually. Pick it up because it's more black a smile under my control. [17:22] That's my long way saying once again we saw growth last year in large part 3 cyberweek Black Friday we saw twenty percent so this 4% bringing it back today. Around cyberweek was you know leveling off from prior years but was on such a significant or based on such a significant New Normal that we really hit last year and by the way we don't see the snapping back to what we saw before the pandemic. Jason: [17:51] Yeah and I think that's a mistake people make and in their head when they're looking at growth rates they see this year's 4% is smaller than last year's twenty to thirty percent and they say oh gosh digital shrinking and no it's growing off a huge number from last year it just growing in a smaller slower rate than it than it did last year. Rob: [18:13] Exactly and by the way people are getting back into the store right especially for those not essential retail we're experiencing something and they want to go talk to a knowledgeable store associate and want to touch and feel the product you know they actually want to see friends out in a mall believe it or not and so there's you know. A rising tide here that's really lifting both digital and physical so you can't kind of look at one without the other I don't think there's a cannibalization happening per se because you're still seeing growth but you can't forget what's happening in-store this holiday. Jason: [18:48] Yeah it's super interesting and inside just to highlight like macro Trend that you're sort of underscoring here so this year cyberweek grew around 4% but holiday digital is growing in like ten percent so I'm gonna I'm gonna do risky public math that sounds like the holiday spike is kind of flattening out and holidays becoming more about that hole. Um cyber November if you will instead of instead of cyberweek is that do I have that right. Rob: [19:21] You got it spot-on Jason you know just throwing some more numbers at you because I know you love them but I know there's a lot is that for November and you hit it by the way you said 10% we saw based on a nine percent year-over-year growth across, the month of November and so in the US that represents 136 billion dollars of online sales so there is this smoothing out there is this flattening I'm not ready to put the nail in the coffin for Cyber Monday and Black Friday just you know consumers are just so condition to shop on those days but retailers can't ignore the fact that you know these spikes are still relevant but there is this smoothing out that started even before this year and we saw even more pronounced this year. Jason: [20:16] Yeah I was talking to a very big client and they were talking about how early in his career they used to celebrate this anomaly where the wear like during cyberweek they would have their. There billion dollar day in total retail sales and this year every day in November is a billion dollars for them. Yeah. So I am still curious even though it does seem like it's slightly less relevant it still is a super interesting novel to me novelty to me can you break down. The key days within cyberweek like I'm always interested in. E-commerce sales on Black Friday versus Cyber Monday and whether you know with the Advent of the smartphone are we selling more stuff at the Thanksgiving table on Thursday what sort of Trends did you see across the week. Rob: [21:11] Yeah I love it that's awesome yeah so let's dive into that you know a couple of things here you know Cyber Monday we saw a three percent year-over-year growth representing eleven point three billion and digital sales on Black Friday we saw five percent year-over-year growth which represented thirteen point four million and online sales and so we saw. [21:38] And this isn't the first year on this it's happening over the course of the last three or four maybe even five years. That Black Friday is a bigger digital sales day van Cyber Monday let me say that again Black Friday according to our data is a bigger digital sales day and Cyber Monday a lot of that you hinted at it Jason is that Cyber Monday you all know this was really. Coming to bear from our friends at the national retail Federation. To coin a term to signify people getting back into their office when the internet was not so great at home so they can get high-speed connectivity and Shop but now. We're all connected right we're all connected all the time and so in fact over the course of cyberweek 61%. Of borders and close to eighty percent of traffic was on a mobile device by the way that's phone. To be specific that doesn't include your tablets. And so there is this moving out partly because of connectivity what we saw in Thanksgiving for the last couple of years is a growing. [22:56] Disproportionately growth I'll say over Thanksgiving because you kind of. Finish your meal you're done with your crazy uncle Lou and you want to sit on the couch a little bit you can press and you pull out your phone and you know shopping generally and especially over the holiday is you know totally embedded and fragmented now you often get inspired by what you see on your phone. When you start shopping what we saw this Thanksgiving actually was. There was a little bit of leveling off we feel like people were more present last year I know I didn't have Thanksgiving and the one or two times over the holiday we did get together last year was underneath our patio heater we probably one of the last people in the country to get one and our fire pit and people want to be present this year and so. It wasn't as strong what I thought was interesting is two more points I'll make is. [23:55] Saturday Sunday we're pretty strong and those are generally pretty light days but this year people are online and people were buying so. You know I'll pause there probably a lot more to talk about but certainly again you see these Peaks happening with Cyber Monday with Black Friday in particular Black Friday where I should say one more thanks I'm just thinking about it is you know obviously Black Friday digitally was really large because more stores were closed and even if they were open people still felt more comfortable buying online. Jason: [24:29] Yeah just just to sort of echo that point Walmart told me that in 2019 they sold a billion dollars worth of turkeys on Thanksgiving and this year they sold 10 billion dollars worth of turkeys. So like a twenty percent jump in in American turkey consumption so that. Rob: [24:50] That's crazy that's amazing. Jason: [24:51] Yeah so sir clearly indicating that people were excited and did get back together so I almost wondered if that was gonna put a damper on the online shopping but it seems like it really didn't. Rob: [25:03] Not across the entire cyberweek it was still again I I'll risk even say healthy but probably closer to moderate growth is what I've been talking to our customers about but again that growth. I'm really or moderate growth is because of the earlier demand which retailers that's what they wanted that's what they got they should be smiling and be happy. Scot: [25:27] Very cool so just for the record Black Friday bigger than Cyber Monday for the first time that's pretty I think it's worth saying again. Rob: [25:36] Yeah it is it's kind of interesting because you know Black Friday think about is such a physical store holiday right and. It's really smooth it out and I know I've used that word before but it's really the theme for this holiday, and I think we'll see how I think it is a sign of things to come by the way I don't think this is now an anomaly but rather. How we're going to view the holiday season moving forward finally it didn't really by the way pull as forward as I would have suspected into October we saw some blips here and they're based on. The promotional calendar but it really started in Earnest on November first. Scot: [26:16] Yeah as a pure play e-commerce guy I'm glad we kind of overtook Black Friday and so yeah the so now that now that we're through these key days does it change your forecast up down or you feel like it's kind of right in line with what you guys were expecting. Rob: [26:34] Yeah we were expecting 10 percent growth over the course of the holiday in the u.s. and 7% growth. Globally we're sticking to that right now we're about just shy of 50 percent of All Digital sales in the books for this holiday. But we still have a way to go and in fact fun fact I guess that wasn't the exact questions got you ask but I'll grow it out there is about one-third of All Digital sales happen in November and December. So yeah we expect there are still a lot of sales to be had out there and we are anticipating similar results and so we're staying Pat on our our ten percent growth year over year across the entire holiday season for digital. Scot: [27:22] Wrinkle any indications of the data so far if you mentioned kind of that first mile any indications of other than it pulling forward that it's you know that it's causing any kind of problems like increased stock outs or we've had this first wave and you're worried there won't be anything on the shelves at the back end or what do you see in there. Rob: [27:43] We do see some concern with that you know I've been cautioning anybody I've talked to so I'll say here now is if you see something you like buy it don't wait for that last big discount we can talk about discounts in a little bit if you like but you're not going to necessarily get it in the product might not even be there what retailers have done based on our data is pull back on their assortment and so what we saw is. First cyberweek in the u.s. we saw a shrinkage of 6% of product catalogs so retailers are being conservative. They're selling what they know or hope is available but there is a concern as we go into these last couple of. Weeks of the holiday as The Last Mile and shipping cut off window starts to creep up what it will look like for those replenishable items if they actually will be replenishable but we thought was super interesting as I just mentioned is retailers were really being conservative and trying to do you know going deeper in there. [28:55] Inventory rather than going broader in their assortment and that's evident by what we saw in cyberweek with a six percent decrease in the product catalog where is generally speaking for cyberweek you're seeing you know anywhere from a five to ten and some cases of fifteen percent increase in that product catalog. Scot: [29:14] Nursing and then let's flip to the other side last year we had ship again in the indications there that that the shipping infrastructure was having problems keeping up. Rob: [29:26] You know we're feeling a lot Rosier than we did last year certainly you hit it on the head with chip again and we. [29:35] We anticipate in Saab 700 million packages at risk and those in most cases were delayed that was pulled back tremendously this year retailers really moved over the course of the last 20 months from Scrappy standing up some pretty Innovative but Scrappy nonetheless solutions for Last Mile and they've really worked to scale that and to not only do it effectively but efficiently efficiently meaning don't crush their margins by trying to get the product to the consumer buy online pick up in store still seems to be the winner, this holiday so those that put it in place over the course of the pandemic are actually seeing. Some really nice benefits from it one interesting fact that the team was able to gather was for those, retailers on Black Friday that offered buy online pick up in store so orders placed with the confidence at home and being able to picked up in and around the store grew at a 50% higher rate than those that didn't so consumers think about it over the course of the pandemic really showed loyalty retailers who are able to provide health safety convenience and Trust to the denominator there is removing the friction from the shopping process and those that offer that service were really. [31:04] Able to leverage and benefit from that in the new consumer Baseline of removing the friction. Jason: [31:12] Yeah you know it's an interesting thing on the last mile. Last year Amazon passed FedEx in terms of the number amount of packages they delivered themselves right in there. Depending how you count something like 30 to 40 percent of all e-commerce the middle news this week one of the supply chain guys that he expects by the end of this year or the first quarter of next year that they'll not only will they ship more packages than FedEx they'll ship more packages than UPS so Amazon could be the large the largest non-governmental last Last Mile in the in the country by next year. Rob: [31:50] Yeah you mean it's quite amazing how large Amazon has gotten with Last Mile and I give credit to anybody who isn't last excuse me who isn't Amazon. And who is in a big box retailer who has you know some capital of fro at The Last Mile Challenge and you know those that partnered with these you know collaborative networks to be able to. [32:16] Outsource if you will the the last mile or even provide buy online pick up in store to you know Outsource The Last Mile to the consumers have really benefited and you know where we saw unfortunate gap between the large players and the neighborhood and local players they somewhat of leveling the playing field. [32:39] Will be leveraging the stores not only for a filament Center but an experiential Center as well and I know I'm shifting a little bit but it's something that comes to mind Jason Scott is you know our research showed coming into this holiday. Those retailers that leverage their store for more than just scanning and bagging will benefit in fact 60% of. Online orders will be influenced by the physical store let me say it again 60% of digital will be influenced by the store which is somewhat the opposite that for store really came at us with five ten years ago about digital orders. Influencing store orders and you know that could be whether the store is generating demand or fulfilling demand and that could be from fulfillment or store associates being social media managers or you know even Service agents whether they're in the store or they're picking up micro shifts at home and then certainly obviously pick packing and shipping and getting the products ready to either be picked up or Filled from there so I know that was a little bit of a tangent to say you know most don't have the scale of an Amazon and so you got to get really crafty and Innovative of how you're going to kind of level the playing field particularly around Last Mile. Jason: [34:07] Yeah no totally agree and it's actually if you have too much free time on your hands it's really fun to read all these retailer Q3 earnings reports because like they often embedded in the back of that they do talk about like the percentage of their sales that are fulfilled by store influence from store and that that's a standout stat for almost every retailer now is how important that store is for the digital supply chain so that's that exactly mirrors your data I want to like there's so much going on this holiday I feel like we could we could do a two-hour show which we won't do to our listeners but another interesting one is pricing promotion and inflation and how all that pays out like it was a lot of the growth from this year in your guys estimation was it. Inflation and consumers just paying more for less or or was it. Rob: [35:00] Yeah yeah we got the data and it's it's fascinating it is really it's you know it's fascinating on one hand but it's like pretty basic on the other which is a lot of the growth was driven by increase prices and so what we saw for instance over cyberweek the average selling price was up 11%. In the US and 5% globally what we also saw at the same time is that order volume was lower, and average order value was higher so the math says, that people are buying fewer items at fewer retailers because they have kind of a zero-sum game you know they have a specific budget and so if you're buying things at higher prices you're buying less of those things and you could equate the 11%. [36:00] Increase of average selling price to inflation and we're seeing that across the board meeting across the different product categories so you know. That's happening we predicted that for the second half of the Year retailers and brands. We're going to have an incremental 223 billion dollars of cost of goods sold and that's from manufacturing supply chain labor they absorbed a good amount of it but. They had to pass some on to the consumers consumers they're happy they're positive. They want to focus on buying things that they want versus just needs. [36:40] So they bought now what retailers did to the discount piece of this and why consumers are likely to lose out on discount chicken this year is discounts were the lowest levels and we've seen. Andres when I say that discount rates where some of the lowest we've seen in recent history and so the discount and the rates being lower I think it's something like eight percent. Down your view here in the u.s. is because you know retailers. Just had to hold their own right and really protect some of the margin and you know even on Cyber Monday where you see some of the biggest discounts it just wasn't happening this year. Jason: [37:28] Yeah interesting you know you talked about consumers picking fewer retailers and buying being a few items for more money I wonder to me that sounds like it's a recipe for sort of retail, I hate using this word because Steve Dennis will get all excited bifurcation that you know if consumers are buying less items than their first choice retailer is likely to win and they're you know kind of longer tail retailers are likely to lose those that are using that at all or do you think that's how it's going to play out this year. Rob: [38:02] Yeah I do just plainly you know loyalty has been redefined we don't mention it before in terms of health safety, convenience and Trust now that's the Baseline and retailers really need to focus you know what we're hearing from consumers they want to be treated special they want to E M I don't know what personalization means but when you ask them the attributes of it they want that right they want to feel like they're unique two-thirds say they want to, have a unique experience and feel like they're being treated uniquely the challenge based on Research that we just conducted is only one-third of retailers can actually harness and democratize that data and turn it into personalized promotions and prices and offers and so. Yeah there's this will give a shout out to Steve face Steve happy holidays there is this bifurcation taking place and it's you know so important especially as we go into this cooking this world for retailers to really harness their data more than they ever have it's not, a new story right we've been talking about for a while but this first part is zero party data so important because that same research showed three strikes and you're out after three bad experiences retail with a retailer or brand consumer is going to abandon and go somewhere else and not come back so yeah just I think you're onto something this and I need to really not just a choir but think about the consumers that you have those loyal shoppers. Jason: [39:31] Yeah if only there was some kind of tool set that merged I Commerce and data and it all lived like I don't know in the cloud that would be amazing. Rob: [39:39] It would be kind of amazing woman that I know I think we're in a pretty good spot. Jason: [39:43] Someone should do that. Another thing that's been interesting to me regarding the inflation is it seems like some retailers are. Passing more of the the costs on to Consumers than others and it's been funny I don't know if you followed all these all these Q3 earnings but there's retailers that are like. We pulled a lot of levers we got a lot of extra inventory in but it came in way more expensive we didn't raise our prices a lot and so our sales have been great but our profitability is down and then there have been other retailers that are like, consumers have been willing to pay more for a good so our sales are up in our profitability is up. Side note I don't I don't follow this is much but the investors like the retailers that took the prophet a lot more than the retailers that acted as a shock absorber. Rob: [40:31] Shocker yeah I think generally that equation that you just talked about not only sales but profit come back into play here retailers and of what I've seen I've gotten somewhat of a hall pass over the course of the pandemic because you know the focus on. Consumer safety. Associate safety getting the product through the supply chain and so the Retailer's took a hit there I think we're taking you know a. Refocus you know back on to profitability and you know that's why it's interesting I was hosting a Roundtable virtually just recently and one of the participants one of the executives reminded all of us is of the profitability of the box right we kind of lost sight up that'll is what I mean by that obviously the physical store. And I think we lost sight of that purposely over the course of last 20 months but. And I think we're going to have to really hunker down and really look at what that looks like especially as you know consumers have gotten used to having a lot of flexibility and choice around how they get in where they get the product. Scot: [41:44] Cool and interesting data from the categories apparel has been under a lot of pressure since the pandemic Electronics have been surging Home Improvement seems to be running non-stop it anything any changes to those kind of Trends we've seen for the last 18 months. Rob: [42:02] Yeah you know I'll look I'll give you some information and across cyberweek. Because it's most recent but I think it speaks to what's happening Scott or what has happened over the last 20 months. Um what we saw in the hottest categories across cyberweek are luxury handbags with a sixty percent year-over-year growth. Furniture at a 56 percent year over year growth. In general Footwear at a 22 percent year-over-year growth now luxury handbags in general apparel I get it. That's going off of a base that shrunk last year nobody saw my feet on any zooms right so my slippers were just fine legs are handbags. I know we weren't really going out to many restaurants in SLE need to refresh that so the growth on Lower base or. Shrinking base from last year makes sense for getting back out in the world you know we're focusing on exponential categories as consumers like entertainment and travel and being outdoors. [43:11] What really is super interesting is furniture. Furniture has been on a tear because we've all been home and whether we're redoing our outdoor patio set because that's where we're spending time outdoors I did for the holiday as I mentioned or it's my home office. You know what I can think about as my team look through the data is it's a shifting slightly of what people are buying for their home they're buying more entertainment type of products whether it's home appliances or its couches. Or the like where people are coming back into your home after a long respite and we want to spruce up our home as well so you know like I said the handbags from where I get it which is great to see Furniture you know ears. Really didn't know walls over the course of the pandemic and as we come through this holiday. Scot: [44:07] Nursing how about any interesting toys you want to highlight like I think Jason mentioned the mixy as one that was kind of called out as being a hot toy. Rob: [44:16] Jason what's the Mixie tell me more. Jason: [44:20] You are I don't I actually haven't seen any data on whether it came to fruition but the toy it was the toy the toy industry was leaning into and it's like it's like a combination of a chemistry toy with a plushie so like like it create smoke and then a plushie comes out of the smoke I think is the the gist of it the the big toy I've seen in terms of sales velocity is that the gaming platforms are selling like hotcakes. Rob: [44:51] Yeah yeah yeah that's what I was saying it's really just a sample size of one where it's like for my boys 15 and 12 they're all about whatever's digital whether that's devices or Dean's on those devices so you know shopping is gotten a little easier on one hand but we have to also be really creative as well. Jason: [45:12] Yeah I wonder we'll see how it plays out but it doesn't feel like Last Mile has had a big impact on on shopping up till now but like even if give last-mile holds up in there's no capacity problems we still have these holiday cut-offs right you know we still get to this date where we can no longer cost-effectively ship something to your home in time for the holidays and I feel like there's more digital gifts out there than ever before so you think of all the streaming services you can gift a subscription to all the content for these these gaming Platforms in these Computing platforms and I'm not super Bush for this holiday but like I think we're going to see more retailers offering enough teas and things this year so it I'm kind of curious if the back half of. December becomes the sort of digital holiday season. Rob: [46:01] Yeah we certainly saw that didn't we Jason last year in terms of the shipping cut off. Come in really early on the heels of Cyber Monday because the last mile issues and a lot of retailers really honed in on gift cards as another source of. A gift and I think you're right I think you're right in terms of you know whether it's and FTS maybe we're a little early for that but we'll see. My colleague Michelle Grant has been tracking that really closely and she's pretty bullish about the whole category as relates not only gifts but the intersection between that and loyalty programs but yeah I mean I think it's you know whether it's gift cards to restaurants or travel or the like gaming as you mentioned just I think there's something that I really think there's something to that. Jason: [46:50] Yeah well listen this has been a super exciting conversation and I always like to end it on a total Debbie Downer note so the. I'm curious if you have seen or have you guys are trying to figure out how you're going to model like any impact from the new covid variant like in my world it feels like people were definitely planning to get together and more in person events but it does seem like people are starting to second-guess those there's all the news articles are talking about what what's the correct pronunciation is it Omicron. Makan. Rob: [47:27] Sounds good to me I'll let you stick to that one I will try to because I know all. Jason: [47:31] Got you I think a Peyton Manning screaming Omaha is my. Rob: [47:34] Hahaha I like that reference nicely done yeah. That's a good question I as I mentioned earlier I only hope we can see each other in person at an arrest in January you know where. We're at Salesforce tracking just. [47:53] Now this new digital world really closely because we're not going back to the same. You know mindset as we had before as our newly assigned co-ceo put it is work isn't where you go but it's what you do and you know we're living in this digital headquarters and it's going to be hybrid I've. Attended plenty of hybrid types of executive meetings over the course of the last month or two as people start, get back on the road as it relates to retail you know I can't really speak to what's to come. But what I can say is we tracked digital sales across the last 20 months as it relates to cases and maybe it shouldn't be a surprise you know as. Non-essential. Stores closed and I hope that doesn't happen again but people want to hunker down and be home and order products online there was a direct correlation between cases and order and sales growth in fact over the course of 2020 we saw a 50% year-over-year growth. And by the way that was I'm sorry 57% to be precise and that was driven in large part by 40% growth in net new digital Shoppers so these are people would hang on a line right they go to social media they be able to browse and. [49:22] Do some research but they ultimately go in the store and buy they're also buying new categories as well and so you know as things. As we look forward we can certainly based on history see a correlation between digital which is set a whole new Baseline as I mentioned before and what that looks like as it relates to traffic orders and sales. Jason: [49:47] Yeah it is certain there is no short – of variables to impact this holiday as it feels like we've gone from playing checkers to playing 3D 3D chess a little bit with all this stuff. Rob: [50:02] Yes you're right I need to bring in my 15-year old to help me play that game because yeah I'm a couple moves behind but you know we can look at data and that's the fun part about our part of the fun part about my job as looking at the data and seeing what people have done. Jason: [50:17] I I do other and that's why we love having you on the show so much is because you bring the data in Rob that is going to be a perfect place to wrap for tonight because we have used up all our a lot of time on this special cyberweek / Hanukkah edition of the show so if you if listeners enjoyed this show we sure would appreciate it as our holiday gift if you would jump onto iTunes and give us that five-star review. Scot: [50:45] Rob we really appreciate you taking the time out of your busy schedule to join us here on the day after Cyber Monday you guys have a fancy cool new portal or I don't know what you want to HUB how do folks find that. Rob: [50:59] We do have the insights hub for the holiday and so perhaps we can in the show notes or however you do it these days share it with the crew but if you also searched Salesforce holiday insights Hub you'll get right to it so you'll see all the data that I talked about and even more across marketing as we get further into the holiday season you'll see it for service as well and so I encourage your listeners to engage through that portal and you know Scott Jason thank you so much sincerely I mean it's been a long week not a lot of sleep for the team and me but. It's been a highlight to share this with you and make this an annual tradition so happy healthy and safe holiday season. Scot: [51:46] Thanks Rob will have Jason put a link to the hub on his friend stir page. Rob: [51:52] Perfect. Jason: [51:55] I will do it I will put it in all the socials and if folks want to keep track of the gar fees that's its retail Rod right is it retail Rob Garf is that your Twitter handle. Rob: [52:07] You got it retail Rob Garth and then I'm on LinkedIn as well. Jason: [52:10] Awesome I will put links to all of the above Rob really appreciate it one of the conversations I look forward to every year and absolutely look forward to seeing you in person at the interrupt Big Show next month and until then happy commercing!

    EP281 - Mark Mahaney, author and top internet analyst

    Play Episode Listen Later Nov 23, 2021 55:38

    EP281 - Mark Mahaney, author and top internet analyst  Mark Mahaney is Senior Managing Director at Evercore ISI, Research Division, he's one of the original and longest lasting internet analysts on Wall Street. He recently published “Nothing but Net: 10 Timeless Stock-Picking Lessons from One of Wall Street's Top Tech Analysts.” We cover a variety of fun topics including the beginning of his career with with Mary Meeker. His initial evaluation of EBay. His long positions on Amazon, Netflix, and Priceline, and butting heads with Jim Cramer over Google. We also discuss what's next for Amazon, and where the best investments of the future might be. Episode 281 of the Jason & Scot show was recorded on Thursday, November 18th, 2021 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: [0:00] Welcome to the Jason and Scot show this is episode 281 being recorded on Thursday November 18 20 21. I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot: [0:16] Hey Jason and welcome back Jason Scott show listeners. Jason as you and the listeners know I am a huge scene in b.c. junkie and you can't turn on CNBC Durning Earth during earning Seasons without seeing Mark mahaney he is one of the top internet analyst. He was actually on recently talking about the artist previously known as Facebook meta Mark has a new book out called quote-unquote Nothing But net and is joining us tonight give listeners an early peek of what is sure to be the best seller in the bookmark covers some of our favorite companies including Amazon Apple Facebook / meta Google Netflix Twitter and Uber Mark welcome to the show. Mark: [0:56] Thanks for having me on guys. Jason: [0:58] Mark we are thrilled the chat with you is you know Scott is a huge Amazon fan boy so I anytime he gets a chance to talk Amazon he's excited. And I'm super excited because after tonight show I'm going to be smart enough to get rich like you and Scott so that's pretty pretty exciting for me. But before we jump into all that we always like to give listeners a little bit of a feel for our guests background and in your case I know I think you're officially the the oldest analysts on Wall Street is that true. Mark: [1:29] Well that's the oldest and longest lasting internet analyst on Wall Street but I don't look the part so how about we do that yes I've been covering Internet stock since 1998 do a series of bank said I started, working with this tremendous analysts her name was Mary Meeker her name is Mary Meeker and started the first Friday I was on Wall Street I got a call from the CFO of this tiny little online auction company that sold Pez dispensers and was looking to see whether any banks would be interested in their IPO that company was eBay so I wasn't there at the beginning of the internet but I was there pretty close to the beginning of the commercial for the public market to internet and it's been a fascinating ride and I thought there were a lot of lessons I could draw both from the successes the market and failures in the market and my personal successes and failures as a stock picker. Scot: [2:20] Cool what's so name some of the firm's so in my recollection you've probably worked at six firms like how many firms have you worked out over or that career. Mark: [2:30] Yeah now I don't want you to think I you know I jump around too much but I started off at Morgan Stanley also worked at Citibank Royal Bank of Canada. A small boot wonderful Boutique called American Technology research and I'm currently at evercore isi but I've been doing nothing but net. Hence the title of the book that's been my email tagline or always online is one of those two it's been my email tagline for 25 years but nothing but net and that's just doing my best to try to stay ahead of these internet stocks the early ones the the eBay's the Amazons the Yahoo excite if you might remember them infoseek. And then and then AOL and then and then later on some of the more Dynamic ones came out ended up with names like uber including most recently one you talked about Warby Parker so it's been a fascinating span and arguably one of the most dynamic. Parts of Wall Street I guess if you were working as an analyst on Wall Street. Or portfolio manager portfolio manager if you could have picked two sectors to be a part of to track over the last 25 years one of them has to have been the internet just how explosive it's been a been plenty of – explosions in there but there's been some wonderful wealth creation the other sector would probably be software just just too wonderful Industries I got lucky I was I was part of the internet. Scot: [3:49] Yeah I'm glad you didn't pick Mall Focus treats that would have been a bad choice. So you know as Jason mentioned there's kind of this auspicious title that you have of the oldest I would say wisest and most longest lasting internet unless. Tell us about some of the as you reflect in the book is kind of got some really good stories and you've been kind of on the front row seat of a lot of cool stuff maybe tell us what was your worst pick and best pick in the span of the career there. Mark: [4:22] Well I had a sale on Google it close to its IPO I was brought on to CNBC show and told by none other than Jim Jim Cramer that I was an analyst with a three-egg omelette on my face because of my cell phone call he was right I was wrong so you know one doesn't pretend one doesn't tend to forget moments like that on public television being told that you know you're pretty much an ass. But it does happen you know there are axes and then there are you know others and so I made plenty of mistakes I had to buy on Blue Apron although the lessons from that turned out to be different than I thought I got the call wrong but the lessons were different than I thought I kind of dissect that a little bit in the book. So those are some of my some of my worst calls I think my to my three best calls have frankly been sticking with a buy on Amazon for pretty much the last 15 years Netflix for the last 12 years and Priceline and now now booking for. [5:18] For a solid 12 years both Netflix of all three of those were really decades-long S&P 500 Best in Class stocks for a variety of different reasons and in the book I try to call out what were those reasons what were the what's that what's the pattern recognition so that you know we as investors can find the next Netflix and the next Amazon doesn't mean and Amazon and Netflix can't perform well from here but what are the things you can see in common that can help you as a stock picker you know kind of see ahead what really kind of started a lot of the the insights the idea of the book was this wonderful book that was written in 1980 called that one up on wall by Peter Lynch kind of a Bible or primer for anybody really looking to invest invest in the market with some wonderful advice and I really had any wrote it based on some wonderful examples of successful stocks and companies of his generation and I thought somebody needed to write one about our generation and you know these phenomenal money-making we know wealth-creating stocks that have. [6:19] That have soared the charts top the charts over the last 20 10 5 and even two years that have been dramatic dramatic winners from the covid crisis to I try to keep it long term in duration and frankly that's one of the big lessons I have in my book is. Is you know long-term I've found stocks do follow fundamentals they just do companies get bigger more Revenue more profits their stocks go higher almost always that's the case if you're a patient long-term investor so you can make money just investing you don't need to day trade and I think that was the last thing that really inspired me to write this book there about 15 million new. [6:53] Trading accounts that have opened up over the last two years you know the mean Traders the Robin Hood accounts and I just wanted to step back and say look you can have very good returns in the markets by buying high quality companies especially Tech and growth companies you don't have to day trade you can sleep better at night I got plenty of examples of companies that created wonderful. Shareholder returns over time and their stories you can take your time and really understand and stick with and anyway that's it this is this book is a little bit of little bit of personal Memoir but really more of a history of the Great. Companies and the ones that failed and then what are the lessons you can draw to apply going forwards. Jason: [7:32] Got it so I know it's not in your coverage area but you would have a buy on GameStop is that what you're saying no. I Nostalgia requires me to ask though I am staring right now at a Puppet still in the box that's like sort of a Memento I have on my on my desk like we're you covering like those guys at the at the. Dot-com boom. Mark: [8:00] No no I didn't but I refer to that in the book and I make this I draw the comparison you know and smoke you know went public with trailing 12 month month revenues of 5 million I don't know if you heard that right five million dollars. [8:16] Trailing 12 months they had been an operating company for under two years I mean how that thing got out you know in hindsight is is is pretty shocking but wait a second go you know go forward 15 years and what came out. To went public with 3 billion in trailing sales and you knows the same sort of basic value proposition to Consumers it's just that the market was a lot bigger it allowed for a lot more scale and a bunch of other things came out o like cell phones smartphones cloud computing which allowed companies to scale up at much lower costs and so the markets really were proved out at that you know the time of there were three unknowns is there really an internet Market are there really good management teams and other really good business models today the first question is emphatically yes they are huge Market opportunities and they've been proven in in the Internet space advertising retail entertainment a lot of different ways you can cut it and there's some business models have generated enormous amounts of free cash flow and then there are yes of course there's always a few select excellent management teams who find that right combination it can be it's proven to be a great path to making money in stocks and chewy has been a stock that I've really liked since its IPO even though it's the next and that's the cynicism that people be placed in front of it when they went public. This was a very different puppy. Jason: [9:39] Yeah it does it seems like timing it seems obvious but timing is such a big. Part of all that you referenced Peter Lynch and I know you know there's. There's all the old Netflix stuff I actually started my career at Blockbuster entertainment and so in my in my industry everyone makes fun of Blockbuster that we got Netflix stand and all those sorts of things and I always have to point out. You know we sold Blockbuster for 18 billion dollars in 1995 like five years before Netflix was invented. Then it was a good business with a good exit you know every every business has it it's it's moment and it's time and you know the the railroads aren't the investment that they once were either. Mark: [10:28] Netflix is a fascinating story so let me let me let me jump to it a little bit you know one of the things the punchline of I asked people if you're going to remember one thing for my book I hope you'll still buy it but if you're going to remember one thing from my book it's dhq it's not DQ That's Dairy Queen dhq is dislocated high-quality companies and. You know time you mentioned timing I was thinking in terms of stock timing I thought those were your going to take us I think it's very hard to the time stocks but you know you can clearly see when stocks are dislocated I either traded off twenty Thirty forty percent so that's usually you know time if you think it's high quality asset and it dislocates them they all dislocate from time to time even the best highest quality names. That's when you can kind of Step In add the positions by the stock knowing that you in a way mitigated some of the valuation risk as investors your tries an investor you're trying to do two things mitigate valuation risk and mitigate fundamentals risk you know the chance that Revenue falls off a cliff margins get crushed the way you mitigate that fundamentals. Risk is to focus on companies with large Tam's excellent management teams great product Innovation and superb customer value prop and Netflix screen so well for me on those four things I'll just take this off super quickly if you don't mind. [11:42] The industry Vision so let's see Reed Hastings invented or started Netflix back in 1997 Netflix the name itself sort of implies that somehow we're going to be doing some streaming thing and this is a 1997 when it would have taken you four hours to download the first five minutes of Terminator like there was no streaming Market there but yet. [12:02] That was the premise of the company in 10 years later you know you look at the first initial interviews with Reed Hastings I mean this is where he was going to take the company all along so I was just giving him kudos for industry vision and the fact that he was willing to cannibalize his existing DVD business first dreaming business very few entrepreneurs can do that so management you know checks My Box customer value proposition the best way to tell whether a customer a company has a great value proposition is do they have pricing power will do people love it so much that they'll pay more for starting in 2014 Netflix started increasing pricing just about every other year and there's some ads accelerated that's a compelling that's evidence of compelling value proposition third is this product Innovation and you know they just don't have a lot of things not just streaming but there's a lot of these little tweaks that the side like binge watching you know kudos to Netflix for just rolling out new series all at once I mean practically invented binge-watching and of course you know they sort of invented the streaming thing or the people who founded music really did that but but Reed comes in a close close second on that and then you know I'm finally in terms of Tam's large Tam's total addressable markets. [13:13] You can add it up a couple of different ways but you know home entertainment video consumption it's it's a couple of hundred billion dollars in total you know Market opportunity and then who knows these things come along like smartphones and all of a sudden the majority of usage is on smartphones that tells you that these markets could be a lot bigger than we traditionally thought just like Spotify blew out the market for what really could be music advertising revenue and music subscription Revenue Netflix is did the same thing with me with Video subscription Revenue they blew up the tan they made it a lot bigger so that's right you know I love that story about the stories about Netflix I gave him a tremendous amount of Kudos I think the sometimes people under appreciate just because it's kind of a singular company just you know video video streaming I think they I think they don't get enough credit for what they've done and what they could still do because I think there's still one more one more trick up Reed Hastings sleeve and I think it's gaming and he's reached they've received such so much skepticism about this pivot or missing expansion in the gaming but you know management team to figured out dvd-by-mail streaming original content International expansion mount give them the benefit of the doubt that they can figure out an Innovative new way. To deliver gaming and therefore further increase their value proposition you'd want to stick with a company like that I stick with the stock like that. Scot: [14:34] Ever kind of a random question let's say there was I'll pick something at random a company that was Reinventing Car Care and making it mobile and digital would you call that a dhq. Mark: [14:45] I think that yes yes absolutely. Scot: [14:51] All right leading the witness. I do have to give you Kudos because in the Netflix section you do have a Star Wars reference you talk about the Disney death star which is which is appropriate because they now own the Death Star it's got a part of there is one of their IPs. Mark: [15:09] But by the way that was you know there were a couple of Netflix there's a rocky stock Rocky stock here that's right that's a that's a rocky stock for you it's had there were two times they miss Subs because of uncertainty over the price increases and they got some pushback it was an obvious that they had pricing power but they proved it over time and then they've got this great competitor risk with Disney and I think what the market missed on that this is just kind of leaving aside the book of just talking about stock picks is you know people are going to sign up for multiple streaming services now not now not five six or seven but they'll sign up for two or three if there's original content and they have original content I mean there's some things you will you have to sign up for Disney Plus for if you if people are like use God and you know dramatic. [15:52] Star Wars fans of course you can sign up for Disney plus but you know there's because its original content if you want to watch squid game there's one and one only place you can go for that and you know there's going to be another squid game or you know another show that just kind of breaks through the site-geist and by the way that's where Netflix is so I'll leave Netflix aside but I'm so struck by is this company shapes the Zeitgeist whether they can cause a run on chess board sales worldwide with the Queens Gambit a year ago where they can cause more people start studying Korean on Duolingo a language app which I actually like is the stock because they can you know they've introduced this show squid games like when a company reaches the Zeitgeist when they when they become almost like a lucky lexicon like they become a verb like I'm gonna google that or you know it's the Uber of this that or that you know that's that's something special and those are usually stocks that have gotten very long runways. Scot: [16:44] Yeah and I'm here in North Carolina and we have all these MBA we have all these universities and I was actually speaking earlier this week at MBA class over at Duke. And you know I have this whole little joke track that I do where I talk about my first company was profitable and I learned I could never raise VC because get the TV season that's a your profit we don't invest in property companies so yeah I often joke that I've been doing it wrong and ever since then I haven't made a dime. And I kind of thought it was those funny because you kind of. The internet sector was kind of early before SAS where and you point this out where there's kind of you know what we learned is there is an investor that loves Revenue growth and in a way that the opposite side of that coin is it can actually hurt you if you start to make profits maybe share with listeners that that you know probably many of them come from traditional businesses where that sounds nonsensical maybe maybe explain kind of what happened there. Mark: [17:41] Well I want to be I want to be on to get nuanced here which is you know I that chapter that says the most important thing out there is revenue revenue revenue you know for tech stocks and growth stock. But of course earnings and free cash flow matter it's that sometimes the public market is a lot longer term focused than people give it credit for Netflix is a great example that also is Amazon. I mean those those businesses had if you look at near-term valuation PE metrics price to free cash flow there's no way you would have bought those stocks. But what I think long-term growth investors realized is there's this you know when these get these assets that can grow their Top Line twenty to thirty percent Plus. From scale for multiple years like that can that creates an enormous amount of value over time and it's so rare I came up with something of a 20% rule you know it's one to two percent of the S&P 500 that can consistently grow at from scale their Top Line 20% which is like five times faster or six times faster than Global GDP growth so it's rare for good reasons but those companies dramatically outperformed the market because they're rare and it's not like growth and scale solve everything but geez they solve a lot of things I've yet to see it's got you know you go way back on this I'm sure you had these comments like Amazon will never turn a profit my first year on the street. [19:04] There's a person who's not one of the most influential investors out there put his finger in my chest. And said you know Amazon will never be profitable and you know I guess he must have been writing he was so smart but he was wrong because he didn't realize just what how powerful Amazon could be as it's scaled over time I mean you generate billions and billions in revenue and you can you can run over a lot of your fixed costs as long as you're not selling dollars for 95 cents you know if you're you know if you're selling them for a dollar and two cents and then you get scale against your fixed cost yeah scale will solve just about anything and I look at what happened with Amazon and I've looked at more much more recently its bring it up to up to date to Uber Uber just printed its first free cash flow quarter ever even though it's Rideshare businesses like down 40% since Pre-K covid levels how the heck did they do that because it took a lot of costs out of the business and then they had this delivery business that really scaled so look earnings matter it's just that when we look at tech stocks and growth stocks you know especially early on is IPOs they rarely go public. As profitable businesses the question you have to answer yourself is can they be profitable long-term are there companies that are already you know similar business models that are already are that's one way or their segments of the business that are already profitable. [20:19] Is there a reason that scale can't drive profitability for the company and the fourth what I call profitability Action question that detail this in a book is yo Are there specific steps steps that the management team can take to bring the product the company to profitability so I've yet to see a company. [20:36] And I'm sure there are some but I've yet to see one that hit the public markets that couldn't scale itself to profitability now some blew up. Well you know that's because they couldn't hit the enough scale so that's that's kind of my answer to the question of yes of course earnings and free cash flow matter at the end of the day that's what they're going to be valued on but just watch these companies that they really execute well they can take what looks like really aggressive valuations and overtime those valuations can turn awfully awfully attractive and a lot of times the stock wealth creation goes from point A to point B it doesn't start at point B. Jason: [21:10] Yeah the you know it's you mentioned then the Netflix. Effect on the cultural zygous fun fun stat on Queen's gamut it drove the sale of millions of chessboard and caused hundreds of people to start playing chess. I do one of the things that comes out strongest in in the book to me and that you alluded to upfront is sort of the difference between trading and investing. You know I always have people come up to me and they're like hey you know a lot about these retail companies what's a good investment and I'm like. I have no idea can you can you talk a little bit about sort of what you mean by sort of fundamental investing versus trading. Mark: [21:56] Well I sum it all up in the pithy expression don't play quarters I find playing quarters is almost a Fool's game the number of times I get questions you know what should I buy for the quarter and for little sophisticated institutional investors that could be I've got a position in. [22:15] Amazon or Google or Twitter and you know do I should I be you know heading into the position prior to earnings or you know facing back and adding to it more afterwards okay that's a different setup but if you're just playing a company for that quarter pop the problem is quarterly earnings reactions there's two things that drive them. Fundamentals great get the fundamentals right that it's expectations so the quarter trades are really about expectations you may get the quarter right you may be right that Nvidia or Roblox are going to have super strong quarters because I see how many of my friends kids are all over Roblox you maybe well right on that but you have to know you know what the market is actually expecting and numbers can go Revenue can accelerate but if the bar is higher than that then you're going to see these stocks trade off it happens a lot so I just unless you're unless you're a pro less you're in day in and day out. You know working working these stocks and really have a sense of where the expectations are. I think it's just a Fool's game to play play stocks just four quarters instead you know you want to stick with stocks for the you know you want to find an asset that you think is going to be. [23:29] Materially bigger in two to three years down the road and you think it's high quality based on some of the screens I threw out then stick with that name and don't try to play around the quarters and it's in fact sometimes you can use weakness or strength around the quarter to adjust your position but don't use it too initiator close out a position at the then you fall trap to these expectations game that is very hard to participate in if you're just a regular you know retail investor and you can make just as much money just staying invested in some of these great assets. Jason: [23:59] That is great advice and it's I certainly resonate with the sticking with the Investments I am curious though on the other end of that on the really long Horizon you mentioned you've you've been had a buy on Amazon for like 15 years. Wait. Like are you going to have a buying them for the next 15 years is that how I mean like does there come a point when they achieve their potential and you have to start worrying about them getting on the other side of the Hill. Mark: [24:26] Yeah I think you can I think you can one look for the fundamental towel and so I'm going to I'm going to spin over to another stock I talked about in the book Priceline. Which is actually the single best performing S&P 500 stock for like a 10 year period 2005 to 2015 phenomenal stock travel name everybody knows it William Shatner excetera although they're real secret sauce with what they did in European markets but. But that's a company that you know sustained premium growth like they were growing their bookings in the revenue 40 percent year over year for years and years and years and years and that's what powered that that that stock and when it stopped materially ah performed Market was when the growth rate decelerate it below 20%. [25:10] And so I don't want to you know create a hard and fast rule but I do feel strongly about this twenty percent rule 20 percent you know we're close to it you know don't don't Nick me at 19.8% you know could close to twenty percent is unusual rare growth. [25:23] And the markets usually pay up for that and when you see a company over time either because of Miss execution it happens or Market maturity and their growth rates you know kind of slide below 20% then that's when you reconsider your position that's a simplistic rule as a lot of caveats to that when I see with Amazon here is despite the size of this business I think they're still growing 20% for the next five years so in that if that's the case. [25:48] You know the simple rule of thumb is companies that can grow like. They can I like to see stocks that can double in in three years in order to do that you kind of have to do you know 20 to 25 percent earnings growth that's what a Maps out too. And you know you can double a stock in 3 years your handily beating the market in almost all time periods. And so when I see what it'll change my opinion really on Amazon is if I believe that this company is going to go X growth it's going to go you know well below 20 percent Revenue growth I just don't see that in the next couple of years given how much growth they have in retail in NE ws and cloud computing and in some of these really newer areas that I'm really interested in whether they really can crack the code on groceries and they can that's a large opportunity and business supplies Industrial Supplies I think that's a very underappreciated part of Amazon's business so I don't see myself changing my opinion on Amazon although you don't want things that we talked about this earlier that I love to see your founder LED companies that's no longer the case with with Amazon so that's you know at some level I've got slightly less conviction than the in the by case but I'm going to stick with it as long as the numbers prove out right and long as I can see this path that's consistent 20% Revenue. Scot: [26:59] Yeah and this is kind of breaking out of the book thing but since you brought up Amazon it wouldn't be a Jason Scott show if we didn't kind of double click on that what did any thoughts on the Q2 and Q3 earnings feels like they're slowing down a bit and feeling some of the labor and see what we call Supply pain on the show are you are you getting nervous about it or you think it's just a little one of their little kind of investment phases. Mark: [27:23] I called the six billion dollar kitchen sink that's how much lower their guidance was for operating income in the December quarter then then what the street was looking for like she was looking for close to eight billion and they guided to billions six billion dollar kitchen sink and they threw it all in there wage inflation you know you right you drive that route 95 on the east coast and you'll see Amazon Amazon is hiring Billboards up and down the East Coast Seaboard I did it recently so yeah they're aggressively hiring at higher wages that's impacting their margins there still some covid related cost shipping they're just not able to a sufficiently source and bring in product and so they have to bring in product into the the ports that aren't optimized for their distribution Network so just a lot of. [28:14] Positive blowing up now the question you have to ask yourself as an investor is are those are those cost increases elective structural discretionary temporary it's kind of like which of those are they the more that you can make a determination that the cost bikes are temporary the more you stick with the name if you think there's something structurally changed about Amazon okay that's different I don't think there's anything structurally changed about Amazon and certainly not its competitive position and then the last thing what I really like to see. [28:44] Frankly is this company. I mean the level of investment this company is making its distribution Network you know you talked about Facebook earlier they're dumping 10 billion into the metaverse which I think there's a there there but I don't know Amazon is dumping billions and billions into its own Logistics Network like they're doubling down on their core competency you bet I'll stick with that and what they're going to what's going to come out of that is even faster and faster delivery and they're going to prove out this concept what I call shipping elasticity the faster you ship the more that people are going to use you in a more of their of the more of their wallet and per-share you're going to Amazon's going to get so we're going to actually going to Super up one day delivery and then they're going to Super up super same day delivery and I think they'll be able to just grab more and more and offer more and more products to people so I like those kind of investment initiatives so I think a lot of that margin pressure by the way it was really due to these kind of elective investments in the infrastructure they added more distribution capacity the last two years than Walmart has in its history. That's how aggressive Amazon is being an eye you know my guess is that third we're going to see dramatic market share gains from Amazon in the next 12 months so I like those companies that kind of really lean in bendin and the double down on our core competency that's what the Amazon is doing now. Scot: [30:00] Yeah. The Press is making a lot of noise around Shopify versus Amazon and Shopify is kind of amplifying that with they're arming the rebels and everything. Jason Connor makes our I won't say his thing but he's not a believer in that I think it's kind of interesting in there's definitely no love lost between the company's what what's your take on that is that a real battle or is that just kind of genda by to kind of raise awareness for Shopify. Mark: [30:26] You have a quick point of view on that Scott. Scot: [30:29] I think Shopify becomes a Marketplace adjacent thinks that's crazy Jason what do you what I'll let you state your own opinion. Jason: [30:38] Yeah I mean I think Shopify is a phenomenal company and a good executor so I'm not throwing rocks at Shopify. They're to me they're not a competitor to Amazon they don't acquire customers they have no traffic there there. Piece of infrastructure and a great valuable piece of infrastructure but a piece of infrastructure. Doesn't draw any customers in so I call these people that are like oh man they're like Amazon they have all this aggregated gmv and they could sell ads to it and they can you know recruit more sellers because they have this this audience and all these things will they don't have any of those things they don't have a single b2c marketer. In their company and I would argue that's that's been one of Amazon's Court competencies is they've they use the flywheel to build this this huge audience that they get to sell all the. Their goods and services to so I just I don't think. They compete in any in any meaningful way and I think if Shopify were to try to become a true b2c company like Amazon. It would just be a phenomenal pivot it would be you know. Can't you know obviously they have the resources to fund trying for it but I'm not sure that's the best move for them. Mark: [31:57] Yeah I don't so I Do cover Shopify I've been really impressed with them I don't know them as well as I know Amazon but I've been super impressed. With them and terms of the product development and they are just providing more and more services to small Merchants so I think there's an are now bigger than eBay in terms of GM vo but I can never there's not enough disclosure to figure out so where's that GM D coming because I think some of that probably does come through eBay so a little bit of double counting that goes on in there but it's really impressive what they've pulled together whether they can actually aggregate demand in a way that Amazon has I think that's I think that's unlikely I think that's a very hard thing to do it's possible they do have a shop app I just, yeah I guess that's the action question we often ask ourselves do you think you're going to use the shop app to shop. [32:45] I don't think so I don't think people are going to do that but you know if they can get enough people to do that boy they will have really they will have some really circled it that you know because they got the infrastructure okay they're talking about building out fulfillment and doing fulfillment for people and spending a billion dollars on it sorry my friends you're gonna have to spend a heck of a lot more than a billion if you if you really want to you know compete. Because the bar is getting higher it's not getting lower it's getting higher in terms of funeral the speed of delivery eBay learn this the hard way and so shockfights Memphis spend a lot more than that so anyway there's a lot of wonderful things about Shopify and I don't know whether if you listening to slammed on by if you think they can build up an aggregate an audience I don't think they can so does it make doesn't make it a slam dunk by it's it's you know it's a deep three point shot put it that way. And you're not Steph Curry. Jason: [33:41] I think we're going back to the basketball references in the book. Yeah it you know I tend to agree I'm not I don't think the shop app you know has attracted an audience that uses it for shopping yet it's a shipping trapping tracking app at the moment. But the it is funny like there are lots of companies that facilitate huge amounts of gmv so I think of like. Excuse me and Akamai is a. Is a CDN that's that used by almost every retailer to help help sell stuff right and so if you said well what's the CD the gmv of Akamai well it's bigger than Amazons. Um but that doesn't mean that Akamai can compete with Amazon so yeah I don't know. [34:28] I do want to go back to Amazon earnings just briefly because I you know I think a lot of the Slowdown is kind of a covid blip and I don't know if you ever think of it this way but. They're there their times in history when. It feels like the external factors aren't a big influence and and you know some companies perform really well and other companies struggle so you know there could be a year when you see Home Depot doing really well and lows struggling and you say. There's something special about Home Depot that I might be interested in investing in at the moment it feels like the external environment for retail is having a. [35:07] Sort of a consistent effect on everyone right and so you look at the industry average is you look at all of them is on Spears and they all have sort of the same shape of deceleration. That Amazon has so it's to me it's hard to attribute that to some. Some fundamental flaw in Amazon but there is one thing I noticed this quarter that it was interesting and I wanted to get your opinion about because I know as an investor you like seeing companies that have pricing power. And you know of course Amazon famously raise the price of prime a while back and seems like that was wildly successful this quarter. They've raised the price for grocery delivery there now charging ten dollar delivery fees even for Prime members. And then this week we saw that they made a pretty substantial increase to the cost of f ba which is you know the fundamental service used by almost all marketplace hours and they they just raise the price of that by like five percent and I'm curious do you look at that as a good sign that hey. They have pricing power and they're doing so well that they can command those prices or to me it's a potential warning sign because I feel like Amazon is so. Zealous an advocate of the flywheel in the flywheel is all about driving costs down to get scale up I just was surprised to see some of these like price increases in in you know. Especially grocery which isn't super mature yet. Mark: [36:33] Well I'm not sure really of the answer to your question Jason it's a it's a it's a really good thoughtful question on the on the groceries I think they raised it because the unit economics were just not working for them in terms of grocery delivery that's that's my guess they also you know yet to have that get to really crack the code on the grocery business and so I sort of see that as they tried it and it just can't right size the economics of they got to charge more for it so I read that kind of negatively what did the raising fees to sellers. But my guess is it's a mixture of things but it's largely driven that my guess is that this largely driven off of Just Rising. [37:17] You know Rising infrastructure costs have been rising shipping costs I mean Rising the two costs that they called out specifically on the earnings call my recall is correct is our steel costs because of all of that dish construction they're doing with their fulfillment centers and trucking services and so my guess is that they've they're doing is not necessarily the right size the economics is I think the economics are working but because they want to try to keep their unit economics relatively intact. And that's sort of the way I think they thought about the raising the price of prime it wasn't they did it because they could. It's they did because they sort of had to like the costs are rising it's just that what I found interesting in terms of pricing power is van acceleration in in Prime ads you know post that price increase like that and so does Netflix to me Netflix is essentially raise fees use the fees to you know generate more Revenue by more content is like a flywheel that they've worked with their make the service more bringing more users allows them to get a little bit raised money just a little bit more so it's not so much raising fees to extract excess profits it's raising fees to further accelerate growth and the value proposition is strong enough that they can do that and not lose customers that's that's that that there's this is subtle nuance and maybe it's too salty but but I think it's an important it's important difference it's not it's no it's raising pricing not to raise margins it's raising pricing to fuel growth. [38:46] And when you so either way it's good I happen to think you you want to the the better one is the latter one is a more impressive the latter one is more impressive because you're raising pricing just to Goose your margins you know you just put a Target on your back. Scot: [39:03] Reading the book made me nostalgic and maybe we'll do a little bit of a lightning round but one of the companies you wrote about that I kind of forgot about and those interesting was Zulily I remember when they came on the scene and we were all like. They were all blown away by how fast they could just get product up right they had this thing where they could. They could have most of those kids so they'd get like all these little kid models in there and throw some clothes on them take a picture and then like changed outfit take another so they could do something like you know thousand different products an hour or something. What's your recollection on Zulily. Mark: [39:40] She really is that was one of my calls that didn't work and. So I and I learned some lessons from that I think to me the lesson I drew a to do with value proposition they had wonderful cohort disclosure in their S1 when they went public I mean it was truly impressive. And you know the they also raise kind of an analytical question because the first it's not too dissimilar to stitch fix today the first three or four million customers were extremely happy the question is. Were there another three to four million customers that could be extremely happy and the problem that Zulily faced is that it customer value proposition had one major flaw which is that you couldn't return product if you didn't like it they didn't they didn't accept returns oh I'm sorry there were two problems and there was no Speedy Delivery you know you could get stuff in seven days and 20 days. That was good for the first day of the first three to four million customers who are fine with that you break into the mainstream and you mean I can't return something if I don't like it you mean I gotta wait how many days until I get something like that ended up. [40:45] And it was very hard being the survey you really had to go with gut instinct on that to realize in advance that they were going to hit a wall in their growth. Geez when you saw what happened to their growth rate when they went public it was Triple digits six quarters later they were doing 10 percent Revenue growth they hit the wall because the value proposition. Wasn't strong enough and then they end up going going private that to me was kind of a lesson which is you know the. [41:10] Growth was impressive but that value proposition if it's not if they hadn't they didn't have it nailed down and you knew from the beginning I knew from the beginning what the two Falls were I just I didn't know when it would hit them and hit them earlier than I thought so you know it gives us another reason to really focus on how compelling do you think this value proposition is how many you know will that can the can a customer base double given the existing value prop. And that's one of the big lessons if I spin it a little bit I mean that's to me is and Scott you look through this entire history like you know the first decade of the internet the king of online retail wasn't Amazon it was eBay and they had like six times seven times the market cap of Amazon that's completely changed and why is it change and I think in part it's because of the value prop I mean Amazon just beat him on price selection and convenience year in and year out and that really mattered but a more recent example in my book. [42:02] In literally and figuratively is doordash and GrubHub and that's example many people will will know but grub have that great business model wonderful investor Centric business model High margins and doordash had this you know generating tons of losses but they had the better value prop because they had more restaurants selection and the end of the day that they want and they were able to scale up and generate serve reasonable profits over time that was the case where my quick tag line is you know customer-centric companies. Beat investor Centric companies most of the time in market cap and market share Amazon versus eBay, GrubHub versus doordash those two examples really drilled that less than to me. Jason: [42:48] Yeah I've been fighting those companies because you know there. They're like increasingly overlapping with a lot of my Commerce clients and like you know a big. A big sort of disruption and commerce right now is all these ultra-fast delivery services and you know it seems pretty clear that doordash and Uber are both gonna want to play directly in that space so it seems like some of those those sectors are on a collision course to chase that Tam. Mark: [43:15] I think you're right Jason I also think Amazon I mean you're talking about logistics like that's Amazon's competency so whether you need to. Whether you're going to vertically integrate and do that or whether you going to do that virtually you know Foo you know a gig economy Network. I don't know which which is going to work better long-term but yeah and you know it's going to raise the bar and make it more and more expensive for anybody to operate in that in that segment I have a bias that Amazon in the end wins that but it's big enough of a market it's so early stage that you can have multiple winners for the next five years I don't know that you can have multiple winners for the next 10 years. Jason: [43:56] Yeah there was a funny question in the Amazon earnings call someone asked about ultra-fast delivery in the CFO kind of I thought brilliantly threw some shade on it he's like. He said something to the effect of we like where we are and ultrafast like we have one hour delivery on about 178,000 skews right now and we're you know we're going to continue to scale that and I don't know how many people follow this but all of the competitors in this space are are desperately trying to figure out how to do one hour delivery for like 7000 skus. So so like they're you know they definitely are gonna be able to leverage the infrastructure there and I'm sure they're making some big investments in that space too. Another area that's that's been kind of interesting lately and I know you've been following this little bit is obviously there are all these privacy changes and the depreciation of the third-party cookies and especially the IDF a you know mobile privacy changes. That Apple has instituted and that obviously had a pretty pronounced impact on the value of some companies like Snap recently A View you have a opinion there is that. Is that a blip or is that a systemic change. Mark: [45:08] I think it's a big pothole in the road. But it's not there but the but the it's a big pothole in the road but it's not a bridge that it's not a collapsed bridge that get that mountain out. Yeah so poor that hey yes. Yes it is yeah that's it that's pretty I mean that's a big pothole that idea Fay allowed Facebook to offer amazing attribution to millions and millions and millions of businesses and now that's gone and and and to their credit to Facebook's credit they warned about it for a year two snaps discredit they didn't warn about it ever and so that's why their stock went off you know 22 decline 25 percent whereas Facebook stock even the numbers came in weaker than expected you know kind of fell off to the 3% and by the way then is traded up above where it was at earnings time so what I mean very intrigued by is I think it will be a son of that idea of a. [46:12] You know child of idea say I like I think there's so much at stake here both from the advertising platforms like Facebook you know and Google's to some extent a little bit and Snapchat but also for you know the millions of marketers out there who you don't you were able to thank thanks to Facebook use of people's privacy data you know from right or wrong I mean that's what that's what they they did I mean this help Merchants really know which of their campaigns worked and allow them to you know run creative and that creative could be automatically you know a be tested abcdefgh like 8 times 8 different ways in which ever those creatives work best. You could actually beat successful one of them then you can just pivot all of the dollars behind that one campaign you know campaign h for campaign be your campaign e.e. and that's just a wonderful way to help these small businesses you know really succeed and that's been taken away now you know there's I think there's first a little bit of shock shoot I can't get the attribution I had I'm going to pull a my marketing dollars but marketers got a market. [47:13] And I think you're going to see those dollars come back and my guess is that Facebook and other companies are going to find some way to do. Better targeting they may not quite get to idea that a type of levels but they were going to be able to do some sort of audience targeting they also have a lot of first-party data but they'll be able to do it in a way that doesn't that you know respect people's privacy and yeah you'll see those dollars come back so that's why I referred to as a pothole I it's a big pothole it's but it's not that it's not a bridge that just collapsed you know you're going to be you can they can they got stuck in that pothole more than anybody else but you know the cranes there whatever they're getting a tow trucks they're they're getting out of it they got to do some nobody work they'll fix the car and it'll be back on the road in part because they've got the talent to do it but in part because there are millions of small businesses that are given to going to give them the incentive to do it because they'll get those marketing dollars back once they figure out some of the idea that a. Jason: [48:09] Yeah I always like to remind people that are like The Skys Falling on the advertising industry that you know. It wasn't very long ago that we had much worse targeting than than we have in digital even with idea of a I mean targeting used to be deciding which publication you were going to print your ad in. And they still got a lot of money in the advertising industry so like I kind of suspect that that marketers are going to figure out you know the best ways to invest their money even if it maybe isn't quite as. As real-time as people got used to for a short while. Mark: [48:42] I think you're right Jason. Scot: [48:45] So Mark you in the book you recap kind of this awesome 25-year career and you know one of the things I've learned is if you're in the game of making predictions you know that it's kind of humbling but then you kind of slowly but surely get better at it right you never get to kind of you know a hundred percent but over time you get better and like like for example you learned the lesson of. The companies that are customer focused to do better than investor focused think founder based in that kind of as you as you take those backward 25-year learnings and project them forward what are some of the things that you get excited about looking out the next five or ten years. Mark: [49:23] Well in terms of Trends even the next year or two I think whoever solves. Marketing attribution is going to be worth a lot more in two years than they are today just because there's so many businesses so many marketers that will pay for that. So I you know so that's that's kind of a debt that whoever whoever fills in the pothole that's going to be a very valuable company it's going to be a lot more valuable to years and it is today my guess is that there's gonna be Facebook so I'm interested in that then there's thing this thing called The Medic verse which I don't know this is just virtual reality just renamed do a Google Trends search on metaverse just watch that just spiked up in the last love so you know you kudos to the person who came up with that idea may be excited maybe Jason or Scott maybe was you I. Jason: [50:09] It's just a rebranded second life. Mark: [50:12] Okay and. But but you know the fact that it was two things that kind of struck me there's some pretty big companies throwing a lot of big money at metaverse you know Facebook Microsoft there's a bunch of others and then there's this Roblox generation people young people who are perfectly comfortable living in the meta verse in virtual reality and. [50:38] You know participating in concerts safely and you know and shopping and communicating and entertaining and learning. [50:49] And learning through the metaverse and so you know we knows 8 18 year olds you know get out into the real world you know they're going to be perfectly comfortable in the meadow verse maybe not the way you know not the way that we will naturally be but you know though they'll help us figure it out and so so I'm really intrigued by the metaverse I think it is going to take 5 to 10 years because that to really develop and I'm trying to trying to figure it out who the big winners are but but I'm very intrigued by that. [51:18] Yeah I'm also got one of those oculist you know I've gotten two different versions Generations the it's the iterations of the Oculus Rift and you know i-i've always it's kind of like when I first saw the Kindle you know the first Kindle I ever got was pretty darn kludgy but you know I just love the idea that you could just download any book on the your kludgy device will you know whenever you whenever you were in a Wi-Fi area and and I and you and you just saw how that device got better and better each iteration and so I just think about that with these with these virtual reality headsets I mean they're clumpy their clunky their kludgy it's kind of embarrassing to be have a picture of you taking them but you know just you can imagine already know how much they've improved over the last couple of years and just think ahead is it possible the next five to seven years it's going to be just it's going to be like putting on a pair of sunglasses I think that's what we should be thinking about if you can easily put on a pair of sunglasses and and enter the metaverse and have you know share a virtual you know in presence experience that sounds but that sounds odd or not but you can do that, I think a lot of people will do that and you know the education the work applications around that so I'm very intrigued by that. Jason: [52:28] So you're saying that that could be to Google Glasses Mark: [52:36] Yes yes I love that yes I hadn't thought about that way yeah and by the way I've got my Google Glass here you know I'm. Got that I got that early version I got the Amazon Fire Phone you know but just be the the early failures sometimes see these I mean they're kind of in the right direction I don't know exactly what there's a there's a backstory to Google Glass that we only partially know but anyway they have the concept is there and and you know the big iterations that these products do get better and as they get better easier cheaper lighter cooler you know like Main Street cooler not Silicon Valley cooler then then markets can appear. Scot: [53:17] I think that's something the three of us have in common I think the three of us are probably the only people that ordered and probably still own an Amazon Fire Phone. Jeff Ellis. Mark: [53:29] And I've Got My puppet to it's in my office I put the hits I got it as a warning. Scot: [53:31] I have one of those too yeah we all I guess we all have one of those too. Jason: [53:36] That that puppet ended up being the most valuable asset from sidenote like I don't know if you followed it but there was there was there was a whole intellectual property fight with Triumph the comedy dog and all that stuff yeah. Unattended value unintended value creation. Scot: [53:53] Mark were you you know we've used up about an hour of your time we really appreciate you coming on the show to tell us about the book when's it come out where can people find it do you do you want them to order from that Seattle bookstore that we've been chatting about. Mark: [54:09] So yeah and thanks Scott Jason I've always enjoyed listening to your show I did tell you it beginning I your analysis recently all birds and Warby Parker I took the heart because I initiated Warby Parker as an analyst but I after after I've seen what your thoughts were on it. So thanks for having me on the show and to talk about the book nothing but Net 10 Timeless stock-picking lessons from one of wall Street's top Tech analyst I just like to nothing but net on a big Hoops fan. And my kids are hoops and that's been my email pack lines there's a lot of meaning for me in that that title it is available wherever fine literature is sold it is available on Amazon it's the it's a top bestseller now and in the business category so I've been I've been just it was just a it was a labor of love for me and throw like a chance to talk with both of you about it because you've lived through the sister just as much as I have and it's fascinating the lessons we can draw from. Jason: [55:01] Well Mark is been entirely our privilege and it's a great sign that you know just halfway through your career you had enough material for an amazing book so I can't wait to read the the sequel after the next half. Mark: [55:13] All right I will talk with will do it again in 25 years. Jason: [55:18] I'm booking it right now. Scot: [55:20] Bring our sock puppet are and puppets in our Amazon Fire Phone. Mark: [55:24] That's. Jason: [55:25] Yeah everyone else will be living in the metaverse at that point in no one's going to get it but it's cool. But Mark really appreciated your time and until next time happy commercing!

    EP280 - Anker Innovations Head of Global Communications Eric Villines

    Play Episode Listen Later Nov 22, 2021 46:01

    EP280 - Anker Innovations Head of Global Communications Eric Villines Eric Villines is the Global Head of Communications for Anker Innovations. Anker is one of the most successful brands to be started on the Amazon platform. In this broad ranging interview, we discuss the origin story of Anker, their evolution from early Amazon FBA seller to Global Omni-channel brand. Eric covers their incubator, Anker Innovation, and their Amazon FBA consulting service OceanWing. We also discuss his recent book, Get Funded!: The Startup Entrepreneur's Guide to Seriously Successful Fundraising. Episode 280 of the Jason & Scot show was recorded on Wednesday. November 17th, 2021. 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: [0:00] Welcome to the Jason and Scot show this is episode 280 being recorded on Wednesday November 17th 2021 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:15] Hey Jason and welcome back Jason Scott show listeners Jason is a fellow Gadget addict one of our favorite brands that we love from consumer perspective is Anchor and then we also spend a lot of time here on the show talking about anchor because it's a very interesting brand that is one of the few that we call kind of digitally native Amazon born so today on the show we are very excited to welcome Eric villines he is the head of Global Communications at anchor and is based out of Sunny Seattle Eric welcome to the show. Eric: [0:50] Thanks for having me we've also been having about two months of rain so we're living up to our our cliche. Jason: [0:59] That for the last two months that might have sounded bad but being here in Chicago I have a feeling that rain is about to start looking pretty good to me. Eric: [1:07] Yeah means known cold and wind. Jason: [1:09] Exactly all of the above although it's been pretty mild so far. Eric before we jump into all the anchor discussions we always like to get sort of a brief background about our guests and maybe you could tell us what your role is an anchor. Eric: [1:25] Sure so I run Global Communications at anchor Innovations which is essentially a fancy way of saying public relations. Which in time it's sort of corporate Communications you could be crisis Corporate social responsibility and then obviously the most exciting part of what I do which would be product PR dealing with the media on reviews and, I'm getting the word out of on the cool gadgets we. Jason: [1:51] That's awesome so does that mean you have one of everything. Eric: [1:55] I have two of everything. It's a funny story I've worked in consumer electronics for a long time and I remember Steven Yang who hired me personally for the role, I remember I was in China and I said I want to make sure that I've got budget to give everyone on my team, you know one of the products and he giggled and I'm absolutely serious, we all have to you know live it and breathe it and love it and know the good and the bad aspects of all of our products because we're talking with the media all the time so I kind of. I'm kind of insistent that everyone on my team has the products and then the other part is we all we can never run out of battery that's like that's like a major faux pas here, if I ever hear the words even coming out of my own mouth that my phone is almost out of juice that's super bad as a charging company. Jason: [2:45] That does seem off brand I am I have a little bit of a fetish for your products and the thing I've noticed is every time I have a family gathering I get completely cleaned out. Eric: [2:57] Oh yeah there is. Jason: [2:58] So I yeah I didn't realize you were in such a replenishment category but it's ended up being one for me. Eric: [3:04] It's funny because I started out an entertainment before I came into consumer electronics and one of the first things I did here because I'm just using my own family Dynamics as I have three children. And my wife of course is involved in this as well and we steal each other's cables constantly and then we lie to each other, about you know and it's gotten so bad that people take you know colored Sharpies and all sorts of things but we had done a survey, on you know what are some of the most irritating things that happen in the family and this came in like is a top four. People stealing each other's charging components and then lying about it so it's a national issue that we just haven't spent enough time talking about. Jason: [3:48] Yeah we'll have to dedicate a whole nother show to solving that problem one last product related question do you have a favorite anchor products. Eric: [3:57] Well gosh I so we have these new cables that you said fetish I don't want to take it too far but it's. It's the material that's made out of is reminds me of certain things and that Dominion but it's a super soft latex like, cable that seems to never because of the material it seems to never not up. And that's one of my favorite things and they come in all these super cool colors and that's really new for us we've always offered two colors a beautiful white and the Beautiful Black Version, and so this year we started getting into more colors and that's been really exciting because that's a really easy way to distinguish your product from say your son's because you can have different colors but the material it's really nice I keep them in my bag I've got him for all my products. Those are really cool we launched a new line of Mag go products which we have a desk version which allows you to, put your phone against and it'll you know magnetically charged it but the battery is removable so you can actually bring it with you, so it serves two purposes and I keep that like in the kitchen so when I'm cooking and I have my recipes but then I can grab it and go. So those are really cool but I mean man we launch new products every day so you ask me next week I'm going to tell you something completely different. Scot: [5:23] Yeah this is an unsolicited but my favorite is there's a little Hub you guys have for the Macbook so I can just plug in one USB C and I've got this thing I'm looking at it now it looks like a mutated octopus with with 800 things, poking out of it that I no longer have to plug into my MacBook so you're you're saving me a lot of ports which I really appreciate. Eric: [5:40] Yeah as they move to usb-c only but you still had a myriad of other things you needed to connect to it. Scot: [5:47] Yeah well now the magsafe is a now they're back yeah they decided they're giving you guys too much Martin said so now they now they have like they're like oh man when you need to add more stuff you know. Eric: [5:57] Well I've talked to a lot of pro users and they're really excited to see the HDMI cable come back it's just a you know it's a strong connection that cables is still different. And sometimes it's a huge hassle putting a hub attached to the computer and then attaching your HDMI cable and everything else to it. Scot: [6:16] Yeah absolutely especially when you're traveling and you're popping into someone else's conference room you'd never have that one little cable, so we obviously we talked a lot about anchor on the show and we can just kind of stopped fan blowing on the on the user side would love to hear kind of your view of the founding story of anchor, you know we kind of classify it as you heard is this kind of like Amazon born would love to know how you guys tell that story. Eric: [6:43] Yeah I mean it's you know I had relatives that move during the Dust Bowl and move to Pasadena and built. You know a chain of gas stations and it's this true Americana story but he what's interesting is I think Steven Yang story is very similar it is that that's story of an idea and perseverance and building and Global brand that. People have in their purses and backpacks even if they don't know it's anchor there's a strong probability that it is and that's that's one is exciting the others a branding dilemma. But Stephen was a senior engineer in California at Google and he had he was trying to find a new battery for his Toshiba laptop. [7:32] And as he was looking online including Amazon and the Toshiba websites he realized he had sort of two choices you either going to buy the one from Toshiba that was super expensive, for take a chance, on all of these other versions white-label versions and unknown brands on Amazon and and purchase one from their sort of buyer beware. And he kind of had a light bulb moment and thought you know this is this is ridiculous like who are the people that are putting these online how they've been tested how can I know that, what I'm buying is going to work with my laptop and you know give me a year of battery life. Long story short he moved back to China with his wife who was then his fiance he took a small loan from his mom. And he started anchor and in the beginning what Stephen did was go around to different factories and and Developers, and with his engineers and they went and tested all these batteries so in the beginning it was a white label play was him finding and filtering through. [8:38] I'll just say it a lot of garbage and trying to find the absolute best, alternatives to all of these laptop batteries and they started selling those through Amazon and that was the first point was the easiest place for them and selling specifically and exclusively to the United States. A year later it was a massive success beyond anything that he had ever imagined, and the next logical step was to take that concept and move it into mobility and start looking at mobile phones and chargers and portable batteries and all these things that were at the time, really starting to come out but the big difference when he went into Mobility is the idea was we need to get as fast out of, the white labeling as we can because we have some ideas that even these these smaller factories and people that were producing, can are doing that we can find ways to make it better, so that sort of unearth the world of you know contract manufacturing where they're Engineers were developing and designing, you know the specifics and then Contracting manufacturers to develop those products and the rest as they say is history. Ironically today we are celebrating our 10-year anniversary actually last month. [9:58] And that's a pretty big deal so we went from a guy and his wife. And a little mama money from his mom to a you know a multibillion-dollar company. With multiple Brands and over 3,000 employees all around the world. So in addition to charging which is still a huge huge part of our, DNA we've developed a number of Brands subsequently over the last three to four years everything from robotic vacuums and future robotic products, to home security high-end true wireless headsets. Smart Home Entertainment pet products baby socks I mean like you know smart baby socks I mean just like the whole gamut. [10:45] And the sort of the common line through all of this is that Steven and his team are constantly looking for areas within an emerging or establish consumer electronics area where they can bring value. And you know usually we might come in and the play might be okay we're going to come up with a really great product that's going to be, a little lower cost and that gets our foothold and then the the long-term strategy is then to LeapFrog over the competitors with something truly innovative. And this is kind of a phenomenon that's worked really really well. For Stephen and his engineers and the marketing teams and all of our sales people around the world. Scot: [11:28] Did he have an industrial design background hurry just had the pain and kind of cheeses and created the company from there. Eric: [11:37] Well he's a Hitman he's a True Blood engineer so I mean he's he's right at that right at the hardware level and into coding and all of that so the industrial design. Was not his core competency so bringing in people that that could fill in, those areas and ultimately well they say 10 years later we brought color right but of course then we had great devices that worked really well but we're but when we look at industrial design, I would say that you know that's what's going to propel us over the next 10 years with with the Thinker charging. Scot: [12:14] Yeah it's been the you know I really like kind of the functional but still kind of modern kind of vibe you guys have with your products it's really nice is he still with the company is you still still involved. Eric: [12:27] Yeah yeah I mean I talked to him regularly he is very approachable. It's interesting because he shares his office with two other people at the company and it's kind of this kitchen table set up he doesn't have a private office, because there's so much collaboration and you look around the company we're all like that even though I'm in Seattle, and in my office I do the same thing with my team we just take some long tables and we connect them up and everyone just sits on them because it's like jazz we're just constantly. You know coming up with ideas and talking and it's just more efficient. Jason: [13:06] I do want a Lobby by the way I feel like you have some cool colors now you have like a like a lavender and a mint but what you really need is like a retailgeek blue I think would be. Eric: [13:18] Retailgeek blue yeah. Jason: [13:20] Yeah I could send you the PMS colors at that. Eric: [13:22] Okay yeah send me the Pantone colors yeah the, yeah I mean we I would think the colors are sort of muted so they're they're a joke they don't offend anyone so they're not they're not super striking their kind of muted across the color spectrum but so far they've been. They've been received really really well there's there's an old joke and consumer electronics that people are always screaming for color. And then when you look at the sales and you find it's the white and black that sell the most. So it's like you need to have the color but in the end most people end up choosing the the kind of safer black and white. Jason: [14:05] Yeah now I actually I'll be honest the style of the colors fine and actually think they are attractive kind of pastel colors but the it's just nice to have a diversity because I actually have a system like I have one color for my USBC cables. Eric: [14:19] Mmm. Jason: [14:20] One color for my lightning cables so that I can you know quickly distinguish them in my back. Eric: [14:24] You're not messing around man. Jason: [14:27] I have a little I have a problem. So I it's funny in the early days of these kind of digitally native direct to Consumer Brands there used to be this religious battle there were companies that were like. And the path to the customer through Amazon we're going to sell this stuff on Amazon and I would characterize anchor as the poster child for the most successful brand that was born. By primarily making themselves available on Amazon and selling through Amazon's traffic. But for every company like that there was another company that's like that's crazy Amazon is going to steal your customer and knock you off and they're all these you know potential, downfalls to Amazon and you know we should own the customer ourselves and we should have our own website and so increasingly that became the Shopify contingency and so it used to be, you know a company was either an Amazon company or a Shopify company. And more recently I feel like the increasingly the answer is not or it's and that. You know the consumers on Amazon so you need to be on Amazon but you also do have consumers that want to buy direct and you should have your own website and. My proof point for that is I want to say in the last year or so anchor has launched its own Shopify site so I now can shop anchor on Amazon but also on your own direct website is that like. [15:54] Like you got did you guys have debates and conversations about that and was that a very overt decision or is it just something where you just swept up a Shopify side at some point and you really still think of yourself as an Amazon only company. Eric: [16:07] Well there's a lot to unpack I'm going to I'm going to try to I'm going to try to find the question in that statement, the first of all we started definitely start on Amazon and one of the things I would argue about Amazon is that it is direct, so whether you're selling on your website you know or you're selling on Amazon you're ultimately. [16:29] Selling direct through the Amazon platform and you're engaging with your customers and your you know you're dealing with customer service and all the things you would normally do so I think Amazon has been a great partner and it is it continues to be definitely a big part of our DNA. But as we evolved into different regions around the world you know that there are different channels, that in our sort of different stages of development but the omni-channel approach meaning, you know in our case Amazon which is always a big part of us our own website which is great for Branding and direct connection and through our Retail Partners because in the United States were sold everywhere we're sold at you know Best Buy Walmart Target, Etc you can go to medium art overseas, so we don't see ourselves as just a single Channel we definitely are see ourselves is an omni-channel but I think you know Amazon is provide us an incredible platform to launch on, the ability the ability I think for a person that has a great product looking to sell something and any part of the world where Amazon is is so convenient and so easy. [17:41] And you know the financial Commitment if you're just starting out and you're Distributing your products the platform has evolved its improved. And it's ultimately pretty easy to get going on the platform without you know a tremendous amount of financial backing. Jason: [18:02] Yep and it is interesting because you have you know been a heavy practitioner on the platform from the early days in it does feel like it's evolved a lot. From your guys's perspective do you still feel like there's a. Competitive advantage in knowing the platform better than other sellers like it feels like there's a lot of levers to pull now and I mean you know different companies with different levels of sophistication in their Amazon presents. Why does everybody learning all the best practices now and they're sort of parody or do you feel like you guys can still kind of win more than your fair share of eyeballs on Amazon. Eric: [18:38] I mean we we've been doing this for you know for 10 years now and so they're the they're the tools and there's the Instinct and then there's the the lessons learned from the billions of mistakes that we've made, along the way and I don't know those things are those things are harder to I think grass for people that are just coming into the space so I think we absolutely have an advantage, but you know I mean I think it's not magic it takes a lot of work and a lot of patience, and a lot of observation, you know if you're putting a listing on Amazon and you're putting that listing in Italy or France or the UK or whatever, you know simply Translating that listing into the local language is just the bare minimum I mean you're dealing with customer service and being able to communicate. With customers being able to deliver products on time being able to answer their questions be able to take returns and then that's you know even before you've really thought about marketing because there are. [19:44] Something like nine million sellers on Amazon right now and that is a huge ocean, just filled and filled with Fish And you are you're battling against the the those eyeballs every day. Organic search or even direct search you're going to you know if you go up and look for toothpaste I mean you know, in the search engine you're going to see a myriad of players in there including you know ones that are common Brands to others that seem interesting and what's going to draw the eyeball away from the common brand that everyone knows too, the new brand what's going to make the consumer just try and reach out a discover you and take that extra effort so everyone going on to any platform, that may deal with a bunch of Brands is dealing with you know millions of competitors and it stopped. [20:39] I think getting set up on the platform and getting started is easy but that's that's you know that's step one, but then you got to get people seeing your listings and you got to get people reading your listings and you got to get people putting stuff in their shopping cart and clicking the shopping cart and, fulfilling and then you know being there at the end of that process to give them great customer service in every language, where you're selling that product because if you can't do that and that last part is critical, you're going to get bad reviews and people don't buy products with two and sometimes even three star ratings when you're dealing with you know consumer electronics they're looking for four and five. So you could have the greatest product in the world but you could have a lot of mad consumers out there where you haven't done right by them and they're not going to give you some great star ratings and you can pretty much. You know kiss your Prosperity goodbye. Jason: [21:33] Yeah I sometimes describe it as a. A darwinian meritocracy that like you know if you think about old school if you sell a product to Walmart and they give you shelf space and you screw up and run out of stock, you lose all the sales while you're out of stock but the day you restock your back on the Shelf your kind of entitled to that that shelf position. The duration of a program but you have to earn that visibility in the front of the Amazon shelf what every minute through a wide variety of best practices and if you screw up, you fall off that shelf and when you get back in stock you don't get your spot back you got to climb back up the hill. Eric: [22:10] Yeah yeah I mean especially now in today's climate there's a lot of. Material shortages and other things and that's been you know super painful for four people across every, line of business not just consumer electronics and that very same thing you know you're working hard to develop customer base and then, you don't have the materials to produce the products or the factories that you're working with and then you can't fulfill you been all this great marketing you brought everyone to your front door and then, grab we don't have any products, and that's it's painful to see for especially you know entrepreneurs and people new to the game because they have brilliant ideas and great products and. You know they've done an amazing job building word-of-mouth and it's super sad to see that fail at that last step. Jason: [23:03] For sure that actually is a great segue we're recording this in mid-november double 11 day just happened Black Friday is next week. As we sit here I think there's something like ninety one container ships off the coast of Long Beach either a bunch of cool new anchor products like trapped in those boats what's holiday looking like for you are you guys well well stocked and well positioned. Eric: [23:30] I think we are with some things and we could be better and other things I mean again we have the advantage of having a lot of skus so we I would say it's easier for us, to adapt, then than others and you know I can say from my perspective if I go out on a media to and September and I show a lot of really cool gadgets. And then we reach the end of October and I'm like well crap so that isn't coming we're going to we're going to delay that because of something it is what it is what we're used to it. But we have so many skus that you know we were Prime day or Black Friday or Cyber Monday or just basic Christmas shopping or Hanukkah shopping we've got something, so we can adapt it will get past it. Jason: [24:23] Yeah speaking of which I given that you're in the consumer at Rackspace is CES ordinarily a big part of your marketing mix. Eric: [24:32] I would say it is I think in the new world order it isn't as important for us. But we you know we've done Big Boost and we've done stuff and you know our sales teams of gone out there I think it's wait and see. This January we've done some some interviews with with media and I think we found that maybe forty percent of those that normally attend are coming, the rest are waiting and seeing we didn't do a booth this year I've also heard from our sales team that their counterparts at some of the retailers may not be coming in January as well. So I don't know is it going to be like a bad prom or nobody dances. I think we're going to have to wait and see I think maybe for many it's going to be a real last minute decision. Jason: [25:25] Yeah it's interesting I've attended like 28 CES has and I'm not going and, talking which I used to catch a flu at CES every single year so it's the I'm not care. I think Tom Clancy wrote a book where like the terrorist likes bedspread the biological Weapon by disseminating it at CES just for. Eric: [25:47] Perfect yeah I think it's you know I think people I think you have to have a vaccination card this time around to get in I think that's what I've heard but yeah I mean from point A to Z you know your. There's a lot of airplanes. Jason: [26:02] I'm kind of curious I think less people are going to but then the magic question is. Does that kind of will they discover that the world didn't end when they didn't go and put your point like does that accelerate the changing World Order and CES becomes less important or you know is this just going to be a down year and next year they'll be back to normal I think, that's going to be interesting to watch. Eric: [26:22] Yeah I mean there's CS is just the beginning you've got Mobile World Congress you've got aoife you've got you know as we move into next year and all of them are going to have to be making those tough decisions. And then I think that the repercussions of companies that didn't go in the world didn't sink either going to be wondering you know what are these what's the value of these trade shows. To us as a business you know I think for us they're valuable you know on the one end of the communication Spectrum it's super beneficial to scale our pitching by having an enormous number of people from all around the world in ones. But it's also very noisy so you know you're competing with a lot of large names. And we've always been very Scrappy so we tend to do a lot of are moving and communication before CES. And after CES or even entirely outside of the you know the wake of any of these trade shows. So and that's that's generally how we've been successful. Scot: [27:27] Brickell any other interesting holiday Trends or anything you guys noticed as we've kind of gone through covid and or kind of hopefully coming out the back side. Eric: [27:37] Yeah I mean I you know not to sound boring but charging is always a big thing during the holidays people bought their new iPhones people are buying new MacBooks people are buying peripherals. And you know around that time usually you know a couple of weeks later when they lost their cables already or you know they realize they won't one for travel and they wanted to stay home and they want one in their home office and they want one in the kitchen, so it's always a good time for us in that category, so charging definitely the other big part of our business right now is audio so our sound Core Audio brand, we develop a super popular line of true wireless headphones the Liberty series, and one of the things that makes it unique is we work with a bunch of grammy award-winning Engineers to help us tune them, so they would come out of the box sounding like the mix that the engineers originally in planned versus over based or over traveled, that's been really really popular for us all around the world I mean as far as India hugely popular in the United States the UK Germany, Emerging Markets that's a big thing and then I'd say home security that's been a big a big Boon for us we launched our home security brand yuffie about three years ago. [28:59] And you know we're developing a lot of unique products in that space that separate us from the rest for one we don't we don't use the cloud when you buy the product at your. [29:12] All of the footage is captured on a secure SD card that's integrated either into the base station or the independent products that you put outside the house. Which is really cool and we have millions of users around the world right now, using that product because they see it not only is protecting your security but also their privacy. [29:32] You'll see a lot of people do personal gifts to themselves during the holiday so a lot of those those big, tend to be you know people in a house saying hey how about we get this for ourselves for Christmas, and and we recently launched a super-smart robotic vacuum called the X8 it's are you fee robotic vacuum. That's super smart so instead of bumping into walls and trying to figure things out at uses both Visual and Laser mapping. And will actually draw up a map of your house that you can look at on your phone, and see it's how it's found the most ingenious way of cleaning around chairs and couches and other things and making sure that it can do everything and then you can create zones, I didn't say well I just want to let stay away from the baby room because the baby's sleeping but you can clean this Zone and that zone and this Zone. That's been really popular and we had been doing kind of lower in robotic vacuums until that point. Entry level and this was one of our first push and super-premium summarize forleo some but that LeapFrog, so in the beginning we might find Our Place coming in as as a lower-cost alternative that still is super quality, and then with the X8 we're doing the LeapFrog moment and trying to jump past the competition with the technology. Scot: [30:59] Frankel, so one of the things we want to do is Pivot you guys have some other innovations that are not gadgets or charging or anything like that, you guys launched a new division that both Jason and I were excited to learn more about called ocean wing. My guess was it was drones but I think that's wrong tell you tell us more about what ocean when you. Eric: [31:24] Yeah so I say first with the title but when I first started working with anchor Innovations in the United States over four years now, I was actually working for ocean Lee that was our that was how we presented our Corporation, and the the story is that it was ocean Wing to essentially take our technology and fly across the Pacific or Atlantic Ocean and bring it to the United States. So when the idea came up of developing a Consulting business, under anchor Innovations the ocean Wing name came up again and simple it's actually makes a hell of a lot more sense for this than it may have Hazard LLC in the United States when we were bringing anchored to the United States. [32:14] But long story short we established in 2019 so we've been around awhile we have about 200 employees around the world. And the long and the short of it is that we're trying to take the the decade of experience that we've developed. Again with all those mistakes along the way to become you know the 7 billion dollar, consumer electronics company and give people an option to improve their business lines, so that's from the beginning to the end of the process and what we're looking for is companies that have already gone in and let's just say made their first 10 million, and they've hit a wall. [32:55] Because they haven't been able to expand the business or scale either through supply chain issues through fulfillment customer service maybe the advertising has become, complicated and convoluted because they've developed so many skus there's just so many problems that when someone reaches a certain point and they want to get to that next 10 or 20 million dollars when they're doing business, it's a different skill set, you know what they've done is worked it to a certain point and they is try as they might they can't get past that threshold and that's where we come in, so we're developing essential overall Amazon selling and operations processes that could be digital marketing marketing insights, advertising management helping them develop their Brand store and their product pages to customer service and relationship management which I mentioned earlier is. Reticle to get those star ratings in a good place through good authentic communication with your customers in a great experience with the products. [33:59] Obviously e-commerce and all the financial systems, and then what we're dealing with a lot these days is supply chain and Logistics management so you get yourself to a certain point and there's a lot of people that are coming to us and that is the area, where they're really hurting the most and they need help they need help developing new contacts new supply chain partners, for how do I deal with the issue if you're dealing with something that might spoil like we're dealing with a company that, deals in collagen and when something spits on one of those tankers out in the middle of the ocean for too long when it arrives in the warehouse, it's past its fresh state so you've just lost all that inventory so each client is unique, but with this kind of broad scope of things that we can help them with and we can help audit the business and hopefully help them transcend whatever's keeping them from moving to that next 10 and 20 and 30 million dollars. Jason: [34:59] Very interesting so going back to our earlier conversation this is sort of a way for other young young Brands to leverage all the expertise and skills you guys have have built-in staying on top of this ecosystem. Eric: [35:14] Exactly it's an opportunity for us to take what we've learned and apply it to that young brand I couldn't have said it better myself. Jason: [35:22] Yeah and it at this point is ocean Wing primarily focused with Amazon distribution or would they also leverage all the other distribution channels that you guys have expanded into. Eric: [35:36] Yeah I mean I think I think our sweet spot is definitely FBA so specifically Amazon. That is not to say that we can't help them with other things like supply chain and Logistics but for us, it's a recipe and you know where we've had our success with the clients have come in or people that have been focused on Amazon and then we can kind of look at what they're doing and we can evolve the recipe a little bit, and and get it all the ingredients in place and help them be successful because they all work together, so but I would say Amazon is definitely our primary focus right now at least dealing with businesses that are on Amazon that isn't to say that these businesses are you solely focused Amazon because they're not but Amazon is a key Channel especially if they're going globally and that's where we come in. Jason: [36:31] Got it and obviously over the last year there's kind of been a lot of Buzz around these I'll call them FB a roll ups where you know these, these companies have raised a bunch of money and they go out and acquire Brands and aggregate them and try to help them with their Amazon presents and we you know we've followed thrash Co and perch and, and all of those is, is this kind of your version of that do you see your value prop being different than those other companies or is it just that you have. Sort of more experience and and product scale than some of these companies. Eric: [37:05] How to say this without sounding like it like it's not a jerk but the again we this is what we do, this is how we built our business so we can take. The lessons learned the hard ones too and we can apply it to our clients and I think that alone is super unique that we're a company that's already done this and you know in spades, and now we can apply those learnings to irregular company the other part of it is that most consultancies are focused on Consulting, and but we're a consultant that actually you know rolls up our sleeves and gets into the nitty-gritty of the business and helps and and and that's really depending on the level of the contract or the engagement but you're not only dealing company that can come in and, say some pretty words and show you a powerpoint of what you should be doing, but you know we've already done it and we can roll up our sleeves and get deep in there with you and help you do it or do it. And then that last part in terms of supply chain and and Logistics and you know dealing with manufacturers around the world or suppliers and stuff I think that's a definitely a secret sauce because of our relationships. In China and around the world that we can bring to bear that others can't. Scot: [38:23] So I'd be remiss as the entrepreneur on the show if I noticed in your bio on LinkedIn you have written a book and it's very much in my wheelhouse it's called get funded the startup entrepreneurs guide to seriously successful fundraising I wish I'd had this 20 years ago but I'm glad it exists now tell us tell us about this book and how it came to be. Eric: [38:46] Well my writing partner John Biggs is a little bit of a media icon we've known each other for I think I took them on a media tour maybe 12 13 years ago and. [38:58] We just became very good friends and our families have subsequently traveled the world with each other and we just kind of dig each other and we both have the same kind of sense of humor and sensibilities. [39:10] A couple of years ago he reached out to me that he had been approached by McGraw-Hill to write this book, and thought that I could help provide sort of the second part of the book so the book is broken out into two parts one is is about financing but written in such a way that whether you're trying to develop a taco truck, or you know a retail store or something else what are the different options out there from let's say SBA Loans to even using cryptocurrency, 22 you know set up fundraising all the way down to the meetings and how you value the company how do you pitch people, how do you put presentations together, so very very very this is not this is for the person that was really starting out with very limited knowledge, on the fundraising process and how do you present yourself at the end of the day so John really focus more on the fundraising side and I focus more on the presentation skills, how to pitch how to talk how to prepare how to answer questions the technical aspects of doing a presentation when everything goes wrong. Obviously if I could if I could rewrite a whole section on this now since the book was published last year in September I probably be a whole section on how to pitch during covid because that was. [40:35] That was definitely not it was not a reality when we were writing the book but it was definitely a reality by the time the book was published and I hope and we've heard, the people the industry has adapted that investors and seed funders and people are hard at work and investing but, for the person that might not have the background in this I still think the book for evaluating your company, getting all your ducks in a row building your presentations and how to pitch is still very valuable. Scot: [41:12] Very cool yet this kind of books I think they're kind of Evergreen and it's kind of a little snowball kind of effort so be patient it'll it'll catch up. Jason: [41:22] I am curious it does feel like there's a little bit of a disruption in the fundraising World why you know there for a long time there's this kind of traditional VC path, and obviously there's still a lot of money that flows through that path but I feel like the the role of Angel Investors and sort of other untraditional fundraising. Is becoming more common than it used to be like you guys try to cover that those kind of approaches in the book as well or is it mostly focused on on moving through Sandhill Road. Eric: [41:52] Well it's we wanted it in some ways to be the antithesis of Silicon Valley so for those people that are going down that road you know inevitably they're going to partner up. Let's say at the app generation. They're going to partner up and kind of go down that road our book really tries to focus everything from the pros and cons of using your own credit card friends and family, crowdfunding as I said SBA Loans if you're a minority or women owned business looking at options they're looking at. Prices and options like through FedEx has a great program for entrepreneurs and trying to cover the whole gamut, so we could make fundraising more reasonable and open to the entrepreneur is opposed to. Yeah the tech bro going to Silicon Valley and looking for for someone's bill. Scot: [42:45] Awesome I had one follow-up on Ocean we just took kind of clarify it for listeners you guys are your kind of more in the agency side of things you're not going out there and finding, new brands that are also born on Amazon and acquiring of in kind of rolling them up like the thrashes of the world is do I have that right. Eric: [43:04] We're talking about anchor Innovations right. Scot: [43:07] Yeah the ocean Wing synchronization set. Eric: [43:12] Well on the ocean on the ocean Wing side it's definitely consultative but I mean those things are going to evolve as the business comes in and I don't know if you mean like Financial stakes and the business and stuff but. I mean who knows right if if something came along that looked amazing and a great partnership I'm sure we would consider that. On the anchor Innovation side I think you'll be seeing and you know in the future probably incubator initiatives and things like that, it would be to me it would be a personally exciting to get involved in as seeking out and finding you know exciting. Developers all around the world we tend to be very myopic here and look at the United States as being, where everything's happening and I'd say you know maybe from apps and things like that might be true but when you're looking at Innovation and medicine or innovation and Robotics or innovation and Farm Technology or whatever, you really have to look outside and around the world and you're going to find that Innovation and really unique an unassuming places. So is is if we do get into more ink you know becoming more of a global incubator, I would imagine in our direction would be all over the place and looking in places like India and Africa and you know wherever cool things are being developed. Scot: [44:34] Cool so no almost boundless growth opportunities for you guys it sounds like an exciting time. Jason: [44:44] Well this is certainly going to be a exciting and different holiday season and this is going to be a great place to leave this conversation because it is happen again we've Perfectly Used up our allotted time, But Eric we really appreciate your time and enjoyed hearing about anchoring some of the exciting new initiatives there. Eric: [45:05] Thanks God and thanks Jason. Scot: [45:07] Yeah if anyone wanted to follow you or you are you big on Tick-Tock or I said it's usually or Twitter or LinkedIn or you publish their and then where should they go for some good the latest Anchor Information. Eric: [45:22] Someone can connect with me on LinkedIn my focus to be quite Frank with you as I'm So Married to my work as I tend to focus my communication through work as opposed to myself. I think it's one of those things when you work in Communications you got to be careful about what use you say. So mostly I'm just talking about my company in the things that we do. Jason: [45:49] Awesome well we will put a link to your LinkedIn profile in there and certainly some links to Anchor and until next time happy commercing!

    EP279 - Amazon, EBay, Shopify Q3 Earnings

    Play Episode Listen Later Oct 29, 2021 58:08

    EP279 - Amazon, EBay, Shopify Q3 Earnings  In Episode 257 we talked about IDFA and the impact of privacy and digital ads, and then on Episode 277 we talked about Supply chain pain (SupplyPain™). Now that we're in Q3 earnings season we're seeing those themes play out. This week we dive into the earnings calls from Snap, eBay, Shopify, and Amazon. We also discuss the Rent the Runway IPO. Episode 279 of the Jason & Scot show was recorded on Thursday. October 28th, 2021. 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: [0:00] Welcome to the Jason and Scot show this is episode 279 the Halloween edition being recorded on Thursday October 28 2021 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:18] Hey Jason happy Halloween. Jason: [0:21] Happy Halloween to you too Scott are you a big Halloween guy I kind of imagine you are. Scot: [0:26] Am I like to dress up but once my kids became teenagers that was suddenly not cool so I haven't been dressing up since probably for probably like the last few years so. If you dress up for your son enjoy it while you can. Jason: [0:42] Come over and spend it with us Steven is happy to be your dress up beard. Scot: [0:47] Yeah he would have a Darth Sidious outfit and work to the channel visor Christmas party and scared all the look it's so so I don't do that with five and under. Jason: [0:59] Yeah you probably weren't invited back to your own company's Halloween party. Scot: [1:03] Yeah well a lot of times the wives didn't know that I was so sorry. Jason: [1:06] Yeah but the other way to think about it is that it's Christmas in October both because retailers are desperately trying to pull holiday sales and but also because Apple finally release the new Macbook Pros that you and I have been waiting for. Scot: [1:20] Yeah yeah we had some Getty conversations about that you've got the new chips and yeah and you know the Apple, the Apple launch events have gotten kind of weirder and weirder with covid like now it's like you know Tim standing in a Tim Cook standing in a giant corn field then the the camera flies around like a crow and so so those have been kind of fun to watch just for the theatrics of they're going through. Jason: [1:47] Yeah yeah no the production like despite the fact that it's all pre-recorded and stuff and you know the the production value is pretty high I I'd like to see him go the other way it should be like Tim Cook in his pj's in his kitchen being like Oh and we invented a new chip. Scot: [2:02] I miss Johnny I've saying aluminium this my favor. Jason: [2:05] Yes and as you may know aluminium is dramatically more expensive than aluminum. Scot: [2:11] Yeah and chamfered edges. Jason: [2:13] Yeah all that's gone now it's just a chunk of aluminium but I'm excited to get mine I have a little jealousy because I feel like we both ordered early on launch day and I think yours already shipped is that true. Scot: [2:29] Yeah it's somewhere on a plane from Shanghai right now I hope according to the the tracking number we'll see. Jason: [2:36] Nice nice I will be excited for your unboxing and I half expected that when you jumped on the, the conference call to record this one that you'd be wearing like a Versace like jogging suit or something because my my Google Alerts have blown up this week because get spiffy is on fire. Scot: [2:56] Yeah yeah we had a big week it's few we announced our Series be fundraising so that was a lot of fun, I think I had a record LinkedIn post I think I had something like 300 comments and so those those good it's always. Yeah it's been a kind of a crazy 18 months for us and I can definitely commiserate with our retail folks that are going through harder times now we had those common being the pandemic but got through and. It's been crazy we've since March our business has grown like eighty percent so it's been like this crazy post covid-19, perfect storm for for Mobile Car Care Bears, you have no one can hire anybody but we've been able to kind of squeak that out and then no one can get new vehicles so they're running their vehicle Vehicles longer, they don't have anyone to take them to brick-and-mortar service centers they don't have mechanics to hire so they call us if so that's been it's been a lot more fun than this time last year. Jason: [3:54] That that is awesome I'm going to assume the one slight negative is you get some good news like that you get all those those post cooking on LinkedIn and I'm assuming, every vendor under the planet has I read your news and is now pitching you for something. Scot: [4:10] Yes yeah I try to forward them all to you because, there's a lot of Executive coaching out there available that you know maybe you could use a lot of video stories a lot of AI chatbots you know I don't know how on Earth we have, the world can sustain at least a thousand AI chatbots but there are a lot of those out there yeah when trick is someone told me, if you put an emoji in your name on LinkedIn the Bots pick it up or get confused by it so that that helps give me an automatic filter so if someone kind of uses that emoji when they're kind of like hey Scott and that you know they put the Emoji then you know that it's a bot so that I just delete. Jason: [4:54] Oh my God this episode of the podcast is now like officially worth it just for that that's a pro tip. Scot: [5:00] Life hacks yeah I'm here for LinkedIn life hacks that's my that's my speciality that and saying aluminum. Jason: [5:08] Those are all good skills but congratulations I know it's non-trivial ever to get people to have their trust in you and invest and then in this climate in particular I'm sure. It was a rigorous process. Scot: [5:25] Thanks thanks and we actually added the folks at Goodyear Ventures so shout out to them I think some of their e-commerce folks listen to the show so appreciate their support. Jason: [5:34] Nice A wise choice in podcast as well so any e-commerce stuff you follow this week. Scot: [5:42] Well it has been probably one of the more interesting weeks in the land of e-commerce for a while so listeners will remember that you know. We were recording this in October so this is always an interesting time to read what's going on in the Q3 results which kind of sets us up for Q4. So we always pay particular attention during this time of year. But if blisters remember back in March of this year you and I I would like to say and I think if we voted on this would be unanimous we're basically Clairvoyant Nostradamus level of predicting things. You and I both kind of felt like the industry wasn't taking this idea if a the Apple privacy changes coming to both iOS what is it 14.5 and then later 15 added some more. It didn't seem like anyone was taking that as seriously as you and I kind of felt like it was going to hit him so he did a really big deep dive on that that's one of our more popular episodes that's 257. And then into 77 you and I again being The Clairvoyant Wonders that we are we started talking about the supply chain being way worse than folks thought it were in coined Supply pain. So we are now starting to see those two things Collide in really interesting ways that I don't. [7:02] You know I think our guesses that those would be bigger than people thought on it came true so let's walk through what that. The first one was Snapchat so they we don't usually cover them on the show but I think it kind of sets the tone here they started off their earning Seasons last week Thursday on the 21st, and they just totally whiffed on their expectations and I thought it would read this little segment from from one of the Wall Street. [7:30] Analyst. While snap was clear that changes have not impacted the efficacy of their advertising iOS 14.5 is limiting direct response advertisers ability to measure and optimize campaigns on Snapchat. Leading to reduce spending on the platform specifically the update was pushed to users in July blah blah blah blah and it restricts the advertisers ability to use their measurement tools. So basically used to be able to measure what was going on in Snapchat and you know and because it's in an app and that's largely the use cases inside of the app for advertisers they have no idea. Traffic is converting or not so that's not good especially, you know and then advertisers are into buckets you know this but just for listeners there's brand advertisers were just kind of top of the funnel building awareness in just really trying to be seen and what not, and then there's more direct response where you're really trying to measure you know I'm selling in Snapchat Maps I'm a convenience store and I want people to come in and get a slice of, and I'm measuring that conversion that just went away so that big segment of advertisers is very upset. And what Apple did is they offered this alternative I don't know the right way to say this but it's their own ad that work how do you how do you say. [8:47] Gad Network Scott ad Network I don't know I'm going to call it apples ad network but that's not the official name. So Apple said okay don't worry everyone we're going to do this privacy thing over here but we're going to give you these little tool sets so that your advertisers can see what's going on. Well those things really stink worse than anyone I ever imagined because you know they. Because they're super anonymised you have to have you have to be at this really big scale so if you're kind of a micro let's say you're not 7-Eleven your Joe's convenience store, well in Des Moines Iowa well you're never going to have enough data in there to give you anything so so it doesn't work for this vast segments of advertisers I think everyone was surprised by that, then if it does work the reporting is delayed as much as 72 hours so it's like what happened last Thursday kind of thing, so it's just a total train wreck and then on top of that to kind of pile on, snap said in addition a bunch of their brand advertisers turned off because, they just don't have any products they can sell because of the supply chain problems so so it was a double whammy for snap and the stock Plum old plummeted like, 10% the first day and has continued to slide and so it's down 20 percent as of now so that was that got everyone really squirrelly and spooked out. [10:16] What is your take on the Snapchat side. Jason: [10:18] Yeah no I mean you I think you covered it really well like in general there has been a trend where more ad dollars are shifting to more of those direct response ads so the fact that like that's the. [10:31] The side of advertising that got diminished was like extra severe because you know people were generally trying to spend more money at the bottom of the funnel than, then they had in the past these digital, platforms and especially after Google and Facebook they the bulk of their advertisers are the long tail Advertiser so they tend to be smaller people that are more impacted by these sort of like cohort models that, the Apple and Google are trying to use, um and I would just say like there is a funny thing here like the attribution always sucked and it best it's this last click attribution someone saw your ad clicked on it and then bought the thing. And so therefore your ad was worthwhile you never will know if you would have sold the thing, without that add right and they may very well have like type your name into a platform that then showed your ad right above your organic listing and. You know the the ad kind of stole the click right so. So you know there always is this dirty little secret that like attribution is not the same as incrementality. And you know now like these advertisers that used to be able to justify their spend are having a harder time because of these numbers but the other thing is mucking up is about 73% of all these digital ads are programmatically bought so. [11:56] Computer program buys it and guess what the most important impart inputs are for that programmatic algorithm its, those those ads success metrics so the fact that is delayed 72 hours it's not just an inconvenience that you know someone buying an ad isn't going to see a report for a couple days, it means you can't do this real-time bidding based on like you know hitting particular row as goals and things like that with your at so, it is a mess I would just say you know snap and Facebook you know used to be a huge competitive advantage that the bulk of their user base was in this mobile app and you know the fact that everything happened in the app was a huge benefit and now it's. It's unfortunately for them sort of biting them in the in the butt. Scot: [12:40] So so that got Wall Street very much awake about this issue and many of the reports were like we just don't know how bad Q4 is going to be because, you know iOS 15 is now out and it increasingly has turned the crank on privacy this one is really more around the efficacy of email marketing, but if you're if you're a brand you have you know and used to do a ton of direct response advertising and snap and, you know you're doing a bunch of email marketing you've just had two legs of the stool kind of taken out from underneath him so. This got Wall Street very worried a lot of the stocks kind of reacted and then that was kind of the set up this week so then we hit Monday of this week, and Facebook was next up and everyone was like losing their mind because if you think about Snapchat is largely used through the app on phones same is similarly true Facebook at least has some desktop traffic. But I believe snap doesn't have any it's just an app yeah it's got to be snap. [13:41] Sermons like okay this is going to be bad but how bad so Facebook came out and they miss their consensus numbers but they were in range with what they had kind of guided to so I wear a snap kind of thing just totally blew up everything. And then they also kind of lowered going into the fourth quarter and so there was kind of a little bit of collective sigh of relief that was like who that wasn't as bad as we thought it would be. [14:08] And they kind of said oh yeah and also we're going to change our name so everyone's like what, okay but then they did they didn't change their name at that particular time so that was kind of weird, so everyone is kind of like what is this and you know they are obsessed with this idea of the metaverse we should probably do a deep dive on this at some point but this this idea that, you know you'll kind of be able to go in and out of the seamless 3D World either with augmented reality or virtual reality and, Jason I love to talk about this future things but don't have time to get into it here, so everyone was like okay that wasn't so bad and then on Wednesday both eBay and Google announced Google surprise to the upside and, you know I believe this is because they are they own a phone platform they own a browser, so in this new world of third-party data kind of going away they're in a pretty good position because they have a lot of first-party data. Now they do have some exposure you know especially through like their ad networks and stuff but they were able to mitigate that through the bulk of their other activities. [15:18] So so that was interesting and then reading that report one thing they actually called out was that they one of the segments that was stronger than anticipated was the kind of called it e-commerce and that encapsulates. The traditional Google shopping that most merchants and brand folks will know, but then they talked about how they're having their starting to see a fair amount of success on YouTube and it wasn't clear to me I was going to ask you it wasn't clear to me what exactly they were talking about their they didn't they didn't elaborate, no is it live streaming is it some product, I think you can send a feed into YouTube now and how things bought through there so I wanted to pick your brain on that Google aspect of. Jason: [16:01] Yeah no it is getting a lot of traction and it's a there's a family of AD products on YouTube called YouTube shoppable ads and it. It's less about live streaming there's a tiny little bit of it on YouTube that's why I've streaming but it's it's being able to embed clickable links in video streams and then add pre-rolls for other people's video streams, the let you endemically buy a product and so the and the. You know the the amount of volume on those kind of add products versus like a product listing add on Google searches lower, um but the efficacy is much higher and the growth rate is is much higher so people are consuming a ton of minutes of a video on the YouTube platforms and you know now we're starting to see. Tangible examples of being able to convert those audiences into buyers so that's that's kind of interesting but it's less live streaming and more. Sort of you know embedded links in the video that that either do an endemic check out on YouTube or send you to a Retailer's e-commerce site. Scot: [17:15] Yeah yeah I definitely want to dig into that maybe we could do a deep dive on another show and kind of look at some of these cases I think it's interesting so then everyone was like holy cow this is this is awesome Google did great and then eBay announced and their their results are kind of what I would call, Punk they're just kind of like yeah you know they they weren't terrible like Snapchat and one of the nursing things is Snapchat set the bar so low that people missing consensus kind of was like, almost like a hooray it was a really weird setup I've never seen anything quite like it so it's kind of an interesting result there, so you know being being not terrible as kind of the new win oddly enough, so there gmv was down 12 percent year over year because of these tough comps, and you have a picture maybe we can talk about where you know you see this mountain last year of, do the pandemic and now women's comping against that mountain and a lot of folks especially, Pure Play anyone Pure Play retail they're not able to compliments that they're coming down their growth has slowed below to kind of where that mountain of growth was last year and eBay has fallen into that trap. [18:26] They did spend a lot of time on the call and I thought this was, Clairvoyant of you that kept talking about comping against 2019 so kind of a two year ago comp because that takes the pandemic out and makes you look better when you take that big mountain of a year Outlast in kind of in the sandwich of, the 2019 in the 2021 and when you do that they were up 9 percent so they felt like that was kind of when I don't know about that. Jason: [18:51] Yeah if you do a word cloud of all the the earnings calls this quarter two years ago will be the biggest phrase on the word cloud. Scot: [19:02] So then today was interesting because the setup was and I don't think this is ever lined up like this so in the morning we had Shopify and then in the evening we had Amazon, and when you when you when you're a public company you have to you can't you can't announce earnings while the markets open most people historically have done, you know after market close Shopify for some reason they like the morning, part of it is I think you don't compete with analyst for their time because sometimes these internet analyst. You know like on that night we had Google and eBay they'll go to the what'll happen is they'll see the press release and I'll have to decide which one of the calls they're going to go to. And they'll say they all go to Google well now you're the eBay folks in your like does anyone have a question and it's crickets and there's no Wall Street analyst. It's kind of there because they're they're all over on the you're competing for their attention, so yeah so so it creates this interesting setup in that like around eight o'clock before the market opened 8 a.m. eastern Shopify announced and this one was really super squirrelly so. Shopify has been priced for Perfection for a very long time if you look at the various ways of measuring you know they're there. [20:18] Valuation against Revenue multiples of Revenue or ibadah or any of that and you look at a chart there always way up in the upper right hand corner just way off the charts and how Wall Street has valued the. So you know so they actually came in below expectations pretty considerably on the top and bottom line. But again because of that weird Snapchat has Snap Chat setup. It was viewed as a victory which is kind of really strange because I would have guessed. Because Shopify has been so price for Perfection they were kind of set for like a ten to twenty percent correction and then you know they would get back on track, but no they were like up 8% by by missing their numbers says like super strange reaction I don't hundred percent understand. So so I think what it indicates is that folks you know Wall Street was like really worried about it because, again they don't have a ton of they're there their merchants, largely our advertising that could be like a set of these these Snapchat advertisers or they're on Facebook and those guys had headwinds and it just felt like it would be natural for them to face. [21:28] So just put some numbers on it their revenue grew 46 percent year over year and Wall Street expectation was 54% I think this may be part of it too right because, this dismiss is still, pretty pretty good compared to some of the other numbers we just went through right so a 46% grower missing 54% expectations during these tough comps has as it's not hard to shed a tear on that. [21:53] Now they did they did kind of danced around i d f a and supply chain and and for the first time that I'm aware of the client to put out a consensus like an estimate for next year and they kind of talked about a framework. Um so I think and the other trick is if you think about it they're doing that call today which is the 28th right. So in their their digital business so they should have they have a kind of a read on the quarter so so I kind of felt like the body language was maybe that. They're not the setup in the queue for is maybe getting a little bit worse than Q3 but I may be reading too much into that so I thought that was interesting and then, they did talk about the supply pain, and then finally one of the big investment areas they called out for holiday is this Shopify fulfillment Network which I thought was interesting because I keep getting conflicting information on this where I've had people tell me they've got one thing in Canada and one of the US and they're tiny and they're not investing in it then on the call they're talking about how they're really investing in it so I don't I don't know what to make of that. Any takeaways from Shopify on your side. Jason: [23:02] Yeah well if you so first of all I have a personal theory that shopify's going to be more impacted by Supply pain than some of the other big players were talking about right and that's because, they don't, they're not a retailer they don't have any fulfillment they don't sell anything to Consumers they're just an aggregation of a ton of small businesses and there's none of those small businesses individually have any leverage our resources to hedge their supply chain problems whereas, Amazon and Walmart have a lot of levers and can buy ships and moved to different ports and do all kinds of different things to mitigate, the supply chain risks and so I I do think because they're predominantly small businesses that they're going to take a bigger hit from the supply chain disruptions then. Is Amazon so Point number one the, I looked at their gmv numbers and and I have to say like in general I'm a fan of Shopify I think they solve a real problem they do it really well I think they have a ton of growth opportunity, I think they've got a bunch of smart profitable. [24:14] Accelerator businesses that they've you know kind of added to the the core platform and the one I like the most is shop pay, and you know their own payment technology is now driving 50 percent of their whole gym V so they've done a terrific job of watching this this payment technology and getting incremental revenue from that and that's you know that's much more valuable than the, thirty bucks a month or two hundred bucks a month they get for hosting because as those the small businesses grow they get to grow with them and all sorts of good things so that's my precursor, um I hate it when people compare their gmv to Amazon and other retailers because it just it's not Apples to Apples. [24:56] Shopify is gmv mostly grows because they add a hundred thousand more small businesses that are each selling a hundred thousand dollars worth of stuff right and so it's, it's not like Shopify hasn't attracted any customer Shopify hasn't sold anything it's kind of like if you said well FedEx is gmv is bigger than Amazon's or ncr's GM V which is the cash register in Walmart and Best Buy and Starbucks is much bigger than Amazon like it is but who cares right like they like NCR didn't create any of that traffic so. Let me just say like there are all these numbers where their cumulative GMB is getting very significant it's over 400 billion their gym V4 last quarter was 41 billion so that puts them at like. Was that a hundred sixty billion run rate which you know is starting to get there as I like the fourth or fifth largest e-commerce site, um and I like I think that's a false narrative that always annoys me a little bit. Scot: [26:01] They had their on CNBC and they have this stat they like to do where it took them eight years to get to a hundred billion and then a year to get to the next hundred billion or something I forget the number but. Jason: [26:12] So one one side note that the thing that always drives me nuts about their gmv as they don't give you any breakdown about churn right so you don't know. Like is that because all the their original customers are thriving and growing and making their GM V much bigger or. Did they lose all of those customers because they went out of business but they got twice as many new customers we really haven't known in their investor presentation this time they did have a cohort graphic. The kind of and it didn't have any numbers on it and you know so it's kind of hard to interpret but like. It implied that they're all cohorts are a disproportionate amount of their revenue and that their turn is less than I personally suspected, so I actually will reach out offline to Professor Dan McCarthy and see if he wants to accept the challenge of trying, to reverse into some some churn numbers from those Graphics that they provided. Scot: [27:11] Yeah that the trick they do in the software as a service world is they'll take a section of customers cohort like you know, Q 1 2019 customers and then the look at the revenue from that cohort well you could lose like eighty percent of them but the 20% survivors if they go up you know if they have sizable gmv growth their revenue swamps the unit lost of 80% that my guess is that's what they're doing. Jason: [27:36] Yeah and it's still for everyone listening it still is wildly long tail like they in this investor presentation they have a list of like the there there big Enterprise logos and it's Jim shark. Which is a. You know probably one of the bigger digital native vertical Brands but you know not not a billion dollar retailer and it's Staples of Canada right and like Staples is a good brand Canada is smaller than California so like. You know it's not like they're they're you know taking these huge Enterprise sites yet. Scot: [28:12] On CNBC they talked about how they just once Banks and that didn't really resonate with me I just can't imagine I don't know maybe it's like a side maybe it's like an international side or something. Jason: [28:22] Yeah now and I do think they have a ton of I mean they have a ton of growth in North America but the international growth I feel like is you know, huge for them and then all these payment things and, and you know they partnered with with a firm so they have buy now pay later in their payment echo system and remember, like you can now use their payment system for transactions that are not on Shopify so it's an endemic payment option on Facebook now and so it's interesting like in the long run they could get out of the web hosting business in just you know be a bigger more profitable PayPal. Scot: [28:56] Yeah sidebar there is a lot of rumors that house going to buy Pinterest and largely driven by this IDF a where everyone's trying to if you're at the bottom of the direct marketing World funnel all those people because of idea of a an unintended consequence I didn't catch up to Wood is they're all trying to walk up the to the the first party data which would be by acquiring Pinterest set very interesting you know I would say we were early. Jason: [29:26] You put in this but they came out strongly and allege that that wasn't true. Scot: [29:32] Yeah well it's interesting to Think Through like you know I do think that a lot of firms are thinking about this because the idea of a is actually causing maybe even bigger ripples than I thought. Jason: [29:43] In my world the way that plays out is everybody is like so focused on the retail media networks right so selling ads on the retail properties where they do have first party data, and it's a it's a very good practice everyone should be doing it but like. The amount of attention it's getting right now like how hot it is in the market like is way bigger than the possible upside and so you get like. Every you know Clarin as a buy now pay later service like they have an ad Network right I just like just for the the you know like if you use the clarinet app too, to maintain your installment love there there's like ads in there that they're selling to to advertisers and a personal favorite is the gap and the reason that's funny is like most of these ad networks are selling to their in what they call endemic advertisers right so if, Procter & Gamble is selling Gillette razors at Walmart than Walmart will get Procter & Gamble to buy a jet razor ad on it makes perfect sense, um guess what there is not at the Gap in the endemic for its first it's all Gap product right so they've gotta like they're going to get Kanye to buy an ad I guess but um, you know they've got to sell to non-endemic advertisers which is a much higher bar so it just funny how. Right there is a huge rush to first-party data right now. Scot: [31:09] You get a network and or you get an ad Network it's like Oprah giving out ad Networks. [31:15] Okay so that brings us up to this evening when Amazon released so it feels like everyone had kind of. We have breathed a sigh of relief and I was like oh Amazon's going to crush it and then Amazon and if you remember last quarter Amazon kind of had a bit of a mellow kind of slight Miss quarter. And you know the stock if you look at these these kind of there's all these different names for it like Fang and all this stuff but these kind of Mega tech stocks, a lot of them have been moving pretty aggressively so Microsoft Facebook Apple Etc especially Tesla and then Amazon has been lagging the pack and usually they're the leader of the pack so, yeah I think a lot of people were expecting kind of a beat and a Amazon to really kind of take off because it's been under pressure. That didn't happen so they actually missed expectations the revenues came in at a hundred and ten point eight billion which was below the hundred fifteen point five billion so 15% year-over-year growth which is, you know a very uh name has on Nyan kind of a result now it's better than, eBay is minus 12 percent but then again Shopify and I know it doesn't count exactly because they're adding scene for sales but you could argue I guess so is Amazon's adding third parties in here too, so it was it was a bit slower than people thought in Q2 they grew 24 percent so another big step down. [32:44] A lot of this is. [32:47] They're Mountain last year really because they focus on so many essential items and Q2 they really didn't get a bump until Q 3 q 4 so there they're comping their Compass actually harder than maybe like an omni-channel or even in eBay just because of the focus of. You have sung mask and what they called kind of Emergency Essentials last year. They peel the onion and they have this one segment called online source and that was only a 3% for the third quarter and that was a deceleration from 13% in Q2. And then this rippled to the bottom line where operating income came in at four point nine billion which was well below the 5.5 billion consensus, so that's the bad news and there was some good news do you want to cover some of that. Jason: [33:35] Yeah and side note is there a new thing called like. Like you know there are always these I'd beat and raised like you know vernacular for like you know you beat the consensus and then you you raised your guidance I feel like there's a new thing it's missing grow where like you miss all your consensus numbers but your stock still goes up. Scot: [33:56] Yeah that Shopify totally nailed that one has come very strange but they did it. Jason: [34:00] Um so yeah some of the interesting things in the in the Amazon number. I like to break down those segments you hit the you know the big segments online retail and it obviously. Had a pretty slow rate of growth by Amazon standards but an interesting subset of that is physical stores right so Amazon's got. Eight different retail formats the bulk of them is 500 Whole Foods stores and historically Amazon's physical stores is the one segment that shrinks every quarter right so going back to Q2 of 2020. Physical stores went down Thirty thirteen percent and then 10% in Q3 and then 7% in Q4 and then 16 percent of in q1 of this year and we're just we just got used to seeing that number go down and we all thought it was going down for two reasons, number one Whole Foods was kind of a distressed asset when they bought it and they haven't really improved it in any meaningful way some people would say they've. Diminished it and so like it probably is shrinking and it's the bulk of their the retail sales but then. [35:09] What Amazon has done for Whole Foods is help them sell groceries online and then of course the pandemic help them sell a lot of groceries online, but ironically Amazon doesn't count those whole food online orders as whole food sales they're not physical sales that that those dollars get attributed to Amazon online and not to Whole Foods brick and mortar, so if there's a big. Shift in mix from shopping and store to ordering for home delivery from Whole Foods that actually hurts physical retail sales so for all those reasons we're used to seeing that number go down, last quarter it bounced up ten percent and then this quarter it bounced up 12% so, I have to be honest I'm not exactly sure what's going on their part of it is e-commerce had such a big growth last year that comparatively, read the the rate of retail growth has kind of accelerated brick-and-mortar growth has accelerated a little bit and the rate of e-commerce growth while still higher than brick and mortar has decelerated so that kind of mix, you know maybe as favorable for the way Amazon does accounting for these stores maybe some of the other store concepts are, starting to get more traction like the Amazon Fresh stores perhaps I don't know but. [36:24] It's interesting to see that number going north for the first time in recent memory, of course everyone always talks about AWS being the profitable segments so they sold 16 billion dollars of AWS which was 39 percent growth which was an acceleration and growth so again, that's been kind of growing at 30% of quarter and now you know last quarter at Route 37 and 39 this quarter, um that makes a lot of sense the pandemic drove a lot more people to the cloud and online so you know it's AWS is firing up. [37:00] And then going back to the ads I talked about how big a deal retail ad networks are Will by far the biggest retail ad network is Amazon and they somewhat derogatory to me like Calder the retail ad Network other sales in the in their, and so this was their biggest quarter ever they sold a billion dollars worth of ads for the quarter which is 49 percent growth which is. Actually a significant deceleration Q2 grew at 83 percent right so this number is growing really fast. But the way to think of this is if you add up the last four quarters of their ad sales they sold 30 billion dollars worth of ads if you add up the last four quarters of AWS they sold fifty seven billion dollars worth of server services. [37:51] Think about the cost for that 57 billion dollars worth of server Services they have a bunch of silicone they make their own chips they pay a ton of electricity and they pay rent and people in all this stuff. In order to deliver that aw s right so there's a lot of cost for it to get that fifty seven billion dollars worth of sales. The the the cost of those ads is near zero right like. It's very well and so 30 billion dollars in ad sales I guarantee you is more profitable than fifty seven billion dollars in in server capacity sales and so, like its I said this last quarter but it's even more clear now that the most profitable business that Amazon is now. Um this this ad Network and in their their their investor call and he's sort of address that and he talked about the fact that like hey, we don't really. [38:49] I think internally of breaking out retail sales versus ads versus Marketplace because they are inextricably linked they all need each other, um and you know together they're a super powerful flywheel but like you know they basically recognize that like. Yeah you know we could break even or lose money selling Goods. When we're making a fortune on the 30 billion dollars of ads that we get to sell because of those goods right and and all the seller services for the marketplace half of their sales so. Like you know the the myth that that the retail pirate of Amazon's business is not profitable or less profitable than things like AWS like I think is. Is getting even more exposed and again all those those those businesses AWS and ads are are growing quite healthily at the moment. Scot: [39:42] Yeah it's interesting Colin Sebastian who's a good friend of the show and it's been on many times he pointed out for the one of the interesting. Parts of this quarter is for the first time if you think about Amazon having two pieces of product business and a service business so a Services would be a WS ads, this thing they call merchant services which is kind of FBA and some of the marketplace Revenue goes in there and subscriptions that is now for the first time the revenue from those pieces that quote-unquote Services pieces is bigger than product revenues for the first time ever, and you see it in these numbers right so online stores celebrated a couple other things accelerated but AWS and ads accelerated so it's a really interesting time where that that that kind of Tipping Point happened inside of there. Jason: [40:35] Yeah yeah for sure and then two other takeaways from the earnings call that I thought were Jewels they got asked because you talked about. Advertisers on some of these other platforms like Snap slowing down because of Supply pain right if I don't have products in stock I probably shouldn't be advertising those products, so they got a spike is other going to take it in the shorts and Q4 because advertisers are going to cut back because of Supply pain. Um and Amazon's answer was no that they're not seeing, people getting back on on ads from supplied pain they said like what is likely Gonna Hurt our comps and add sales for Q4 of this year is that Prime day was in Q4 of last year and that there's a lot of, add activity that's driven by Prime day so they said like you know what car comps. Four ads in Q4 maybe not as strong as they ordinarily would be but it's going to be because of the shifting dates of prime day not because. Advertisers are slowing down which is interesting and again Amazon's attracting. The long tail and the the head advertisers whereas like Snap is mostly getting long tail advertisers so. I found that really interesting and then Amazon also said like what. [41:53] Supply chains going to be really challenging and as a result we are incurring a lot of incremental costs but they were very strong that it wasn't going to hurt their revenue number that it was going to hurt profitability, but they felt like they had enough levers to pull and pull those levers, to ensure that they both were going to have enough inventory and that they were going to have enough fulfillment capacity, to deliver on that so they were super confident there and what they call that they said the the. Impairment that's going to be the most hard for them to overcome this quarter is not inventory it's not Logistics it's labor, right and that's the one that they felt like was the hardest for them to overcome is they've got huge turnover they're trying to hire a bunch of people and the cost to hire them are just you know skyrocketing because there's you know constrained pool of people willing to work and, and they're able to command a lot more for their their labor right now. Scot: [42:50] Yeah Jesse basically said that they're getting back in he she basically said I want to remind everybody this is a second quarter a CEO that one we have to choose short-term profit over long term customer experience we will lose money for for we will invest in long-term customer experience, Wall Street that is like we're entering into one of these investment phases usually they get kind of excited by it because usually ratchets, the orbit Amazons in up in the profit kind of spills over after about 18 months or so but there really wasn't a lot of enthusiasm this time so that was interesting, and then you know I mentioned the operating profit was about 4 billion their forecast for 4th quarter of the actually they do you know unlike most companies right now that are just like we have no idea what the heck's going to happen when I put out a fourth quarter forecast Amazon did, and they basically said the bottom line it could be between zero and two billion well that was like you know again that that's a very strong signal they're going to be spending a lot of money in the billions. And in fact they add a little color and said we see several billion dollars of additional costs related to and they put them in this order labor shortages higher wages, Global Supply Chain issues ETC but then they said they still need to hire 250,000 people for holiday and they're going to do whatever it takes because they won't be able to deliver and execute unless they have them. Jason: [44:14] He used an interesting metaphor he said like. That you know they just decided it wouldn't be customer Centric or in their long-term interest to raise prices or fees, and so he's like we really think of ourselves as a shock absorber and we are going to take the hit on all of these incremental costs for both our customers and our Marketplace sellers, um because we think in the long term that's going to strengthen the flywheel so I mean he was pretty like the you know there was not a lot of subtlety about the fact that like. You know it's going to there's going to be a lot of incremental costs to win this holiday but they're going to win the top line and not worry so much about the bottom line. Scot: [44:56] What else did you get from the Amazon call. Jason: [44:59] Those those were the big things one other thing that's interesting to me is. You know everybody's struggling to figure out digital grocery right now and saw the unit economics but there's this other tidal wave behind that that will call ultra-fast delivery and we've talked about a little bit on the show but they're all these firms. Go puff most notably but Joker and gorilla and all these firms like coming out with these. 30 minute or 15 minute delivery promises for a constrained set of products and one of the analysts ask Amazon like. You've always done really well against the your traditional retail competitors in terms of, of logistics but are you worried at all about these guys that are being like purpose-built for like a speed that's faster than your usual service level and it got a pretty arrogant answered I would say he's like. We really like our model we have a hundred and seventy eight thousand skews right now that are available for two hour or faster delivery and that's a lot more excuse to a lot more consumers than any of those companies. It was it was you know like I think obviously that is a space Amazons going to watch closely in play in but the. What's almost happening is they're just ratcheting up the service level for so many products I'm like when I you know Chicago is a advanced market for Amazon but when I put stuff in my cart now I get two options for same-day delivery. Scot: [46:29] Are you getting that like morning and then like there's like an insane one just like 4 a.m. Jason: [46:33] 4 a.m. to 8 a.m. yeah and it works like I wake up and there's stuff like at my front door. Scot: [46:39] Wow. Jason: [46:40] Pretty you know I wouldn't say perfectly but pretty reliably and so again like you know if I would have before noon there I have two windows often to pick. Products and I'm not having to go to some separate experience and Shop from some constraint set of products or things like that like I think the the universal experience in Universal cart and the move away from Amazon Prime now and all these separate experiences like, I do think in a way like Amazon is solving for ultra-fast delivery but they're just one generation more mature than any of these you know new companies. Scot: [47:14] Okay anything else there. Jason: [47:18] That is it on Amazon what did you have any other takeaways there's one other IPO that I thought was interesting this week. Scot: [47:24] Well then it was really weird because after the market closed we're all adjusting that and then Facebook's like hey everybody we're changing our name to Metta and then they put out this logo that looks like a warped eight on its side or like the infinity symbol that's been bent and you just look at it you're like I bet they spent eight hundred thousand dollars on that logo and you know there's. Jason: [47:47] Any amount of money spent on branding and Logo generation is well invested hashtag publicist. Scot: [47:52] Okay yes true true yes absolutely call Jason if you need new logo did you guys do that logo for. Jason: [47:59] I can neither confirm nor deny we did. Scot: [48:03] I love it sorry I love it. Jason: [48:03] Not because I'm being not because I'm being stealthy I just honestly don't know it's totally possible that we did. But I don't know but we certainly do a lot of great branding work including the Amazon logo so fun. Scot: [48:16] The chief the chief branding digital logo officer doesn't know what logos you're doing. Jason: [48:22] No but the way more talented people at Turner Duckworth would probably be able to tell us. Scot: [48:27] Okay cool what IPO did you say. Jason: [48:30] Yeah so have you been following their Rent the Runway IPO at all. Scot: [48:33] I have yeah. Jason: [48:35] Yeah so this is pretty interesting so. Digitally native company unlike a lot of the other digital native Brands that's kind of in the the re Commerce space right because they're they're buying a parallel and and renting it to Consumers, and they have been one of the the. Most hyped digitally native Brands because in general rental models can be like extra profitable you buy something once and you rent it a bunch of times, old Mentor mine Wayne huizenga used to do that with videos and he made a lot of money in that space and trash cans and other things. So it was interesting to both see their financials and then they actually have their IPO this week. So and it's a very. [49:23] I'll call it a bifurcated story so it's an 11 year old company they've raised over seven hundred million dollars in venture capital and their, wildly unprofitable coming into this IPO, so they lost a hundred and fifty four million dollars in 2020 they're forecasting to lose a hundred seventy 1 million dollars in 2021, um and of course they're in like the worst possible business case for covid right like they're they're renting apparel to women to wear to parties and to work, and two things no one did in 2020 is go to a party or go to work right so. [50:02] You know they historically they would have like hung their hat on having all this subscriber revenue and their subscribers basically got cut in half by covid their last 42 percent of their active subscribers the revenue drop from, hi in 2019 of 257 million 258 million in 2020 so covid really hit them. And you know you go man that it feels like they're kind of limping into the IPO and I want to talk about how that IPO went for them but two other interesting facts before we talk about that, one thing I thought was really interesting and and. Arguably like the one favorable thing and all of their financials is how they get the inventory that they're renting so, a catastrophic piece of news is that their inventory is way more fragile than I would have expected right so they they rent you know one of those garments six times and then they usually have to retire so they're not getting like. Tons of reuse about around each of these garments but thirty-six percent of their rental inventory. Is Rev share with designers so what that means is instead of buying it at the wholesale price and then them renting it a bunch of times, they're getting it free or at a very low cost from the design house and then they're sharing the profits with those those those brands. [51:26] That's frankly exactly how the video rental business grew like in the early days of Blockbuster we bought videos and rented them and later on you know we did rev share agreements with all them the movie studios and that. [51:38] Let you get a lot more inventory a lot more affordable. Um also surprising to me eighteen percent of their inventory is private label which I would have thought like a big part of the value prop of Rent the Runway was all these well-known designer Brands so I was surprised to hear they're able to get away with you know almost one out of four five garments being. [51:56] Being private label so that was interesting and then the last piece of catastrophic news is as bad as their finances look the accountants looked at it and threw up even more because, I mentioned that this inventory gets really perishable and and they have to throw it away well the what they did all their finances without including any depreciation of their inventory so, invented a new flavor of bike ibadah before inventory depreciation and you know those if you were to actually put the depreciation on their books. The those losses I just read to you would be even much higher so. So mostly like a pretty negative look at the company going into this IPO and then I want to say they did the IPO at 21 and immediately the stock went up and they hit a high of 23 and everyone's like wow in spite of all this horrible finances. They're having a big IPO and then as the day went on the price started dropping down and now I want to say it's about 18 18 bucks and 85 cents so, you know pretty significantly down from that $23 offer. [53:16] Like Scott in your mind is like let's call it ten percent like is that a. An acceptable IPO is that a disaster does it surprise you given their finances that they were able to do an IPO at all. Scot: [53:30] Yeah and you know one of the ways I look at it is let's look at the valuation so they're doing a hundred and fifty eight million ish last year and we don't have enough data this year to kind of know there haven't really materially improved since then so let's say let's be generous and say they'll do 200 million this year they're at a billion market cap so 5x for a business that. You know has all the kind of the negatives you're outlined there. You know the they're not getting as much use of the Garment as you would think I think our friend Dan McCarthy is at MacArthur, McCartney or McCarthy McCarthy yeah he he kind of picked apart their Co hard data and it looks like they have pretty high churn, yeah I actually think it was kind of a win because that's a pretty good valuation for this snapshot in time. [54:24] Pricing IPOs is tricky because you want to kind of price it where you get a little bit of a pop but maybe ten to twenty percent up, but if you get more than at the company you're kind of sitting there saying we just sold a bunch of stock at a discount and that wasn't great now the good news is your hopefully you know you haven't sold the majority of your stock so you sold maybe 10% and I have like 90% that's worth more so it's. It's you're not going to totally cry over it cushions the blow yet going down isn't isn't a good look and it doesn't Kate that know a lot a fair amount of weakness as people you know maybe they got excited and they're coming yeah I think I'm gonna I'm going to kind of limit my maybe they sold half of it you also and I peel you're trying to place the stock with people that will hold it long term so the fact is down means that didn't really work that people were just trying to flip it for a quick buck. Jason: [55:17] Yeah one other side note like a lot of people were optimistic for this IPO because this like re Commerce model like it's you know potentially better for the environment, and looking at the economics it actually ends up that this is probably worse than like buying disposable apparel from H&M because like the the reverse Logistics of moving this stuff around so many times and then like having to throw it away pretty quickly and like you know weaning into the fashion trends and stuff becoming obsolete as new trends emerge like it all it all netted out to like it wasn't a very favorable ecologically story either. Scot: [55:58] Yeah well we'll see a for effort. Jason: [56:02] Yeah I mean my big takeaway again like there's there's going to be some interesting digital native companies but like this this myth that that is fundamentally an advantage model and that all these companies are doing great like this is one of the companies a lot of before there was any public data available everyone's like oh I think there's a billion dollars and they've got all this sticky reoccurring rental subscription Revenue so they're probably wildly popular and their costs are super low because they're renting the same garment over and over again so I this is an amazing business and then you know when you get to look under the covers why no it's not so you know I just I would just say, you can absolutely build a good digitally native business but like it's not a good business just because you're a digitally native vertical brand. Scot: [56:47] Yeah one for listeners yet as you know one of my favorite hobbies is I really love to watch The Road Show presentations but they're only out there for like a week or so all birds is on the road right now so that one is available and you have to go to Retail Road and get from this list and watch it, it was one of the better ones I've seen in a long time the video they did the with the founders had like a cheekiness to it that was kind of unusual usually these. Jason: [57:16] Talking about the Auburn's one right because Rent the Runway is on there right now or was on their last week too. Scot: [57:21] Yeah it's on sadly it's faced off yeah the all birds one is really really good so I recommend folks watch that one and then I just saw that NerdWallet hit and I'm kind of interested to see how they talk about that one. Jason: [57:33] Yeah that has been entertaining TV I watch those videos on my my Peloton now. Scot: [57:41] Nice. Jason: [57:43] When I'm not listening to Amazon earning calls. Well Scott is happen again we have perfectly used up all our lot of time but hopefully people found some value in this recap and if you did as always we sure would appreciate it if you jump on the iTunes and give us that five-star review. Scot: [58:03] Yeah thanks everybody and until next time. Jason: [58:06] Happy Commercing!

    EP278 - Adobe Holiday E-Commerce Forecast with Taylor Schreiner

    Play Episode Listen Later Oct 20, 2021 45:18

    EP278 - Adobe Holiday E-Commerce Forecast with Taylor Schreiner In Episode 277 we covered some of the early overall holiday sales forecasts, and the issues likely to impact this holiday season. In this episdoe we get the very first look at Adobe 2021 Holiday Shopping Forecast. This is a deep dive on digital shopping behaviors based on Adobe Analytics, which analyzes 1 trillion visits to retail sites and over 100 million SKUs. We break it all down with Taylor Schreiner, Director of Adobe Digital Insights. Episode 278 of the Jason & Scot show was recorded on Thursday. October 14th, 2021. 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: [0:24] Welcome to the Jason and Scot show this episode is being recorded on Thursday October 14 2021 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-hosts Scot Wingo. Scot: [0:38] Hey Jason and welcome back Jason Scott show listeners we are smack in the middle of October and for all of our retail listeners you know what that means it is go time for Holiday 21 way back in episode 277 last week we talked about the supply chain challenges I like to call that Supply pain and we shared the e-commerce retail forecast from Salesforce Deloitte and beIN but there was one notable missing forecast from that list and that's one of our favorites the Adobe forecast well in this episode we're going to fix that hole in the universe we're going to fill it and Adobe is releasing their holiday forecast here on the 20th which is when we'll be releasing this podcast and we are really excited to have with us today Taylor Schreiner he is the director of Adobe Digital insights and fun fact this is adobe's fifth time on the show Welcome Back Taylor. Taylor: [1:34] Thanks God do we get a free sandwich. Scot: [1:37] Sure if we were there together we would have a sandwich but we'll we'll do a virtual high five instead how about that. Jason: [1:44] Just to warn you Scott's character is like grilled into the sandwich so some people find that. Taylor: [1:49] Oh no I'll close my eyes this could thank you Scott thank you Jason it's great to be here we'd love talking to you guys and we love listening to you guys so it's a fun conversation to have. Jason: [2:03] We are thrilled to have you Taylor and I do want to Dive Right In to your methodology and then your data but before we do real briefly remind. Um the audience what your role is at at Adobe to sort of frame frame where your perspective is coming from. Taylor: [2:20] Sure so I run a group called Adobe Digital insights it's got mentioned and we are charged with, using aggregated and anonymized adopted in data to. Help the industry retail and other Industries as well understand the major trends that we see in the data that comes through Adobe analytics or adobe Commerce or any of the other. I could get it to Commerce and experience cloud services that we have. So so our job is to tell stories to make it take all that huge area did it and tell stories that help people understand their world. Jason: [2:59] That's awesome and so there's a bunch of different components of the the Adobe marketing cloud in the do Adobe Commerce Cloud but. Sort of Marque things Adobe analytics which a long time ago too many of us that are super old was Adobe was omniture, is a is a key component of the analytics suite and Magento is a key component of the marketing cloud and so you you get to see, an awful lot of, Commerce transactions across the web via those two products and the rest of the the Adobe stack and you get to use that anonymized data to sort of formulate this holiday forecasting this case is do I have that right. Taylor: [3:41] Absolutely and I really appreciate you calling me super old. Jason: [3:44] I didn't say you called it I'm not sure I said I. Taylor: [3:47] I remember I remember the under two days I do but yes. Jason: [3:50] I'm pretty sure there's like the URL for the analytics dashboard still says all mature. Taylor: [3:54] I think sometimes it does yeah now it's absolutely right face. Jason: [3:58] And then one important distinction some of the. Holiday forecast that Scott mentioned in the intro are actually overall retail forecast and one of the things that that is unique your forecast is slightly more focused you're focused on digital Commerce do I have that right. Taylor: [4:16] That's right we have we focused exclusively on digital Commerce and we're looking what makes us unique is that we are looking across, over a trillion interactions with retailers across thousands of retailers across over a hundred million skus with a boatload of AI behind that sort of categorizing and understanding it but you know the core of it I think for your listeners is weird. The where the group is actually looking at what people are buying in what quantity and what they're actually paying for it. It's ridiculous prices we're not doing surveys were actually looking at the the behaviors that we can observe a huge scale and using that to do both the reporting in this case are forecasting of the holiday season. Jason: [4:56] Yeah and that's super exciting to me because that I frequently rail against the value of stated preference surveys in our industry and and what we're talking about today is observed preferences lies actual data and consumer behavior that you're watching. Taylor: [5:11] Absolutely and it's gonna be fascinating. Jason: [5:13] Yeah so just two other minor precursors and we'll jump in because there is so much variability out there when you say holiday what date range are you talking about. Taylor: [5:22] Good point right now we're talking about the first of November till the end of the year although arguably make it into it you know some of the stuff is starting to creep into October 2 but when we talk about numbers were talking about November 1 to December 31. Jason: [5:34] Perfect we'll come back to that but yeah I think I think the the shoulders of that season are going to be more interesting than ever and then when you say, retail. Like approximately like what is in retail to you I could go US Department of Commerce restaurants and gas stations are in there like do you guys have a standard definition of retail just to kind of frame what we're talking about. Taylor: [5:56] We generally look at a thing where the transaction the Fulfillment are fully executed online we exclude from this things like travel which is a different industry or anything where it's simply a payment system online but you know any Commerce where you're doing your shopping, your your payment and your fulfillment online generally falls into into our space so not restaurants are delivery services but but the goods that you would normally associate with with retail shopping outside of that. Jason: [6:27] Awesome and so digital grocery than would be in there. Taylor: [6:29] Yes he's a digital grocery appliances apparel all that kind of thing. Jason: [6:34] Perfect okay well I think that's enough Preamble and we've done enough teasing what's what's the Top Line are we all going to get our bonuses this year or is it going to be bleak. Taylor: [6:43] It's your our data showing a good year or days showing a year where the story is really consumers want to shop consumers wanted to go buy online but it's going to be really different year for retailers and for consumers because of the supply pain that Scott was referring to earlier they're going to see a lot more out of stock they're going to see a lot, you know a lot higher prices frankly and that's I think it'll hold us back from having a incredible year. Now just keep in mind I'm talking about a 207 billion dollar, season which you know we don't have a great aggregate retail forecast that we based off right now but that's roughly $1 and for of all of all retailgeek. As far as we can see maybe a little more than that. And it's 10 percent up from last year which you know in the long run of historical growth rates is a little bit low but we're getting off of a 33% jump the year before so if you kind of look all the way back to 2019 we're still. Accelerated from where you would have expected us to be if you've been projecting from a prepaid nemec stance so it kind of depends on where you're looking at it from. But however you look at it it's going to be a big year. Jason: [7:58] Got it so in my mind I sort of think of it traditionally year of e-commerce growth for Holiday being kind of like pre-pandemic. We were kind of running in this like 10 to 15% a year sort of range, um and all of retail would be growing at like four percent a year so then last year the pandemic forces everyone online we have this monster year 33 percent and then this year you're looking for you're looking at 10% on top of last year's monster year. Taylor: [8:27] That's right that's right still going to grow it's still good grow significantly it's still good grow you know maybe as you stay at the kind of lower bound of what we used to see but it's a real real growth rate now they'll be some differences in what grows and how it grows you can get into that but it's going to be a good year. Jason: [8:44] And one of the thing that's always funny to me is I guarantee you when the the sort of superficial press get ahold of your forecast they're all going to write the story about how e-commerce has is slowing way down. Taylor: [8:58] Right yeah nobody wants to talk about two year growth rate or you know try and digest everything that's happened over over the course of the pandemic and fine and but I know, when you step back even a little bit e-commerce has transformed over the past 20 24 months I think the bigger story is people are shopping for their groceries people are shopping for their Furniture you know folks out here in Berkeley or buying compost online, the way that people engage with e-commerce has radically transformed over the course of the pandemic and that's here to stay and that's this the basis of that growth and that you know that's the part that really has accelerated over the course of cobit so if you want to look at a particular growth rate and say it's slowing down, fair enough, but I don't think for instance you know I want to make predictions in 223 but I don't think this 10 percent growth rate in 22 is telling you that 23 is going to be slow I think it's more of a balancing act between. 2020 and 2021. Jason: [9:58] And again like this still means e-commerce is almost certainly growing faster than brick and mortar. Filming the whole industry is still growing in a very disruptive year I do want to like maybe double-click on covid just for a second because this was the big open question when we were all living through, the first half of the pandemic was sure. Everybody's turning to e-commerce people don't want to go to the stores there's health and safety issues they're all they're all these open things so not surprising that it drove more people online a big question at that time was. Is this just an acceleration of a trend and this is going to be the new normal or will those people all be desperate to go back to the store and resume and back to the mall and kind of resume their pre-pandemic. Shopping behaviors and. My read of your data says no no we're locking in all those changes that happened last year and then we're we're growing at a pretty healthy clip from there is that a fair way to be thinking about it or am I wrong headed as got usually points out. Taylor: [11:02] No in this particular case you happen to be right the that's absolutely true if you look at the aggregate growth I think it tells exactly that story that it, it is we're banking all the gains that you got through covid and there were growing on top of that, I think another stat I think really tells the story is our buy online pick up curbside. Data which you know followed that trajectory you talked about Jason, getting up there as we got into the pandemic and retailers adjusted we have a we have a set of retailers we look at the median portion of their online purchase online orders that are fulfilled curbside and that ramped right up last year with all of its fulfillment challenges ranked right up right before Christmas you about 25% we thought that's a that's a high peak right we got into April of this year and it gone right back up to 25% people are still going and pick you up curbside that's a habit that they're in their shopping online and fulfilling next to the store and we expect that to hit a whole new record frankly as we go into this year so it's a it's a habit that people have gotten into and they're not letting go of. Jason: [12:10] Wow and if this is from memory but I want to say last year you guys said that well well e-commerce grew at 33% the dopest segments are the curbside pickup segment grew way faster than that it was like a hundred and ninety-five percent. Taylor: [12:25] Yeah I don't have enough time I have like it's something like that it was it was significant and this year's going to be. Going to be crazy and you know anecdotally you know there are a number of stores where I think hey I really like this I'm not going to set foot in number of those I'll shop with them but I'm against it putting them again for a while if I don't have to this is great for me. Jason: [12:47] Yeah you know it's maybe only partly analogous but I talked to a lot of Quick Serve restaurants. And you know they have the same thing right they sold they sold meals but it was all off Prem consumption and you know the restaurants that have the biggest intrinsic Advantage were ones with drug through. And I've talked to an awful lot of restaurant tours that are like if I could wave a magic wand and make my dining room go away and have a more robust drive through. I would do it because that's the customer that that appears to be the long-term customer preference. Taylor: [13:19] Yeah I think and I think a lot of retailers who have got good real estate or obviously having to rethink how much of this is a you know distribution center and how much of this is a shopping experience and you know it's gonna be different than it was two years ago for sure. Jason: [13:34] And then I guess the one other sort of observational thing I've noted is. Yeah so you know our store is going to get people to walk back in the store to pick up those digital orders are they going to continue to pick them up at curbside and you know one who knows but one clue. Um is pre-pandemic Walmart had these in storage lockers these robotic lockers this cool Tower and all their stores. Um and they d installed all of those towers and they're now doing a national remodel with a much more robust, curbside picking lot parking lot right so it seems very clear and Walmart's case that they're saying hey the. You know this isn't just a reaction of the pandemic this is a you know a permanent infrastructure change we're making two. To make to eliminate in-store pickup and make curbside pickup more. Taylor: [14:24] I think that's right I think that is likely the trend I think you know it there's a lot. A lot of the hassle of of shopping that you're removing with shopping online and pick you up at the store is, is that last not mile I mean the last you know a hundred feet hundred yards of going in there and getting in the inline or whatever if you can just sit with your app and check your email with some well so they put stuff in the trunk that's a lot of a lot of value add there so I would expect that to be continue to be the trend. Scot: [14:52] Bullets as I introduced I'm kind of keenly aware or following the supply chain stuff and I noticed in the front of your presentation one of the bullets is unprecedented out of stock levels if you guys can you share like you know what you think that's going to be and is there any way to put a number on that like you're numb your forecast would have been you know twice as big if it wasn't for this or you just guys are just flagging it as this adds risk to the holiday. Taylor: [15:21] It's a fair question something we think a lot about I mean it's really hard to characterize and we probably just need more more. Time with the with the day I met don't make time to think about it but time series data to really understand how out of stock. Alters people shopping behaviors whether they abandon or whether they take some to which they redirect themselves. I will tell you is that you're going into if you look at sort of 2019 isn't as the normal it was growing when people were getting more out of stock items more of stock hits over time maybe you know creeping up toward fifty or a hundred percent more even over the course of the year and the pandemic hits and people are five times more likely basically four and a half to five times more likely to get an out of stock message and that's today that's not necessarily going to Holiday where things could get more challenging. So that could go up where we see it often isn't most often is in apparel so again you know I think it's going to affect different categories differently out of socks in the Peril can be if you're looking for a particular stereo pair of sneakers or particular you know this is the 20th so what made you I was buying for my wife but something you know a vest or something right that is her birthday is on the 23rd so I want to tell her what's what I was shopping for, anyway the you know you might not get that. Scot: [16:46] Is your wife a listener. Taylor: [16:48] I really doubt it. But yeah you might get redirected to something else whereas in electronics for instance we see you know a lot of chips shortages but. But price is a bigger factor in some of that marketing and decision making and so you're able to see apparel prices creep up a little bit but a lot about a stock you see for instance Electronics prices creep up a lot from what we would have expected but that that has reduced the out-of-stock challenges that they faced. Scot: [17:24] So so it's hard to put a quantity quantify on at this point maybe you think after the holiday you guys will be able to. Taylor: [17:31] I think it'll be easy yeah I mean you know we have a clear estimate of what things might have looked like before I think after the holiday talk to us in January we can we will have a better sense of how this played out this holiday season one of the challenges that I think is out there is it's not clear yet how much out of stock consumers are really going to see this season, based on you know when retailers are running promotions how they're stocking us those promotions how they're managing their their portfolio of goods so. We'll have to see but it's something that yeah had Beyond in January we'll talk about. Scot: [18:09] Okay it's going to be more of a chess game because the retailer they have the only information about what they have and what they can expect and then matching that to the promotional calendar this year is going to be interesting and playing a little game of chicken with the consumer to because consumers should be reading about this a lot so it's going to be fascinating to watch watch how that plays out. Taylor: [18:29] Yeah I've been recommending to Consumers frankly to make two lists, say look you got one list of things where I know I want this for the holidays and you got to buy it early because you might worry about your your out-of-stock situation and then another set of goods were you think hey you know if this doesn't come through or if I don't get specifically the version of this that I want yeah if I don't get this TV but I get a different brand TV I'm okay and then those things you can really shop for on the big major sailed is but it's you know. It's going to be it's a lot of a lot of work for the retailers to figure out how this game is going to play out and frankly it's gonna be a lot of work for consumers to figure out how they're going to address it. Jason: [19:10] I guess one of the ways I think about this it's important to remember that out of stock does not automatically mean wah sales like a lot of times there's a. Customers first choice but the they'll make on the Fly substitutions are switches when they discover some things out of stock so we still capture that. That's a land it seems like all like you know all the people forecasting retail sales for this holiday are pretty robust numbers you're coming in with a pretty robust number, everyone saying we're not going to find, consumers first choice of goods so the sort of logical conclusion here is the consumers in a spending mood when I go to the store to get baby grow goo for Scott for Christmas and it's out. Um Scott's going to have to settle for some cool dune toy that I find. Taylor: [19:58] Hey didn't really cool the The Arc right and I think maybe the way to answer Scott's question directly is you know. In the face of this rapidly increasing out of stock, we're seeing at least you know up to the 5x of what we saw in 2018 we have still seen really impressive growth this year especially we're 2019 so so far whatever headwind it is is not. Super significant now I think you know the experiment that will be able to look at is if this starts to spike as we go into the holiday season if retailers have a hard time matching their inventory with with consumer demand then that might have a bigger impact in the they'll be saying we can look at more closely. Jason: [20:42] So you alluded to some of the categories and I have a feeling that. Um that both out of stocks and the impact of out of stocks could play out very differently in different categories right like if someone goes to the grocery store and we're out there out of your preferred brand of toilet paper. You're probably going to switch to another toilet paper but if there's a particular luxury fashion item or a particular toy that little Johnny is asking for for Christmas. Um you might be more inclined to hunt her harder for that product or defer that purchase and get it later or something like that right is does that make sense. Taylor: [21:16] Absolutely yeah and you know grocery out of stocks are not not at all infrequent with your particular Goods at a particular moment and then apparel is something I don't know about the rest of you but I've gotten. Pretty acclimated to the notion that I'm not necessarily going to be able to find the size and the color I'm looking for on the first try that it's quite quite possible I have to hunt around but you know there's a lot there a lot of style choices that go into that whereas I think you know if you're looking for a you know something specific as you say you know for particular. Particular toy your gift you might have to hunt them different retailers to go find it but you might be willing to do that exactly well. Jason: [21:58] So when you roll it out all that up are there any categories in your mind and end up being clear winners or losers for holiday. Taylor: [22:06] Well you know I think the it's it's a good question the the. [22:17] Clearly where we've seen growth is where we've seen the clearest growth in the holiday and in e-commerce in general has been in the things that are not holiday specifics of groceries apparel those kinds of things have really grown and we continue to see them grow so in some sense they are the Commerce winners because they've really absorbed the, I think what's going to be very successful early on are going to be these deals that get spread out around electronics and other gifts in an apparel we expect to see those went out very well I've got my eye though on non physical Goods things like downloadable games and things like that that happen the mic pop up toward the Christmas season is people who are looking to deliver something that is great experience especially for kids that isn't going to be constrained by shipping challenges and then. [23:18] I don't know where to put my bets this year because I've got my eye both on the demand that I see in a lot of things like gaming consoles that are looking great but also on you know there's a big question mark over over Supply challenges and how that will play out for them so I would be cautious in spread my bets but but electron you know the traditional gift areas are going to do really well and apparel seems to be continuing to take off very strongly in what we've seen so far. Jason: [23:48] So you the non-physical thing is super interesting ordinarily and holiday like as you get closer to the end of the year and you kind of hit shipping cut-offs and last year we talked about a lot about ship again I didn't, and you know bottleneck sit ups and FedEx and all of that you know retailers pivot to trying to sell. Intangible products pretty hard right and most notably gift cards so I imagine that with the the inventory situations this year that that's going to be more prominent than ever that you know if you can't find the, the toy you really want you know it might be an IOU you're getting, it holiday in the hopes of getting it in January or February but there is a new kind of intangible that kind of didn't exist last year and is having a little bit of moment and I have a feeling Scott's way more into it than I am but why. Does all do all of these out of stocks kind of play into the the the. In Ft kind of hate this year do you think that we could start to see some of them on the holiday wish list. Taylor: [24:52] I think I think in a few still have a ways to bleed into you know consumer experiences and consumer expectations that I see a lot of reading and not a lot of a lot of buying but if people can figure out how if retailers can figure out how to make. You're kind of cross that Chasm and figure out how to make it a real consumer experience and yeah I think there's a lot of opportunity there for that and you know and speaking of things that are not necessarily tangible and expire or unique you know we don't forecast travel into our into our data but we do look at travel and right now you know prices for. Plane tickets are about 13 percent less than they were on average in 2019 so you know depending on how. Vaccinations and mask mandates and travel restrictions all play out there may be a push if knock wood covid gets better for more experiential, experience driven options for people to give as gifts to. Scot: [25:49] One of the things that I've been really intrigued by and this is because some of the companies have gone public but this buy now pay later and I saw you called it out and I've seen a lot of the Wall Street analyst as a for my generation I look at it I'm kind of like, you know why don't I just put that on the credit card what's interesting is I've seen this whole generational thing where Millennials and gen Z years they're looking at it as they associate the credit around the item they don't like kind of having open credit and they want it to be around a specific item what what are you guys seeing as it relates to the be npl. Taylor: [26:25] We love new acronyms right be in PL no I have exactly the same experience you just got where I think exactly what you do this but we had two sources on this one is we looked at the actual data that we see flowing through our systems and we saw skyrocketing last year of buy now pay later Behavior we saw about 44 percent growth over the course of the year, weeks that slowed a little bit in percentage terms as we went through this year but you know as we get back into the holiday season I have every reason to expect that to re-accelerate, and you saw quite the distribution two of you know sources of this is some retailers got into this business a lot of financial institutions got certain play in this area so there's a lot more more options we saw those we saw the minimums for buy now pay later come down from those institutions and simultaneously we actually saw consumers spend more or put put bigger purchases on buy now pay later, and when we surveyed about it we, we saw what you were alluding to Scott this is a generational difference in the way that people manage and even think about what credit really is and was striking to me is that the top, category that folks told us that they were interested in using buy now pay later for was was clothing that they were making those kind of purchases and and Spring Meadow over time because they were, lumpy in their year and then they were spreading it out across their income without affecting their credit. [27:52] Electronics was obviously on that that set to you going to buy your television as televisions get bigger and more expensive or cheaper but bigger but what was the. [28:02] Third category that I thought was fascinating was groceries. And not again we dug under that that wasn't just people it wasn't generally people saying look I've got a week's worth of groceries and I spread the payments out over four weeks that's hard to make sense of but but more you know I'm throwing a party or having an event and I have a spike in my grocery budget no one at this I want to smooth it so it is a and then they were everyone was managing it sort of separately from this notion of having a lump of credit card debt they had a managed versus a purchase they had to think out and pay off those are two really different categories so it is it's a really different way of thinking about credit that's manifesting in buy now pay later and it seems to continue to be growing at a significant rate. Scot: [28:49] Yeah do you think. The pitch that a lot of these so that the two big companies are there's three there's a firm karna and after by and I'm sure there's more egg even like shopify's coming out with their own and what not, their pitch to retailers is it bumps up your cart size right do you think, is this going to be a factor this holiday in our is it going to bump up the ASP you think there are still too small to be a meaningful consideration. Taylor: [29:17] You know when we when you average across the enormous event that is the holiday season I don't think we're going to see average order value is our average basket, values go up significantly more noticeably are or more to the point me off trend of what we've seen in the past that said, you know I think. If these retailers are thinking about their customer base has more granularly and they're thinking well I've got a group of folks who I can actually juice where I can do sup there their basket sizes and their purchases by offering that I think that probably is true and, you know as with these kind of generational shifts it may make a difference in the longer term as you change consumer buying habits it may open up a door for that generation is incomes increase and time goes by so I think probably more of a long-term play when it comes to aggregate average order values but for specific audiences for specific customer bases I think it did make a difference. Jason: [30:18] Yeah it's going to be interesting you know there's a payment method that historically has been really popular holiday that you know. Rich people that listen to e-commerce podcast don't tend to think about but it's layaway. And I like one of the interesting Trends you know Walmart which does a very robust delay way business retired their layaway this year in favor of a buy now pay later service. Taylor: [30:44] Yeah I remember the I remember the Layla way shelves. Toys R Us when I was a kid and just sitting them seeing all these items sit there waiting for people to pay for them but if you can get the same effect. And both for the consumer on their credit and for the retailer in terms of getting paid then it's certainly more enticing for the customer to actually get the item rather than wait for it. Jason: [31:10] I know for sure I do like to sad things there was kind of a fun tradition because of away away some very kind people would often go into a retail store. And pay everyone's layaway. And it was kind of this like secret Santa thing and you know it would happen every year there would be lots of these cool stories so I worry we're going to miss out on that which you know probably isn't. Isn't hugely meaningful but it said to me but the other thing that worries me a little bit about holiday I do think like based on your growth forecast like this is going to be a bunch of consumers first experience with these buy now pay later services, and I would still say there's a lot of consumer confusion because like I look at the landscape of these services. And the spectrum is very broad there are you know some kind of thinly veiled payday loan operators that are you know charging like huge interest and late fees and all these things on one end and then there's there's some like. Really generous programs that are very popular in here that don't charge interest in don't have late fees and you know is sort of a. Very low cost and so it. I'm not sure consumers are going to be Savvy enough to differentiate all of those for this holiday I know Target in particular is offering two different buy now pay later options and. Consumers are going to have to learn how to shop for those vendors now. Taylor: [32:35] I think that's absolutely right Jason it's very hard you know it's sort of an unstructured product that can have a lot of different attributes and it's not like a credit card where you we serve reduced it to something like credit limit and interest rate right with some with some bells and whistles and it's also not, it's not even something that consumers know how to frame necessarily like I certainly didn't when I got into the space what is this what are these payments mean what is the penalty if I miss the payment you know what are my other options how are we going to communicate how you get paid what information do you need has if at my credit score it's a lot to think about and it's going to you know thinking has a lot of costs especially when consumers are shopping this quickly so you know I think we'll have a reckoning Reckoning but a moment to pause and. Reflect on how this all evolved we get to the holiday season it will see some things shake out I would imagine. Jason: [33:31] Next well let's pivot to something near and dear to my heart the we alluded to up top the shape of holiday so there's two. Parts of this that are super interesting to me, ordinarily when we talk about holiday we're laser focused on these five days at the end of November the turkey fiber that I think you guys caught the Cyber five. Taylor: [33:53] Yeah they're my wake up at 3 a.m. 5 so I have I hold them in a different regard but they are. You know the story that you know when we would talk to you guys before for the pandemic would always be you know hey this the the season is growing but these big days are growing faster retailers are concentrated you're competing and concentrating their deals on those days and we're seeing retail consumers follow suit and they're expecting those deals on those days that really flipped around last year we had a massive growth last year about 30 odd percent 33 percent for the season. [34:27] But the individual days were growing in the low 20s there are growing about 10% slower then the season as a whole and we expect that again this year we expect the season to grow at about 10% expect the big days to grow about five-ish percent. To be clear they're going to break records I mean we're going to have an 11 plus billion dollar a day on Cyber Monday we're gonna you know Black Friday is going to going to inch up close to 10 billion Thanksgiving is going to be you know over five it'll, level that we used to call Young used to be Black Friday of numbers it's going to be massive but both because, retailers are spreading out the deals for supply and fulfillment reasons and because consumers have really shifted what it mean what e-commerce means in other words they've established sort of water level of shopping for things that are not holiday and promotionally driven, those percentages are harder to move than they used to be so yeah it's going to be they're going to be big days they're gonna be huge that last hour before the end of Cyber Monday we're going to see $12,000,000 move through the system in a minute so, every minute so it's going to be big but it's going to be a different pattern especially the thing from the Retailer's perspective than we've seen in the past. Jason: [35:40] Interesting and do you have a feel for like how much it like I think you hit on the 2 reasons for it like one is the lot of large numbers there already huge. Huge numbers and and you know frankly in some cases quite you just can't squeeze more Goods through the. The funnels on those days and then the other one is changing consumer patterns and and just you know more General e-commerce consumption on every other day of the month and all those other things like it, I'm assuming it's a blend of both of those but but is is this year more prominent that people are going to be holiday shopping on other days or you think we've just. Taylor: [36:18] Yeah it's hard it's a hard call I think what's unusual about this year's really the retailer side I mean you could imagine a world where with fewer Supply constraints where retailers are more willing to put big sales on those big days and compete for eyeballs and four dollars so maybe a maybe there's a new normal where that changes but what I don't think is changing is that consumers are now permanently going to be in a state where Ecommerce is more and more available to them where you know be their home. Certainly their phone is is increasingly an easy place to go shopping and so all this concentration on these days is going to make less and less sense to them in terms of shopping behaviors if you go back out you know the origin of these days is really about sitting outside a big box and and can't be out and trying to get deals because you had to go in person but if you don't, if you if you if it's less and less the case that you actually have to go get things then it becomes easier and easier to spread out your purchases over time and if you're always shopping online you're not, you know just sort of the complete opposite of what you know going going to the office for Cyber Monday to go shopping which is what some of us used to do then you know you're much more open to these deals and opportunities that that retailers can offer you throughout the season so that part's not going away. Jason: [37:40] That's a great point so so then let's let's zoom out a little bit you guys are counting holiday is November 1 through December 31st a lot of retailers would, include January in there, holiday season again a lot of you know gift cards and returns and people you know come in with that return and they buy more stuff so January normally is a good month, and then this year the deals. Started in October right like Amazon Started Black Friday deals on October 4th time to get started on October 10th I think. Sort of boosted because of the supply chain concerns retailers are fighting really hard to start holiday shopping in October, and because all the stuff we really want is stuck on a boat off the coast of Long Beach we might not get it until January or February so with all of that supply chain squishiness. Like is there like what you know. Taylor: [38:39] What do we see. Jason: [38:40] Holiday in November and December but is it even a like the rate of growth is even bigger if you were to kind of you know redefine holiday as a October through February. Taylor: [38:51] Yeah I mean the way that shows up in our data is that we see a we so far I've seen a very strong October, we've seen very strong October in terms of overall e-commerce growth not not on par with you know the big holiday months but it's you know we're looking at you know roughly that ten percent year-over-year a little bit more for October so it's a good sign. [39:17] The what we're also seeing though is we're keeping a close eye on prices and as I said we're see we see. Data at the transaction level and it gives us a particularly unique view into into prices and we're going into your September are digital price index which is the of the basket of goods that we see purchased online through retail was up 3.3% over last year less than the CPI was up last month but still really significantly and for context up until the pandemic we had never seen digital inflation it always be always in prices going down on part about 5% order of about five percent so people are going into this season with higher prices there will be some discounts but we in October but I don't think they're going to make a dent in that inflation yet. And frankly from what we've seen historically over the other holidays of this year we expect to go in with higher prices for goods in general and we expect discounts to be, significant but a little bit shallower than they were at their last year their deepest point so consumers may be paying significantly more, this year on a Black Friday for a particular item than they were they would have been last year on that same date when you add all that up. Scot: [40:35] Nursing the so I know we're up against time so a little lightning around here it wouldn't be a Jason and Scot show if we didn't talk about Amazon any any tea leaves on Amazon. Taylor: [40:47] So we are we assiduously avoid commenting on particular retailers for a number of reasons but everybody's going to have a big year I would imagine this year. Scot: [40:56] My theory is if the supply chain matters Amazon Amazon Walmart and maybe Target are so dialed in on that but it was some a bit of an advantage and could hurt the small guy this year but we'll see how that plays out. Taylor: [41:11] What do you think the large versus small is a good good framing of that, you know bigger retailers in and out of stock in a world without of stocks have more options to to offer and complete a sale and then small retailers who may see their carts more likely to be abandoned I think that's a significant factor. Jason: [41:31] Okay so then the next lightning one is you talked a little bit about inflation you talked a little bit about like discounting not having to be quite as deep. How does that all washout in terms of profitability I do do retailers make more money on fewer sales this year or does do all these supply chain costs eat it up and, and it's you know thin margins. Taylor: [41:51] Yeah well so I think margin management is going to be a whole different game and retailers of already had to think a lot about that this year that you know the top line is going to be bigger per item so you're going to get more Revenue but I don't see that really being driven by some kind of margin maximization Behavior it seems to be largely driven by increasing increasing costs of goods and so you know I don't see a real Gap step open it up between increasing costs and and increasing Revenue to create a giant chunk of margin there. Scot: [42:28] How about anything on device Trends any news kind of done to be a bit of an old story that you know the smartphone is overtaking the desktop. Taylor: [42:37] There is a little bit of news it's kind of fascinating so we that's that's it if you looked at the share of Revenue that was doing through smartphones from 2014 till even into the pandemic you could have basically drawn a straight line I mean it was a it was a sort of, Early College regression experiment that we've been super easy for First Years to do that's changed a little bit smartphones are still gaining cheer don't get me wrong they're still growing faster than desktop in terms of the revenue is coming through them. Ever so slightly more slowly than than they used to and it may be an indicator that, in America at least we may be headed toward an equilibrium to looks more like a sort of 50/50 World between desktop and phones which is obviously really different than some other parts of the world where that it may be 80/20 or 90/10. [43:33] Right yeah I got two expense that so I can you know make it part of our part of our. Jason: [43:38] If we get our new app tops in time then we're all shopping on our laptops otherwise we're all shopping on our floor. Taylor: [43:42] Exactly. Jason: [43:45] But it wasn't a or we could talk all day I know you're in super high demand this this time of year and and you know quite frankly not in demand at all the rest of the year so I'm sure we'll talk again when. When you're less popular, but this was awesome we really appreciate your time as always if folks want to continue the conversation or have questions you can hit us up on, on the Twitter or the Facebook page, and as always if you got value out of this show we sure would appreciate it if you'd go on to iTunes and give us that five star Christmas review. Taylor: [44:19] That's what I'm going to do Jason. Scot: [44:21] Awesome we push it if that's aren't your gift to us and it's digital so we don't have to worry about Supply pain if I think in past years you guys have set up kind of a cool holiday news Hub is that something you're going to do this year and we're world where will we find them. Taylor: [44:37] It will be there I need to get you the URL we can put the URL in a link to this if you guys are watching this online I will make sure you guys have it before we got there but yes there will it'll be there. Scot: [44:47] All right we really appreciate the time. Taylor: [44:50] Right thank you guys I really appreciate Scott real patient appreciate Jason happy to do this anytime. Jason: [44:56] We appreciate you Taylor and until next time happy commercing!

    EP277- Holiday 2021 Preview

    Play Episode Listen Later Oct 4, 2021 61:43

    EP277- Holiday 2021 Preview Holiday 2021 will be one of the most uncertain holiday events in modern retail history. Major disruptions to the supply chain, the last mille, and to consumer behavior as a result of covid, will make this year extremely hard to predict and manage for brands and retailers. Will shipageddon 2.0 play out again this year? Will the supply chain become the supply pain? With Amazon and Target starting holiday deals early in October, and consumer still looking for scarce inventory late into January or even February, Holiday 2021 is likely to be 5 months long. In this episode we break down all the potential issues, and make some prediction about how it might all play out. 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. Episode 277 of the Jason & Scot show was recorded on Sunday October 3rd, 2021. Transcript Jason: [0:24] Welcome to the Jason and Scot show this is episode 277 being recorded on Sunday October third 2021 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 Scot show listeners, Jason this is a really good time for listeners to pause because we're going to do a deep dive here so that means it can be a little bit of a longer episode. And leave us that five-star review this episode is going to be so good you can go ahead and pre leave us the five star review so we'll wait for second for you to come back. All right thanks for doing that that really helps us out as we get the word out about the show, Jason last year at and I went back and had a one of our many interns look at this and it was exactly this time last year I think was actually October 2nd recording this in October 3rd so it's a pretty darn close. We coined and we were doing our annual holiday preview and we both coined and predicted ship again and that is where we saw pretty early on I think before a lot of the rest of the folks in the industry that there was going to be both a surge in digital adoption due to covid plus the normal holiday increase from e-commerce and that that was going to more than absorb all of the available last-mile demand and that's the why we coined ship again and it happened and it was bad but we all survived and made it through and hopefully the folks listening to this show got in front of that both on their business and personal side. [1:58] Well this year we want to use this episode and do a deep dive into what that's going to look like this year and it's a more complex situation last year was pretty easy to lie to read those tea leaves because you know we were already pretty close to capacity before covid and it was kind of pretty easy prediction to say that we're going to far exceed the ability to deliver the packages. This year we have a lot to unpack for you spoiler alert it's going to be worse than last year much worse because not only is it that last little piece of the whole digital retail chain of events The Last Mile that's going to be a problem but it's all the other pieces leading into it that are going to be a problem something we call the supply chain but this year we are going to call it the supply pain so we're going to peel the onion on this and first we're going to look at the economic setup heading into holiday 21 then we're going to look at the global state of supply chain then we're going to look at some of the holiday trims that are kind of factors we think that are going to tie into this last some of the pontificate errs are out with their forecasts and we're going to go through those and kind of see what we think about those. Jason want it could suck kick it off with the economic setup coming into holiday 21. Jason: [3:15] Yeah awesome Scott so first of all let me start by saying on the macroeconomic picture most of the professional analysts that look at this. Are pretty uniform in feeling like the consumer is generally in a good place that the economy is in a pretty good place and they are all very bullish on the consumers ability to spend this holiday. And I say that because my own personal feeling is that there's a little more uncertainty cooked in there there certainly are some encouraging favorable things. And there's a few worrisome things and I think. What's going to become the theme for all of these sections we talked about today is there's a significant amount of uncertainty there's a lot of things that could swing either way and have a dramatic impact on holiday so. It is what it is but. Sort of giving you how I look at the macroeconomic situation the first thing we'll talk about is inflation and there's a bunch of ways to look at inflation but a simple one is there's this thing called the Consumer Price Index which kind of. Factors in how much of each good consumers purchase and how much prices are raising for that, and the the CPI is it about 5.25% right now so that's pretty significant we more expensive Goods that consumers are having to pay. And ordinarily that inflation can be problematic for the economy a couple of things to know though. [4:43] If you kind of look at the shape of that CPI it actually is going down a little bit from a peak in July and so possible we've seen the. Peak of inflation and it's starting to come back down. Inflation is a mixed bag for retailers and holiday because they get more money for everything they sell they tend to sell less stuff but make more on each in certain circumstances it can be more profitable. Um but you know the goods are costing more we've got this 5.25 percent inflation. We also though have a pretty significant increase in wages so people are getting paid more for their work, particularly low-income people, are getting paid more for work retailers and warehouses and all kinds of companies are having to raise their wages to compete for the for this labor force that's been hard to find right now and so, wages are going up and in general the analysts would call those two things Awash that that consumers. Are getting bigger paychecks and they're having to spend more on their necessities and that at the moment that's about Break Even so two interesting things to know. [5:52] A kind of predictor of future spending is this this huge survey that University of Michigan does every month the consumer confidence index. And when when we were kind of in the peak of recovery from the first wave of covid-19, that index was a leading indicator that said consumers were starting to feel good about the economy and it hit like it's this index it over a hundred today it's sitting at 71, which is the lowest point since January of 2019 it's not, like a historic low or anything like that that you know you go like oh it's way below normal, but it does appear that consumers are in general feeling less good about the economy than they were, um you know just a month or two ago now there's a bunch of political news out right now and there was fear of government shutdown that we've already averted and those kinds of things have a big impact on the consumer index oh. [6:49] Um I that consumer index doesn't have a perfect correlation with spending so I don't spend too much time thinking about it but just to know, that's a number that had been favorable and is kind of shrinking down. A big one we talk about is unemployment because people don't have jobs it's hard for them to spend on Goods obviously at the beginning of the pandemic we had a huge spike in unemployment, unemployment is actually pretty good right now we're at five point two percent. The kind of pre-pandemic average was about four so we're not all the way back to pre-pandemic average but that pre-pandemic. [7:22] Point was a historic low so historically 5.2 percent is pretty decent for unemployment. Um so like most most analysts would say that's a favorable indicator the two things to know there is, that's based on the people that are seeking jobs and not getting it there actually is a ton of people that kind of took themselves out of the workforce we. Fully understand where all those people went but a big chunk of those people were second incomes for household so like a lot of women. That like maybe don't have as good a help childcare as they had before or more school challenges or things and so they haven't gone back to the workforce and many of them are seeking work so they don't show up in the unemployment number so. Just be aware like household incomes are somewhat stressed because of that factor and then as we've talked about before on this show like as of July. People that make over $60,000 a year the unemployment is actually ten percent better than it was before the pandemic so they're doing great. And the low-income people that are making less than $30,000 a year their unemployment is still 21 percent lower than it was. The beginning of the pandemic so so a little bit of a bifurcated recovery on the jobs thing. [8:38] One of the reasons that we historically have that we had high unemployment was because there's all these rich benefits this enhanced unemployment benefits that people got that all expired last week. So if people were staying at home because they could make more and unemployment that that justification probably ended. The bad news is that ended in 26 States over two months ago and in general the data shows that people did not rush back to work when it ended. So there's not necessarily a reason to think a ton more people are going to rush back to work now that that it's ended everywhere but we'll have to see. Um the other macroeconomic things all these natural disasters are negative to the economy so you know when hurricane Ida takes a hundred billion dollars out of the economy that's a bummer. Um [9:25] Another hugely favorable one in the one that most of us are hanging our hats on that are looking for a good holiday is the savings rate and this is the most unprecedented recession of all times. Unemployment you know went way up at the peak of the pandemic but so did savings which has never happened before, and part of that was because we had all this stimulus money we were pouring into the economy but the savings rate normally hovers around 8% it shot up to 32 percent during the peak of the pandemic, it's way off of that Peak it's a nine point six which is still a little higher than it was before the pandemic and that. All that extra money that a lot of household socked away because they got the stimulus and they spent less during the the peak of the pandemic. [10:18] Arguably puts consumers in a good place to spend for this holiday the counter-argument would be all that stimulus. Is mostly over there still are you know very lumpy employment situation and a lot of that savings has dwindled, um so we'll see how it goes, um but then the last fact I'm going to throw up before I go at Scott get a word in edgewise is that the stock market has done phenomenally right and, we're way up from the pre-pandemic level and so the investor class and people that have you know as a meaningful portion of their wealth. Tied to the market. Did terrific right and so if there is economic uncertainty and instability in this economy it's bifurcated and it's the lower-income people that like do not have equity in the stock market. Um there were her but roll all that up and the the professional analysts feel like. Macroeconomic situation all to all in is pretty good and of course when rich people do well that help certain sectors of the economy quite a bit right and at the moment luxury and jewelry are doing phenomenally well for example so. That's kind of my snapshot of the macroeconomy Scott anything you'd violently disagree with or anything you pay particular attention to. Scot: [11:45] I think I think that's right I think you know there's a lot of folks that feel the inflation the CPI isn't the right inflation number it's kind of this old metric. This basket of goods and doesn't capture a lot of things you know there's, I follow a lot of the crypto people and, so there's been a huge wealth creation through crypto and that whole world which is kind of interesting and then you know there's there's a feeling that the FED has pumped so much cash into the system that is just sloshing around and kind of crazy ways which is why you saw that savings rate kind of go up as high as it did and you know they're they're talk track goes that that's why we're not seeing as much employment where folks have taken so those free free dollars and and you know. Done something with it so that they don't need a job now or they're going to be less likely to enter the workforce but I think at all. Yeah I would say I agree with the analysts on that it's going to be a pretty good holiday. [12:51] But I think the problem we'll get into that as I just don't think there's going to be a thing to buy so I don't not sure if it matters. Jason: [12:56] So step one American families probably have some money to spend okay so now as we've already alluded to the next challenges what is the supply chain look like and what could they spend it on and Scott what's your kind of read there. Scot: [13:13] Yes Supply chains from those things we always talk about but then you know in in your mind you have this kind of linkage these things linked together I remember as a kid when you would cut out the little construction paper strips and make the little chain to go around. The holiday tree there II reminds me of that and we kind of vaguely talk about it as this big, big thing and we want to really unpack it on this episode so as a summary you know there's when you make a product let's say it's one time in a million familiar with right now is a vehicle that which is one of the more complex products or even a. You're relatively simple product like an electronic toy or an apparel item or almost anything it's going to have first of all it. It's going to have component parts right so there's going to be some form of pieces that go into that I kind of mentally think of them as the Lego blocks that make up that item so if it's a cool trendy trench coat there's going to be obviously fabric buttons may be a variety of fabrics and things like that so there's generally it's hard to make any product without there being at least 10 inputs and then many times, thousands if not tens or hundreds of thousands as you get into like iPhones and vehicles and stuff like that. [14:33] So that's important to remember is each one of those component parts has a supply chain right and you can't make a widget until its component pieces are all there so what happens is we're seeing this really interesting and it's hard to know the root cause or theirs some of the economic stuff you talked about is part of it we're we're just having labor shortages that cause things but then you know we'll talk about some of this there's we import a lot of our goods from China and they're having all kinds of issues of their own there's covid related things non-covered related things but generally let's think about the supply chain and kind of the broad sense of you have typically the bulk of goods are made offshore some of them are are made on Shore but let's kind of assume in this example A lot of these products are coming from offshore or at least income the many of the components maybe there's some assembly in the US but at least the the components for a any widget are made offshore so that's number one so that has to be made in a factory somewhere and then shipped here so there's the port of origin so it leaves a port in a foreign land and then needs to come on its way to the United States for a consumer to buy it. That Journey can go a variety of different ways will to it can go by boat or air, the standard way that products are moved is through containers so you by everyone seemed these containers there's all these cool. [15:57] We just opened up here a restaurant container Village kind of a thing so you have those containers their specialized boats that carry these and and or you can put them on airplanes. So then they get on a boat let's say the bulk of products do go by boat there is some by are then they have to go over the sea and then they get to a destination port so there's you know there's two ports involved with every product that comes across in a container then it has to be unloaded from that boat you've probably seen these giant cranes somewhere. [16:29] Fun Star Wars fact those are the that's where George Lucas got the idea for at-ats he saw some of the cranes and one of the ports on the west coast and thought of what if you had a giant walking robots that look like that so those have to be unloaded and then typically you're going to put them on either so then when they get to the United States in one of the ports they're going to be offloaded onto either a truck and then part of the truck that's really critical in this is called a chassis so if you've ever seen you've probably driven by a million of these container trucks but if you take the container off that's the chassis part as you've got the front part of the truck, then you've got the chassis which holds the container and then the container sits squarely on there it's pretty clever if you think about how it's all been designed or that same container can be put over on rail so there are specialized railroad cars for carrying containers and then and then the product goes on its way then it makes it to a warehouse and then it goes to from that fulfillment center it gets distributed many times do a couple maybe from a big kind of inbound fulfillment center to some regionals to some locals and maybe even one step closer to kind of hyper local and then it gets into the last mile delivery part of the world so it gets onto the virtual shelves and then is sold and goes into that last month so [17:52] There's there's a lot that has to happen right in there and we're going to go through some of the things that are not working right now and you know like any any chain any. There's at least common denominator problem so all that can work great and if you don't have Last Mile Vehicles then you've got a problem or, the factories aren't making things fast enough then the whole chain is compressed and you've got this other set of problems and you know where we are now is almost every single part of that chain I just walked through is is kind of you know sport or in a bad situation right now and we'll take you through some examples. Jason let's start with factories what's going on there. Jason: [18:34] Yeah well a couple challenges with factories so obviously the we have the most factories in China and the good news with China is. Covid is mostly under control they definitely have had a. A spike from from Delta they almost had had down a zero before Delta. [18:55] Because of their their concerns about the the virus they have China has what's called the zero covid policy and what that means is. If they have a single case of covid they will they will shut down an entire business or. Even a sector of business so while there's not huge outbreaks of covid and factories right now. There have been a bunch of examples where only a few cases of covid showed up and that caused a factory to be closed for two weeks so there there have been some disruptions with the Chinese factories. But the bigger problem has been that it, from before and in the very beginning of covid a lot of manufacturing got Diversified and moved out of China right and so the second biggest manufacturer of apparel behind China right now is Vietnam. Vietnam has had a lot of trouble with Delta and about a third of the factories in Vietnam are shut down right now so a lot of the factories that make goods are not making as many Goods either because. [19:56] They don't have very good access to vaccines and they're having covid problems or they have really rigid government policies like China. And then forecasting a future problem that's a huge Debbie Downer, is China is actually experiencing a real energy crisis right now and China always has to kind of, ration electricity and they give quotas at the beginning of every year to these factories and factories often have to shut down because they exceed their quotas. Well this year like they have less. [20:31] Energy capacity in China for a variety of reasons in the cost of coal has gone way up. Um there's there's fixed pricing for for energy in China and said the producers can't charge you more even though the cold cost more and so they have less incentive to make it which means there's less energy and so there's a lot of fear that there's going to be a ton more slowdowns of Chinese factories because of this looming energy crisis so all of those things. Our kind of conspiring to make like the amount of product available from the factories like. Significantly inconsistent and hard to. Scot: [21:12] And then say the call thing and because I have read a couple articles on this and I haven't under Center so they're in an attempt to be green they've lowered the price of coal so cold manufacturers have stopped making goals that. Jason: [21:26] So I think that's what the the green thing has a significant impact here but the the communist country they set the the. It's a. [21:37] The energy industry is a tightly regulated industry and so the prices are fixed so that so the government decides the beginning of the year what the price of electricity is going to be. [21:47] So then these factories are only allowed to charge that price or plus or minus 10% of that price, and coal is four hundred percent more expensive so a lot of factories don't want a lot of power plants don't want to make energy electricity from coal right now because they can't do it profitably, they don't have permission from the government to charge for hundred percent for their electricity but they're having to pay 400 percent for their coal so. There is less production because of that it is also absolutely true that China has some, zero emissions by wants a 2060 things and they have concrete milestones in place every year and so even before cover that constrain how much electricity they were going to be able to make this year with current production means. And it meant that factories had a quota, um and and often that means Factories do periodically shut down when they use up their quota factories are rushing to get more efficient so they're all its, it's like everything it creates all these Downstream effects whatever equipment you use to make your stuff there's probably a more energy efficient version of that equipment that you now want to buy. But it's hard to get your hands on so all the factories are competing for the more energy-efficient versions of all this this materials, but the it's likely that more factories are going to be shut down for longer this year than ever before because of energy shortages. Scot: [23:14] And I saw an interesting graphic I forget I think is there Bloomberg or Wall Street Journal where the government then said well if you're going to shut down energy they created these zones and they put like a lot of that Apple manufacturing plants in The Greener zones that we get more power but then they neglected a lot of the input parts so. But the factories that can make the iPhone 13 or operating but they're sitting there idle because the the red zones that aren't getting a lot of power or only able to run like half a shift are. Jason: [23:44] Per your point like even if the Lego factories allowed to make Lego castles if they're not allowed to make red blocks. It's tough to make a lot of weight so castles so that that is yeah. It's a mess and then to give you an idea how cute it is normally they only shut down the the industrial areas there's so much constrained energy now that they're starting to shut down residential areas so people are. Are like having their power in their residences turned off as well. Scot: [24:14] Interesting and then I've been tracking ports here in the US very closely but what are you seeing at ports of origin in other countries. Jason: [24:24] Well this is one we're very publicly this zero covid policy that China has instituted has come into play. So that that all the biggest ports in the world are in China the third largest port in the world is divided into four terminals one of the four terminals was just shut down for two weeks because of a single. Positive test of covid and so that again to the extent that the factories are making stuff and they need to load up all those containers, um if they have to stop loading for 2 weeks that that creates a real lumpiness in the in the supply chain and that is a particularly hard thing to predict right like if you're just saying like oh man of. Factory you know has a bunch of sick workers it's going to shut down you can kind of watch that and see it coming but what you can't see coming is, you know a very small number of cases having a very material impact on the supply chain like these these ports that are shutting down and so the. The those impacts are sort of outsized on the supply chain at the moment. Scot: [25:34] Yeah and then so so now we've got our products you know, if they can make it through this Gauntlet that we've already laid out they're going to get on a boat and they are going to go get packed into a container and there's a fun if you're a business you're trying to get as much of this product into a container as possible because it's pretty much all you can eat once you once you buy a container there's fractional containers whatnot and because of there's a shortage in containers and then the cost to send these containers has gone way up so right now as we record this the cost there's actually an index you can look at this so if you were will put a link to show notes but if you Google Freight Fredo's fre IG HT o s index there's an index that tracks this and we have hit a record of 20500 86 average dollars to send a container and that's twice what it was in July of this year and that was twice of what it was in January so we effectively you know in July it was about ten thousand dollars and in January as about five thousand dollars now another interesting Factor here is depending on how many units you put in a container you divide that that unit cost right so if you're putting I'll keep the math easy a thousand units in one of these containers which would be something relatively big you're going to you know you just added effectively another. Yeah. [26:57] Let's see I should have smelled your $15 to the product just in kind of Landing cost with this with this increase so whatever your cost is on a per unit it's gone up effectively 4X since January so that's a factor to consider. [27:15] And what I'm what I'm hearing from people on the ground is you'll go bid and you kind of get get in front of this number right now so you're actually out there bidding today 30,000 to get a container and then you think you'll have one and then they'll say oh you know we need to re-evaluate that because they can the shipping company I'm talking to is now saying is 33,000 so there's this like running auction to get. Space on these boats that are coming over because of some of the rest of the supply chain that will talk about so. [27:46] So how about are so that's that's what it looks like by boat what are you seeing on the air side. Jason: [27:51] Yeah and obviously the most cost-effective way to get all this stuff here is via boat so you'd prefer to do that but when the boats aren't available or if you you need stuff considerably faster like a, in Good Times it takes about about 40 days to move a container from China to the west coast of the US so. Some Goods do come via air and little known fact 50% of Air Freight that comes into the u.s. comes on the bottom of, passenger airplanes right so it's not it's not FedEx and UPS planes flying from China to the US cargo planes it's, it's the bottom of these passenger planes and guess what is not happening right now is. International so there's just way less flights and said there's way less capacity for this Air Freight and so both, because there's more demand for Air Freight because of all the problems with the ocean Freight and because there's less Supply that the air option has you know been dramatically diminished from where it would normally be. Scot: [28:56] Yep so then so then you decide okay well I've got to put on a boat you do that you wait your 40 days and then what you find out is your delayed for a very long time because the heart problem is the u.s. ports are all pretty much maxed out so we've kind of done this very big under-investing in our ports so one of our our biggest one is in Los Angeles at Long Beach and then we have Savannah New York New Jersey and then there's a lot of secondary and tertiary ports but those are the big ones and there's another index that Bloomberg, puts out which is effectively the number of boats that are anchored offshore and you know what you want to you never want to Anchor these things because effectively they're just sitting there all that product just sitting there you know. Doing nothing waiting and the reason the reason why they're sitting there is the ports are they can't unload the products fast enough. [29:55] There's a million reasons why we'll talk about that in a second but this just actually ticked up over there's over 40 boats, and this is interesting I've read a data point this has 74 Los Angeles and 40 I think there's 40 anchored in 30 actively kind of being done there's these Maps if you look at my Twitter feed I just tweeted one to just show you know the port and the congestion there's just all these boats just sitting there waiting to come on shore I have a friend that lives in LA and they can just as they drive around they can just see the boats out there just fact it's very unusual time frame. Jason: [30:30] One of the supply chain guys I work with suggested that we should start a new company Uber barge where we deliver like In and Out Burgers to all these boats that are stuck offshore. Scot: [30:39] Someone someone tried to actually get a helicopter to go out one to get their container often. You can't do that because if you've ever seen these things are stacked like 50 deeper someone is crazy you can't just say I really need that one right there so this this index just ticked over 70 for the first time ever since has been created which is just just crazy. [31:00] And so why is it taking so long to offload the boats well we have under invested in these things and then we have this discontinued problem with the supply chain. Number one there's not enough people to I think it's longshoreman there's a lot of these Union type jobs that you hear about that do this so there's a longshoreman or the ones that offload products for a long time due to covid they were only running like half the number of shifts that used to so they have actually spun that up, they're running more shifts but now there's a shortage of chassis and then because of that. [31:37] You know if you don't have chassis you can still off load the boat but now you have to put it into kind of medium term or short term storage and then all that is full so there's not enough chassis there's not enough truck drivers if there is chassis and then if there's not chassis all the storage is full and then, the one when a product comes off the boat at the Port it can either go by truck or rail the whole rail system is all jammed up as well the this is interesting I read this one article that. Near you in the Joliet train yard which is one of the biggest ones in middle of the country they're so jammed up they have over 8,000 containers stacked there waiting for more training capacity and then some some days the trains are backed up for 25 miles waiting as they're loading these containers on there to try to do this, normal turnaround for a chassis to go at a port to deliver something to where it's going and come back is three and a half days due to all these various shortages that is extended out to 17 days so that's pretty crazy. A big factor in this port jam up is also the shortage of drivers and I call them CDL Drivers which is a commercial driver's license. [32:49] To drive one of these 18-wheelers that's going to carry a container you have to have a you know a certification for a certain type of vehicle there's It's relatively, no time-consuming to go get the certification and the number of drivers that have this is actually decreasing over time as they age out and enough people are coming into the profession so I read one article and this was by one of the one of the professional groups of CDL drivers that there's about 240,000 shortfall of CDL Drivers compared, kind of where the demand is there's about you call it to and 50,000 fewer drivers than they need so we're seeing you know I think I can remember was you or someone but Amazon and Walmart are ineffectively gunfighter these people where they're charged their they're paying crazy signing bonuses and hourly rates and salaries for any kind of truck drivers and so because they're the biggest. Employers of these things they tend to have the better economics and its really starving out other parts of the market as they absorb all the available CDL drivers. Jason: [33:57] Yeah that Walmart's paying a hundred and for a new driver $160,000 a year and eight thousand dollar signing bonus. Scot: [34:04] Yeah yes it's not uncommon uncommon thing to see out there it's pretty crazy, so that's what's going on at the ports it is a hot mess on this side as well so even if you are fortunate enough to get your product here to the US then you know you're looking at probably an extra 40 days I think is kind of you know what everyone's saying right now and that's average it can take a lot longer the LA Port is so jammed up that people are are they're rerouting you know rerouting boats across the sand getting them to other other ports but there are no like there's one in Georgia and it's the Savannah one and it's getting backed up I just saw they authorized building this this kind of effectively opening up a big giant parking area to put containers and that's going to give them some more storage capacity but you know where if you add up those, here we are you know in October and you start adding these things together the the holidays pretty much baked at this point right there's you maybe have 15 to 20 days of window here for stuff you already ordered. 80 days ago to kind of get here but none of this stuff is going to get fixed fast that's going to be part of the problem. Jason: [35:17] Yeah yeah if you follow the earning calls like Nike for example like dramatically lowered their guidance and they said Hey look it's it's cost four times as much to get a container of shoes here and the container takes twice as long to get here, and so we're just not going to have the supply to hit our original guidance and and Nikes better this than a lot of other people so it's a. [35:41] Pretty prominent problem and then there's all these secondary impacts right so you mentioned the math of the container right like you'd like to fill up that 40-foot container with Goods if your goods only take up 90%. Ordinarily you'd put someone else's Goods in the last 10% to try to make it more. Cost effective and efficient and share those costs but when the unloading is so gummed up what you don't want to do is have a secondary process where that container comes off the boat has to get re packed your stuff goes One Way their stuff goes another way, so people are actually shipping containers less full than they normally would which is entirely counterintuitive for what you would expect. The boats are all slowing down because they can use less gas to come here and 80 days then to come here in 40 days because there's no place to unload them. Um and the the supply chain guys I'm like we've been helping a lot of retailers hire truckers lately and they kind of summarize it real simply like the average commercial truck driver was 55 years old with multiple comorbidities a bunch of them. Retired and all the trucking schools that can teach people to get these licenses shut down for covid so there were no new licenses being issued for like. [36:54] Year and so there's just this this huge acute problem. And then you know without those truck drivers with the train problems and Barge problems of your on the Mississippi there's just like no place to move all those goods. You mentioned people are moving the boats from from some ports to secondary ports. That helps somewhat but the biggest cargo ships can't even fit in these ports right so I Long Beach the one of the most advanced Sports we have certainly the most advanced on the West Coast, um [37:27] Can't take the two biggest class of ships it can only take the third biggest class of ships and then as soon as you divert that ship to Portland instead of Long Beach. The the that class of ships won't won't fit there and so like there's there's a limited option to just move the stuff around so we're just we're gummed up like never before and most scary of all Gap and their earnings call kind of said like Hey we're loading our guidance and we're going to very lumpy inventory and we don't see any alleviation of these inventory challenges until at least 2020 3. Scot: [38:06] Yeah in the Auto World we're having a huge problem here where there's a chip shortage and then. [38:14] Another problem is you spend down these factories they don't just get spun back up because all the component parts are you know they stop ordering them and then those factories and everything so so even as chips are starting to come in a lot of vehicles can't be made because there's some other component that now is stuck in one of these containers that that were talking about I read this other interesting article where Coca-Cola has several of their bottling facilities that are down waiting on replacement parts so they went and basically least 20 or 40 bulk ships they didn't even worry about getting containers and they just jumped onto those ships the pieces they need to make their factories work and and are bring him over in this kind of crazy never done before way for a big company. Jason: [38:58] Yeah and I guess that that's one last point on this supply chain thing. It definitely is favoring the biggest players in every industry right so if you're the you know the biggest receivers of goods in the US. You're still being impacted by all of this but you're first in line for what capacity does exist and you you mentioned the games that the Brokers are playing with the price of containers that's going to happen a lot more to the independent shipper than it is the you know number one or number two shipper for that port and so. Well this this is a pain for every retailer in America it's going to be less painful to Walmart and Amazon then it's going to be to the, the medium-sized specialty retailer for. [39:49] And I was just going to point out I think you saw this as well as got but like Salesforce kind of put together a holiday forecast and they looked at all these supply chain problems and they're estimating, that this is going to add about 233 billion dollars in extra supply chain cost to holiday sales for the US so that's. Going to come like straight out of margins basically or or drive more inflation. Scot: [40:13] Yeah that's for the products to get here there's this another side of that equation where which is the opportunity cost right because you know. There's not gonna be a lot of exciting merchandise on the Shelf so we're what's opportunity cost of that we'll have to kind of. We'll get to that I guess we talked about forecast so what what holiday behaviors are feeding into this. Jason: [40:34] Yeah so tricky this one is there wild swings both ways right so you think if you remember at the beginning of covid there. Fundamental changes that happen people spend a lot less on travel they spend a lot less on restaurants they spend a lot more on their homes and they spent a lot more grocery stores right and so then as, people got more comfortable as people start getting vaccinated as infection rates are going down we started seeing all those things swing back right and you started seeing, a lot more bookings that are being be you saw a lot more Airline reservations you saw a lot more traffic coming to stores and you certainly saw a lot more people going back to restaurants. Then Delta hit. And we saw a dip again and people started returning to the the the kind of earlier covid behaviors not as dramatically as the first wave. [41:25] You kind of had a second wave and so predicting which of those, behaviors are going to be at the at the peak for holiday is really hard right now so retailers are looking at consumer sentiment and Doug mcmillon in his investor call he's like hey. Our consumer has told a strongly they want to have a normal holiday that they want to sit down with their family and have a meal, they want to travel they want to do the normal things and there's a strong desire and that if it is remotely safe they will do it and Doug's I kind of under his breath comment was. [42:05] Even if it's not safe they're probably going to do it right so, his viewing is there's there's so much fatigue in all of these like covid change behaviors that were going to see a significant return, you know closer to pre covid behaviors but you know we are we are seeing some signs go the other way, in the u.s. store traffic never fully recovered we are still down about ten percent versus pretty covid levels in China store traffic totally recovered and then Delta hit and store traffic drop back down, 30% below pre-pandemic levels and so since China has historically been about 4 months ahead of us. That that would predict that we're going to see another drop in. Um store traffic which again doesn't mean people won't spend it means they're going to buy more online instead of in store and that exacerbates all of The Last Mile problems that we talked about last year and we're going to talk about it. [43:09] Again this year so it's really risky to predict. What's going to happen with the coded behaviors people were starting to buy a lot of clothes again after having not buying clothes in here and now the closed sales are slowing down and then we talked about. Apparel is one of the categories most impacted by all these supply chain issues so there just may not be close to buy and so really hard to predict that stuff. Um but what I can tell you is retailers now have a couple of reasons to desperately get you to shop earlier right one reason is they're not going to have very much stuff and they don't want to be the Grinch that caused you to miss Christmas so they desperately want you to come in early, and give yourself the best chance to get the stuff you want so, the every retailer is more loudly than ever before trying to incentivise and entice customers to shop early. [44:03] Also if this ends up being another digital Christmas where people shop a lot more online than they do in stores, we have a huge problem with the last mile we don't have enough capacity in FedEx ups and u.s. post office to deliver twice as many packages over holiday, and so we need to spread that those those orders out over more days and so for all of those reasons we're seeing retailers start their sales earlier than ever so. To kind of paint you a promotional picture Amazon Prime day normally is in summer it historically celebrated Amazon's birthday which is in July. So then the pandemic kids they can't have a July sale so they have an October sale and it went really well. So this year they went back to Summer but they went to earlier summer they had the sale in June and a lot of us think they did it earlier in June for one of two reasons either they hate their own C fo and wanted him to have to talk. On earnings calls about the sale being in a different quarter every year for the last three years or. They were having a sale earlier to make room for a second big sale they intend to have this year during holiday to kind of repeat the success of. [45:11] Of holiday Prime Day last year and we haven't seen any all the announcements yet but Amazon has already announced a 30 day. Beauty and personal care sale starting in October of this year Target match that and said hey we're going to start our deal days in October, and we're price-matching for the whole holiday so if if you don't believe us and you think we're just making a joke about these early sales and you think there's going to be better sales waiter know if you buy it early will guarantee you, that will match any lower prices that you see anywhere for the rest of holiday so targets leaning heavily into that. And we think most retailers are going to launch their sales. Earlier than ever before to try to pull in these these early Shoppers because of all the supply chain and inflation issues. The sales aren't going to be as good as they usually are like that what used to be 40 percent off is going to be 25% off but what deals they do have are going to be earlier in the year to try to drive those, those sales earlier. [46:21] And people aren't going to get everything they want they're going to be limited inventory and so what's going to happen people are going to get more gift cards people are going to celebrate the holiday later and we're going to sell more stuff in January January is always a good holiday month anyway but January is going to be disproportionately large this year because of the lumpy supply chain think so, if you think of holiday as generally like being a strong peak in October between that that the kind of turkey five, this holiday more than ever before that spending starting in October and is going to last all the way through January. Scot: [46:58] And then as we get to the last mile we're definitely have another ship again so we've got we haven't increased our capacity hardly any because you can't really buy Vans and the everyone's renting Vans and there's just this fixed number of biliary vehicles and if we're going to have this Less store traffic even more e-commerce than last year even if you throw you know maybe. [47:23] Low middle digit low single digits on there like five or 7% or something well we effectively had 98, we can only deliver like 97% of the packages last year so it's going to make it a now will only be a little deliver maybe 90% of the packages so it's going to be really tough delivery, set up coming into the holiday. Jason: [47:46] I think the like some data points I saw the that are alarming like so number one. All the Fulfillment centers have an average turnover rate of like four hundred percent a year right so they're having a hard time hiring people and keeping people. FedEx in their earnings call said that like we just can't staff some of our distribution hubs so we're having to reroute packages in a less efficient manner, because for example we only have sixty percent of our labor force in our Portland Hub right so ordinarily they would try to, be at a hundred and twenty percent of their labor in these hubs for holiday with all this seasonal labor and this year. [48:24] They can't even fulfill all the permanent jobs they have so there's not going to be a seasonal Flex. For the main carriers you know the Retailer's do a lot of seasonal hiring for stores but they're prioritizing the seasonal hiring for their fulfillment centers over the stores because they're so. Worried about enough labor to fulfill all these packages and then you know when when FedEx and UPS have less capacity. What do they do they smartly charge more for it so we've seen gas surcharges we've seen holiday surcharges and and they're now announcing their rate hikes for January and FedEx announced the largest rate hike they've had in the last ten years so on average, it's almost six percent as 5.9 percent rate hike it varies wildly depending on the class of service so some kinds of shippers are going to get hit much harder. Um and just like last year all of the the big shippers have a quota and they're not going to be allowed to ship more more packages. The maybe one silver lining in this is that. Because readers are likely to be more successful in spreading the demand out this year than last year that's going to help a little bit and. [49:37] As a as challenges everyone's going to be with the capacity last year there were political challenges that that particularly got the US Post Office sideways which is a big part of this whole chain. And they don't anticipate that that will be as bad this year and so there is absolutely going to be ship again in 2.0 this year with the, the The Last Mile but the most of the analysts I'm talking to are saying the first mile is going to be so disrupted this year that the last mile is going to seem. Less severe in comparison whereas last year the the holiday challenges were all about the last mile. Scot: [50:16] Yeah and you know the double-edged sword of there not being enough product is maybe there just won't be enough product and it won't you should be getting but if whatever there is is going to get jammed up I think. Jason: [50:29] Yeah so that's a great transition to so like that's a lot of Doom and Gloom what's going to happen for Holiday should we all be shorting the retail stocks like what's. What's going to happen. And spoiler alert I don't know well we'll talk a little bit about our educated guesses but maybe before we do we can walk through some of the the forecast from the the brave souls that have been willing to share their holiday forecast. Scot: [50:56] Yeah the one the one I saw was from Salesforce and they, they say that e-commerce is going to be up 7% versus kind of that huge surge last year which was like you know fifty percent so they're coming in kind of with a moderate 7% growth which which is done yeah I think that would be the probably the slowest e-commerce growth since 2008-2009 yeah. Jason: [51:24] 2008. Scot: [51:26] Yeah that's that's the one I was tracking and you know when I read through the bullet points it made sense they're definitely putting a pretty wet blanket on things due to the this kind of quote-unquote Supply pain. Jason: [51:38] Yeah and it is tricky so they were the only one I've seen that's done an e-commerce forecast right and I would say that's the most uncertain because. Of we just don't know whether people are going to go back to stores or whether they're going to be worried about health and ordering online when they start having constrained. Um supplies is that gonna. Push them to online more because they can hunt more places or is that going to entice them to go to the store because they can use their eyes to see the inventory for themselves like there's, there's a lot of variability in that e-commerce number but I would remind people even as low as 7 percent sounds its. 7% on top of the huge bases from last year right so it's it's that's not a decline in e-commerce by any means that's a slowing of the increase just as a reminder for. People. But then I did see several like of the other the kind of traditional Consultants put together an overall holiday forecast right so beIN predicted that they were going to they thought holiday was going to be up seven percent from last year. [52:45] Deloitte said that they thought holiday was going to be up between seven and nine percent from last year. And MasterCard said they think holidays going to be up 7.4 percent from last year so. To put all three of those numbers in context those are all huge numbers. Um last year was the best holiday year in 10 years and sales were up 10% but the average is about 6% so saying we're going to grow if. You know these three things kind of all averaged out to about seven percent growth if we're here we go. If all holiday store an e-commerce gross 7% on top of the ten percent from last year, that's a phenomenal holiday and so that says, that these guys are pretty confident that the consumer is going to spend even if they can't find exactly what they want right that the supply chain is going to be painful but that the all the macroeconomic stuff we talked about at the beginning is going to win out and consumers are going to spend a lot of money this holiday I. [53:49] I want to believe this I'm going to be pleasantly surprised if it plays out like that right and my um, the the one caveat I'll say is that us retail is incredibly Diversified right and so for every category that's going to get shellacked by the supply chain or by changes in covid behaviors. Some other category is going to benefit right and so. It is true that the holiday could absolutely hit these numbers like I'll remind people that cars are 25 percent of retail sales gas is another huge chunk of retail sales. Some of these forecasts have those things in some don't some of these forecasts are for November and December some are for November December and January like everybody has a different definition of retail and a different definition of holiday so, you can't really apples-to-apples any of these but I pulled all the US Department of Commerce data and again last year November through January 10 percent growth, average of the last ten 10 years is about 6% growth so 7% growth is a. A terrific number and. I don't know I could see it happening if it happens it's going to be because there was a we had the most Monster January ever because I just don't think there's going to be enough Goods on the Shelf in November and December to do. Scot: [55:17] Yeah I'll take a so I think the winners are going to be the companies that have the most power and smartest supply chain operators so I think Walmart and Amazon. Maybe Target I don't know them as well do they have a you think they feel like they have a pretty dialed in. Jason: [55:33] They Walmart and Target both in their earnings said like look our inventory isn't going to be isn't where we want it it's not going to be where we want it but we we in general are feeling good and neither one lowered its guidance for holiday in their last earnings call so they both felt that they were going to weather the storm but you know below that you go look at like a Bed Bath and Beyond and they're like look there's no way we can hit our numbers with the supply we're gonna get. Scot: [56:00] Will they miss this quarter and if you miss this quarter you're just going to get worse the next quarter Seth. Jason: [56:04] Exactly exactly. Scot: [56:06] It's a poop storm now and it's gonna be a bloodbath and in 90 days yes I think I think if I kind of do the calculus on that I think those three guys win I think everyone else is net negative and. You know I don't think those three are big enough let's say they represent Amazon's kind of half of e-commerce only think about e-commerce the rest of retail is. That's your bailiwick yeah Amazon's half, yeah I could see it being flat to down five percent because. Amazon Walmart and Target doing decent isn't it be enough for to make up for the whole that it's created there so yeah so that's kind of, where I see it it's going to be the big get bigger and stronger and because they you know they have Prime, they have more technologies that this has been on their radar longer they have more containers they have more trucks they have more dollars to spend on solving these problems they're going to be the winners so that's going to be you know it is going to be I think a bad year for the small medium sized business the incumbent brands that are just getting their legs under them and you know having to kind of have a Miss effectively miss a holiday because you couldn't get a bunch of product it's going to be be a rough rough year for everybody. Jason: [57:25] Yeah no I in a way it's going to be the exact opposite of last year when covid first hit nobody obviously had Advance warning or was prepared for this and so a secondary impact was a bunch of eCommerce sites that didn't traditionally get a lot of consumer visits, got a lot of Trials because Amazon constrained FBA in Amazon head supply chain problems right and so suddenly you were looking to get your instant pot from Bed Bath & Beyond suddenly a bunch of people are looking to see what eBay had, that hasn't shopped eBay in five or ten years right so a lot of those kind of second-tier eCommerce sites got extra visits as people were. Trying new address the supply chain shortages this year I think we're going to have exactly the opposite there's going to be a ton of supply chain shortages there's going to be a lot of, news stories every day about supply chain shortages and the big players with the best infrastructure in the most advanced supply chain planning, like the Amazons and Walmarts of the world and and targets, are going to be the winners and it's going to be a lot harder for those specialty retailers and Regional retailers to compete unfortunately. Scot: [58:41] Yeah I think that that is the setup and we will continue so that hopefully that gives everyone an idea of the big talk in the industry and you were just at an industry event is this what everyone was talking about Jason. Jason: [58:55] Yeah yeah slightly less than I would have expected I mean it was a huge topic everyone understands the supply chain thing. I do think it was the first conversation a lot of you know customer experience folks and people that you know we're kind of had their head down in their own in their own Silo you know we're suddenly getting their eyes open to the fact that like. Yeah your customer experience is going to stink at there's no products on the. Scot: [59:20] Mix the CX person's job a lot easier they just you know just take the holiday off. Jason: [59:26] Yeah and so you know it is interesting though again like. [59:31] You know we may we may hit the top line numbers and it may be from a lot less items that sold more expensively. The you know category there's going to be winning and losing categories by far and again because of the consumer health and the supply chain issues, the supply chain for diamonds is looking a lot better than the supply chain for Budget shoes and so you know you just may see what jury where you know you say you sell a few things for a while, do better you know where there's extra scarcity then you know some of these low-margin high-volume consumer goods and so I think. [1:00:08] My key takeaways for everyone is it's going to be a very lumpy like the averages will be interesting we should all follow them but but every. Um retailer and every category is going to experience a very different holiday and there just is more uncertainty than there has been in the last 30 years of retail so like for anyone, to definitively say this is how it is going to play out I think is super risky because there's so many things that could go either way at this point, will consumers you know by another toy when they can't get their first choice will consumers go to a restaurant you know or not will consumers take a vacation or not. You know all of these these will they pay 5% more for something or not like there's just so much uncertainty that you know this is going to be. Holiday that really rewards people that do good scenario planning and are prepared for any eventuality. Scot: [1:01:06] Absolutely and we will keep you posted here on the Jason Scott show but hopefully this gives everyone kind of a framework to work within and we'll be updating various components of the supply pain as we get closer to Holiday. Jason: [1:01:22] And until next week happy commercing!

    EP275 - Mickey Drexler on DTC

    Play Episode Listen Later Sep 9, 2021 64:06

    EP275 - Mickey Drexler on DTC Mickey Drexler is the former CEO of Ann Taylor, The Gap, J. Crew, and is a former board member of Apple and Warby Parker. He is currently the CEO of Alex Mill, a digitally native vertical brand, founded by his son Alex Drexler. He has been dubbed the “Merchant Prince” for his successful turn around of Ann Taylor, and his dramatic transformation of The Gap. In this broad ranging interview, we cover his distinguished career, his opinion about the recent direct to consumer trends, and much more. The interview is full of juicy tidbits including: Getting kicked out of a Levi's meeting after turning The Gap into a vertical integrated brand with its' own label. His efforts to sell J. Crew to Amazon. He turned down Steve Jobs first request to serve on the Apple Board of Directors, and how he later helped Steve and Ron design the Apple retail store. Steve Jobs desire to be a direct to consumer brand. The pros and cons of intuition versus data to select merchandise. His cameo on Breaking Bad. How Old Navy was partially inspired by Targets early private label efforts. And much more Episode 275 of the Jason & Scot show was recorded on Wednesday September 8th, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 275 being recorded on Wednesday September 8th 2021 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 last week we did a deep dive into the Warby Parker and all boobs s-1 filings which was a lot of fun and we got a lot of really good conversation out there with listeners talking about digitally native vertical Brands and we thought you know who could we bring on that keep this conversation going who has experience with wholesale Brands retailers in a vertically integrated d2c brand I'm pretty sure there's only one person in our industry that checks all those boxes and it is industry luminary Mickey Drexler we are very excited to have Mickey on the show Welcome Mickey. Mickey: [1:19] Thank you for having me and I'm excited to be here. Jason: [1:23] Oh my gosh Mickey we are we are thrilled to chat with you I'm eager to get into all the juicy topics going on in the industry and kind of cover your background but we have to start with the most important thing first and you may not know this Mickey but Scott as very successful in the e-commerce industry and he's invested a lot of his earnings from that industry into the car wash industry and. The reason I bring this up is because you you have famously been on the TV Show Breaking Bad. And I think that Scott is basically the plot for Breaking Bad is that. Scot: [2:05] Yeah I'm sitting on pallets of cash right now. Mickey: [2:08] One of the highlights of my life nine takes but it was really a lot of fun and I love that show. Scot: [2:17] It is a it is a great one. Jason: [2:19] One of the best shows on TV. Yeah so yeah we could probably do a whole show about breaking bad which I'm going to resist the temptation so, Mickey normally we start up the show by letting the guest kind of tell us a little bit about their background that could be tricky in your case because a lot of us orders probably know some of the highlights of your background and your backgrounds amazing but like when you meet someone that doesn't know you like how do you describe your career. Mickey: [2:50] Well I say I'm a retailer and I leave it at that, no reason to go further sometimes people after the fact say gee I didn't know you are who you are and cetera but if they want to know then maybe answer some specific questions, but I don't give them my resume. Jason: [3:16] Nice well for the sake of our listeners I am going to break it down a little bit although I appreciate the the humility of it and you you tell me if I have a ride but like you grew up in the Northeast and and started your career in the apparel industry so you work for a bunch of storied apparel retailers Abrams and Strauss Macy's Bloomingdale's and if I ever write your first big job that I don't think that many people remember is you were the CEO at Ann Taylor. Mickey: [3:51] Yes by the way the Northeast means the Bronx to move is that was very special in my life so that's who I grew up. And my first after the three I had joined say Bloomingdale's then briefly Macy's, Then I then I decided I did not want to work in the department store business anymore and I was fortunate enough to, become CEO banjo which is a tiny company losing a lot of money owned by a larger company that happened on Brooks Brothers and probably never heard of the other companies who spoke to March around anymore, and I did that for four years and we were then taken over by big bureaucratic department store, and I decided I was never more disappointed at that point in my life I was a pretty young guy, and I wanted to leave because they didn't appreciate the business we were in it was all about bureaucracy was Alex Stewart. Who then eventually like to play towards I'm not sure who they bought but so I left I left a mess a mess I left it in Taylor. And moved to Gap in San Francisco. Jason: [5:14] Yep and then for other young kids listening to the podcast Gap is going to sound like this famous iconic brand but when you joined in the late 80s um they haven't may be achieved all of their success yet and so like, frankly you you are traded in for being that the CEO that led this, enormous expansion and growth both financially and in terms of popular awareness of the Gap and I want to say you, you watched a couple of the Gap Brands like Old Navy and Gap Kids and somewhat relevant to the conversations we have on this show a lot I think you made a pretty significant decision to take Gap from being a wholesaler that sold a fair amount of other people's Goods to a vertically integrated brand that primarily focused on making your own goods and selling them direct to Consumers through your stores do I have that right. Mickey: [6:09] Yeah yeah correct I joined Gap you don't mind if I correct details I join Gap, at the end of 1983, which is then it started as a hundred percent Levi's company they only bought from Levi's and then when I got there was about one-third of their business was Levi's, and long story short, I learned in my retail life than especially having worked alongside Brooks Brothers which was at the beginning of the decline Franklin, in the mid-80s but they were they own their label and they didn't sell wholesale them, and they did not have to worry about competitors etc etc and going on sale. [7:05] They also with the highest profit company in a relatively small conglomerate of retailers and the reason was their margins were very high. Because again they weren't dealing with competitive sales my department store experience was the opposite, if you're in buying wholesale someone else will put the goods on sale and of course today you know 30 years later plus it's the standard. [7:35] And so I decided when I got to Ann Taylor. [7:39] To own our own label over time I didn't want to deal with competitors who have the same Goods as we did and we did, to consumer or whatever you call it today and that was in 1980 1980, 1970 actually 74 5 trans legally 1980 exactly I joined them in 1980 so when I hear about direct-to-consumer today being the new heart area, it's been there has been a number of your few of us who did it, and through a profit point of view it was the only way I wanted to go not want to buy wholesale we, leave ours ironically after nearer to kick this out because they said we were copying them I'll never forget the lunch was a long boring lunch in San Francisco, and I said after I said they should have told us that right at the beginning so we didn't have to go through this long boring lunch when they when they then said would not sell you anymore well frankly I didn't really care and when you have news like that, you figure it out better than you don't have these like, so we stopped being buying wholesale from Levi's and great brand virus they were no hugely monstrous plan, and we did it on their own but that was fine and that's how it began. Jason: [9:08] That's amazing and I'm totally with you it's I talked to all these young entrepreneurs that just started a new direct to Consumer brand and many of them are under the misguided impression that it's a new business model that they just invented. Mickey: [9:21] I know well there's a few of us then and now there are many many of us, but it is what it was it was not where you could build a business and wake up in the morning and control, your inventory and your prices when I joined the apple board in, I think years later in 1999 Steve Jobs basically felt that's what he wanted to do with apple that was his first year there. And he wanted to go direct and of course she did continue doing business with Walmart and Target and all that but he became. Direct, probably the greatest retailer ever and but you know it's a standard today and there's nothing new about it in fact it's old and it is what it is. Jason: [10:18] Yeah no I tease people that the very first merchants of all times I you know made their own rugs and sold them direct to Consumer so that's that was the first Model like wholesale is the newer the newer model. And so I do so then the next chapter is going to be J.Crew and we're going to go back and talk about some of the interesting issues that you confronted in some of these places but I do want to just highlight, I assume you still follow the Gap the, I would check out because it seems like you took them predominantly Direct in a lot of their news lately I don't know you fought it but they have a partnership with Walmart for their home goods and I just saw something today that they announced that they're going to distribute Athleta which is there they're their work out a pair of brand on this doing really well through REI so it's almost like they're it's interesting that they're now adding some wholesale back to their mix. Mickey: [11:13] Yep well each company is entitled to you know they all have a point of view they have a vision and I think that's what there is is can argue with it. Jason: [11:24] Yeah no and obviously pros and cons to all of these so then you left the Gap was it around 2000 2002 something like that. Mickey: [11:33] Yes I think I left in I think 2001 yeah yeah they say I think I left in 2001, in fact September 26 to be exact. 2001 and I started at J.Crew who's counting January I think 25th or something in 2002. Jason: [11:58] Awesome and what was the circumstances that J.Crew when you started. Mickey: [12:03] Well it was a mess a complete mess by the way I know you mentioned this but I started Old Navy I do it you probably know that story right. Jason: [12:16] No no tell us. Mickey: [12:18] Well it's an interesting story there's an article in the New York Times page 4 5. In terms of some some things I never forgot that like that and I read about Target Corporation then known as they Hudson starting a company to copy the gap. And what do you do when someone wants to copy you get emotional you get crazy and then you fly to Minneapolis to the Mall of America and say okay I want to see what it looks like. And I walked in on you say probably four minutes and I said this is way way off so I was relieved, because to me everyone would sewing machine is your competitor potential, I walked out and said you know is a big research company you know they I know they do a lot of research very successful and today more than ever, stopping Chicago on the way back to San Francisco I visited. Two stores demographics would be a price point below where Gap trailer very few me we were very much. [13:29] Not expecting, and I spoke to the store managers which you have to do in this world today you speak to who deals with customers it's like I've always done that it's my rule in any case they taught me a lot of lessons, Gap was too expensive for this area things are always on sale and I knew that I pick those tubes that low-margin stores, long story short got flew to San Francisco thinking about that, check the jeans Business 80 percent of genes in America than was sold 25 years ago sold below $30 a hundred percent of our genes are above 30 dollars, so I say this is not this is not a stupid idea, for them because we are considered a little more expensive I gave 10 of our Associates, then two hundred dollars each I assign. Them to shop certain categories: Target Walmart then you came on versions and come back. [14:39] Let's discuss it in one week they all came back bottom line is, they care about product they carry about price they couldn't care less if it ended 99 Cents 87 cents as Walmart used to do, etcetera and and right after that meeting I just said we're going to do it we're going to open up, our version of it was called everyday hero, and a few people from Jenny mean who worked at Marvin's was running for the gap, Jeff Eiffel we moved over we started with a small group to do what was then had no name. [15:23] And Don Fisher was always you know he was always pretty open about entrepreneurial stuff and I said was starting his company we didn't have a name long story short, I couldn't come up with the name I was in Paris going to the airport and I see a bar on Rue Saint Germain called Old Navy. And I said to Maggie who was with me marketing I think what a great name for a company, registered the next day in America no one had it and that was the name now of course my board didn't really like name you know but to me your name your kids you're not going to have a negotiation over what you name them, we have a negotiation I hard to naming companies that have with horrible names and later on I'll tell you how we got the Old Navy from olden days, and that was the beginning first store open whole Gap Warehouse only had three names and I said, we do this and we have no gaps in five years so then the next door is called Old Navy and that's how we started today it's about probably 80 and 90% of the earnings of the Gap Corporation I'm guessing. But tremendously successful. Jason: [16:38] Yeah that has been the tide that has lifted all the the Gap boats for a while. And yeah that that is amazing you raise something that I have to ask though because it comes up a lot I work with a lot of Brands and these days I spend a lot of time cautioning them about how good the retailers are becoming it inventing their own Brands and and their first reaction is always the same is your trip to Minneapolis like you know targets not very good at this I'm not very worried right, and I think that was absolutely true back then and in many categories it still is true but I would argue that in some categories, and Target more so than most is getting darn good at this and you look today at like cat and Jack and they're very successfully competing with with Baby Gap and and you know sort of traditional brands. Mickey: [17:30] Hundred hundred percent I totally agree but you know what you're good at and the products right. And I think their inspiration I was told was the crew cuts I don't know if that's true or not I'm not the kids business anymore and I don't pay attention, but absolutely true look if it's a vision, and and the product is right and I always say the product has to be right and in their case you know the price is right well the past its product, quality of product value and that's by the way we did oh maybe that's the story in any business right product right value. Right marketing and emotional connection to it and then we had operated retail. And the style and taste is all for us it's very important. Jason: [18:23] So then we mentioned that you you started that that January a J.Crew which was a mess at the time, and I want to say one of the things you did for J.Crew kind of mirroring the Old Navy story is launched the Madewell brand there. Mickey: [18:41] Well I did that before I join J.Crew. I bought the name Madewell from a fellow named David Mullen who was it really nice company, hear that David used to work with me in wash it was a wash consult very talented guy showed me the name before I went to J.Crew, I love the longer it's very hard to name a company and the name immediately resonated with me, and I should Wanted You by Sly can't afford it, and so I paid $125,000 for the name which you know once you finish with those naming companies which I wouldn't want to do they'll charge you a million dollars will come up and bad names no offense the main companies. But but I thought the name 1937 already it had history it had a feeling it had emotion so I bought the name and tucked it away, and when we went public when we turn Jake you around, see I was there to about three or four years to you actually turn around always starts a year and a half later and that's three years later or whenever I thought it was time to start me. [20:04] So that's what we start the username and that was unlike every day unlike the everyday hero. Target this was a this was more complicated because the Old Navy was price point or two or three below gas. [20:25] This one and I might say was the first company to get to a billion dollars in sales as fast as they did until Apple get there. So it took off like a rocket at Old Navy like a rock it was really a very nice toy and maybe well was much more difficult, we took it we had a number of different people leading it, and we just couldn't get it going the right way I made a number of mistakes in opening up. Bedroom state which knows things it was real estate wasn't on Vine and that didn't work, we just didn't get our act together for at least four years in five years, and I was really upset because I said you know this is taking away from the value of our public company so we must 15 and 20 million dollars a year which I think we were maybe 15 million a year, you know you take the multiple of the stock and all the sudden you know the company's worth three hundred million dollars less because we're starting made well, so that kind of aggravated me couldn't get rid of that aggravation way things are but then some set. [21:43] I came back to the corporation he left for you or two and he was putting to be in charge of. Male and he did an incredible job and so he and I work very closely together. And I always merchandising Missouri involved. [22:06] And he did the design and he had a vision for design I had a vision well the storefront, it was kind of a I was always inspired by I think they're still around but I'm not sure a bread bread store in the village called the suvi oh maybe, I don't know if it's still there to be the bakery yes I always loved the way the storm was so we designed a store. I kind of felt like a see it was the studio I'm just actually look at a picture again we fun and we built a really I was really pleased with the store but I was not pleased with how the business was going, and some sack pinion looking at the storefront now online beautiful store and it's beautiful store goal, and emotion, and then when he came in the rest then this is starting to take off like a rocket plus woman named Mary. Who was jeans made merry new Mary knew more veggies. [23:19] And she joined us from Jay Vernon and Mary came in. Thanks Gary Pierson and she and some set and it takes people to do it we put together we became a major genes, that was our vision the best kind of jeans that not crazy designer prices and the company took off also at some point like a lock. And that was the story of Nemo. And you know all the retail to be all the over companies to Fashion they hit a wall at times and then they come back or they don't come back, and hitting a wall is part of what goes on every company I've been involved as hit a wall at some point it's a wall in any me to save it and bring it back or it or it continues to have a hard time. Jason: [24:17] For sure the side note another company hit a wall sadly was Vesuvio which is a hundred year old Bakery in SoHo I have some good news bad news they had a Hiatus and they reopened in like 20/20 so the last and I was is in SoHo they were they were open I had not heard what has happened since the pandemic and I can imagine it wasn't a great time for them so I hope they're doing well. Mickey: [24:43] We'll check it out and we'll let you know that's cool. Jason: [24:47] Awesome so then I do want to kind of just wrap up the clear stuff and then we're going to dive in a little deeper on a few of the things that we've already talked about but so today you are Alex Mill and do you want to tell us a little bit about Alex. Mickey: [25:01] Yeah sure Alex my son or Alex. Jason: [25:03] We're both I was waiting for you to tell that yes. Mickey: [25:08] Well my son started the business in 2005 13, and he just started I was very involved and I pretty much had nothing to do with it at all which he reminded me when I started here, he says you know you don't even wear our t-shirts which were famous for. And he was right I just didn't pay any attention and I probably should have but he didn't ask me really and he was a wholesale come. And we do business it was kind of cool we had a little bit of a cult following and and I'm allergic to high prices which really gets translated as too bad value, you know I don't mind high prices in certain categories or where you get what you pay for for a you know the prices are ridiculous but you might learn from his luggage or whatever from a mess, but we designer clothes in general so he went along I went along he. [26:18] When I left J.Crew I didn't think anything about his business but when some stack. Who is he quit he had a non-compete and I was his age. So we need help I hope to get jobs in the industry part-time jobs freelance because he walked away from a very very big job, and so the day his non-compete was up, I that was the day he was a beginning of a new Alex will be in some segments and do each other, and Alex was very happy that he would find some partner and some seconds considered the founder of the company he's a major shareholder long of Alex and myself, and he joined us. [27:16] And then I was very happy kind of had a job again because I was doing stuff but not doing what I love to do which is be involved in building a company Vision etcetera, so I joined I think it was about two and a half years ago I'm not even sure the day. And we had a little tiny office which I'm now we doubled the space instead, that we start to build a business and we had a vision and a woman's and Alex and I at the beginning or I would say it wasn't a marriage made in heaven, it's the it's the come one since when and it took a lot of work and a lot of a lot of help. And we finally listening I'm going to say that he's going to listening to his mother my wife about making certain that he and I get along and I did that with him, it was like another else conversation and it's been really really nice over the last number of months but it's hard. To be with your dad and I was trying to figure out is he. Someone I work with or is he my son and it's extremely difficult and he kept dealing with me as whatever I done. [28:40] And so now he's you know he's a partner along with some set and and Hussein. And we hired a team and it's very hard to start a company I had the bank of Gap in the Bank of J.Crew in my other two startups now I didn't have their back. And so we funded us elves which in a way is really good I also do want to have for the first time in my life. Too many opinions that weren't right and that was a blessing even though you know I'm doing this for a million years, if we're right we're right if we're wrong way wrong but my best board members were always people I knew anyway not necessarily on the board. But when you have a money partner which I certainly did they think about profits they think which is nothing wrong with it but, take its long-term to build a profitable company, and when you have hit a wall you succeed if you're good at it I always had a kind of ability to. Knock down and I just get right back up and I don't stop. [30:00] But some cases that doesn't happen but here we are independent Leo and not negotiating colors or Styles or what someone else thinks we should do. We're expanding in the business is starting to really kind of take off now so I'm really excited I've always been excited. It's about the taste quality I look at the landscape out there. And I think this is not a lot of things going on that I feel or what I would say are incredibly impressive there are those winners, and you all know who they are so what I'm hearing so I think we're all excited but small you know. But that's small anymore 20 people work there and we all have like multiple jobs which is good I've say snorts growing pretty rapidly, so and you know that's our mission. Jason: [31:03] My I have a some great empathy for your son Alex I'm a fourth-generation retailer and I think I can imagine poor Alex just wanted his famous dad to wear his t-shirts and he got an activist investor instead. Mickey: [31:15] What your fourth generation retailer. Jason: [31:19] Yeah yeah my family sort of started out in the in the grocery and then later jewelry business, I did want to highlight you've referenced it a couple times that you're also you had a long stint on the board at Apple and I want to say I've been, worked with Ron Johnson the number of times and I've seen some interviews with Steve Jobs and in both cases they reference you as the the retail Savvy board member and Apple. Mickey: [31:46] I met Steve in I loved Steve idolized ski and I still love him to this day, he was extraordinary and I give very slowly thinking about the way he died went through, and to excuse me per. Steve we met what he wants he gets when he doesn't stop at anything the most seductive human being I've ever met in my life, we met at a mutual friend's birthday party in Napa Valley came up to me and we start the shoes and, you don't say what's the job so long Steve you know a niche wasn't and we're talking and he. [32:32] Got in touch with me after that asked if I would join this board, and I said no I don't like public companies now I took my schmuck anti schmuck pills after the okay, because hello is that a bad word to say she's no and I realized holy shit, and I just you know I was yeah I was on a board you know bless them family board, in other words and items on a number of other boards and I get bored very quickly on boards because that's the way I am and I need to be action busy, and I'm not a technologist I don't know much about it but. So a year later he came to me after becoming come to me and said you join my board I will join Apples by Gap store, well Steve hate Sports also, but he and I said deal why because God will he be amazing on the board, just as a factor of not going along with everything already. [33:50] And he became a pain in the ass to the number of people who isn't always on Tiny going and what's up this kind of but he privately we had a really nice strong relationship. And she joined the board I would say made a few enemies on the board because he whatever he thinks he says that's it he says. And and sometimes he says it doesn't make people happy so so that's essentially what happened so in any case I join these board. And first thing he wanted me to do was to design a store. [34:31] And we had a really bad looking store and that he designed and then we got a warehouse which we used to do with my old company, and we got a warehouse you designed a brand new store in the warehouse p.m. for 5,000 square feet and. The store was really good-looking that's basically what happens students are today simple it showed off the price. And it wasn't a story that was czechia where the product was competing with the design and that was our first Apple Store, and then after that I just you know he asked me about color of iPods he always want to review the colors Etc. You know it's like you're 16 years and lives through extraordinary success and you know appreciate it I don't know you and appreciate it well he was alive and well. But just I just always you know he went to the meetings he started every single meeting for it spent most of his time on the. [35:46] And you don't find that many people and many companies they spend most of their time necessary not on product that was steamed on product, things tough he was titled in an infant in a good way in my mind you know Obama didn't call him back, one morning he wanted to President Obama to launch the first iPhone he was Furious Obama didn't get that I'll never forget that, he says how do you not call me back like this light in four hours Al Gore was on the boy houses Steve I'll get him to call you back whatever. [36:24] You know Obama told and back when you had a minute came back and says he's going to launch the iPhone pushing never did but that's what Steve wanted to believe anyway amazing amazing run, an amazing person he and Johnny I everyday had lunch and every day was you know what's the future going to hold. For apple and he the other thing he did, is he kind of made me for sure and numbers feel stupid at the end of a board meeting I wasn't in technology guys sometimes I'd say something that you look the righteousness gee how can I say that, and then you can bury yourself and say oh I don't want to disappoint Steve yeah but he was to me was a special unique gift to the world. And I miss him and I think the world misses in today. Scot: [37:18] Absolutely, because I'm the entrepreneur on the program Jason has a fancy corporate job and a title that has more words that I can keep track of the so you've been a successful entrepreneur for decades what advice would you give to an aspiring entrepreneur listening to the show like what are, distill down some of the things you've learned through there. Mickey: [37:36] I was explaining to him that every single day this we haven't really nice marketing business we do well but every day I come to work. And I reach for the sky. [37:52] And I'm trying to explain that no matter what we're doing oh he also time says I'm too critical of things or people or whatever and I said you know Alex everyday. I come to work I said every day you come to work I come to work and I look for what. Could be better not for what you write and I think a lot of people have a hard time with that vision is, where you going how you get there with the unknowns is critical, so people say well how do you do this that and the other thing and I said I had a photograph of what Gap should be I didn't in Maine. I didn't J.Crew and I actually I did yet in J.Crew and I didn't Old Navy and I didn't so I had a photograph in my mind we get sale in one Business book. Because it was actually misses you by I had to do with those. [38:56] That didn't work but yet not them to get up into the skill set whose huge toes. What you need to do and I can't speak about Instinct in other areas but I think Instinct judgment. Seeing around corners where they say skate to where the puck is going. Is extremely important in the fashion business and knowing when to go knowing when to stop when things slow down extremely. [39:30] Picking the right team is something rules that rules but got to pick the right partners and when you make a mistake in a partnership and so many of us don't do this for cleanup face up to you but. [39:46] And do something of that. You know and the bigger companies are no longer into the smaller company like this. About your all living together and it doesn't take long and when you're writing your own checks, that's a big difference when you're writing your own checks which I know most people probably don't have the ability to do, it's very different than the private Equity the joint venture etc etc but he country each business, as if you own it it's your money in and that's part of it and then you know we will passion, I say leadership curiosity I think anyone was not curious in my mind can't do well running a company, they have to be curious unless it's look like you speak about technology I just assumed the same rules. But building a retail company it's kind of like painting a very beautiful picture as to what we'll stick together you know I once went twice went to visit Ford motor. Design. [41:01] Headquarters and the first time I got was because Anna meaning with Jeff Sons yeah. Surrender they show the new Mustang this is probably seven. The co-host and I said he says what do you think of the car in front of all these people I said it's a very cool looking car. [41:26] The wheels are really big and I would never want to Market or sell a car for have one myself with a wheels are bad, I know it's kind of silly ish but it's not it's putting together a painting and there's nothing worse, there are worse things in wheels that stand out like a sore thumb so he invited me to, Detroit with designer factors Co didn't go with me which I thought says. He's no one not because of Nations and it was seven people designing the one car. Now you understand why the cars a lot of cases look like they look. Steve always wanted to talk he would have done now they were to get when I he was he was fascinated with Tesla very impressed night, from his point of view it wasn't I said I know if you remember the to see your test sports car. Scot: [42:28] Register yeah. Mickey: [42:29] I said Steve it's such an ugly looking Paris looks to me like you are pathetic it's not about the course looks you can always design a beautiful car it's about what's inside. Mechanics engineering but anyway I think. You know as for me I'm accused of being a micromanager you really better be, you better care about the wheels better care about this hear about that Medicare by recalling about he just you know we have a few new bad colors in Arabic in Arabic. The color is of opinion L and if you buy three good colors and then two bad ones you don't morejon out on the product because you have bad colors which I don't think people pay enough attention to. And I could know what I'm trying to think what else to go on. Scot: [43:23] You know I know we're running up on time but just quickly quickly so you you kind of were very early on what this kind of direct to Consumer now there's this whole digitally native vertical brand what what do you think's driving that Trend and where do you think it goes. Mickey: [43:39] Yeah I think it continues to go because if you're buying wholesale you know the pricing is all off. And I saw that when I was you know young guy you know like when I was at Bloomingdales I was 23. Alexander's department store maybe Fourth Generation member states they I was a swimsuit sweater and t-shirt. And everything else I wasn't I didn't do that for terribly wrong but for the year I was in there you are Alexander's cut their prices. In the middle of June and I'll never forget I had a couple my prices we had a policy to meet price. Young kid in the business and I was Furious Alexander's just here and now my my profits and margins. Then what to help. Because I hadn't worked out on my bathing suits that was a stupid rule but it wasn't a bad I kind of like the idea of Crisis competitors that was the beginning, what's happened to the last 30 or 40 years T.J.Maxx the most important department store. [44:58] And you know the word stimuli, we have all the discounts that and you go online and you we had a big discussion here yesterday you said well we sell this to Nordstrom Rack and he said well if it was an existing item, we want think if it isn't bad covers and they said you can't miss anything going to go online, given a look for this island yes my little bit Nordstrom Rack will whoever Valance T.J.Maxx before you see Alex Mill so the pricing. Is critical so white and a lot of what I did was also because who I always admired Ralph Lauren Bailey – pricing and I know all these things cost and so I said we can put together. A design team that will hopefully be as good as a design team ourselves if we do that I say I don't I don't want to have another problem. [45:59] So the prophets were always all the retailers are inflated in America in Goods that are wholesale purchases, because it is plant safety and cost, and here we might sell 250 you spend fifty yourself Bloomingdale's 425 and hundred twenty-five goes to 275 or $300 is the difference. In pricing so TJ Max knows that really long Ross stores. Everyone knows it and and I think that's why I don't think there's a future to be in that business. And I sit to the parks to excited family with a lot and probably not have to hear this but. Jason: [46:46] Yeah no department stores listen to our show I promise I'm. Mickey: [46:52] So I said I really don't want to see I said where you going to be in five years or ten years if everything you bought. Is available at a discount and that's the truth. So and I have friends in the business they do hello mrs. with teaching marks they do with most of the partner stories and what does that leave you and Caroline Woods is a great coach. And really smart nice person but what is forty fifty sixty billion dollars huge profits so, and really big believer must now this is where I'm standing in the luxury business is not. We have they probably can do it now via makes does. They do with brilliantly I guess the other one you know they have they can probably do it who's those customers probably like it exclusivity they like paying more money and so on and so forth but it works through that I think it does, so so I know if I knew the answer to that question with that pricing thing is huge. Jason: [48:06] No it's a it's a big issue for the industry to figure out and people that don't are going to. Have it have a challenging future I think as you've highlighted I did want to ask you a question so, if anyone Google's Mickey Drexler your you're gonna find all these business articles with your picture on the cover and some variation of this title that we've all given you the merchant Prince um and that the kind of just I hope you're okay with it seems like you get that title whether you want it or not. The gist of all those is that man, Mickey had a really good run of picking a lot more winners than losers of therefore it having the the products that that consumers wanted and you know they're there for achieving a bunch of financial success for your various businesses and I've always wanted to ask you, is in your mind is that success as a merchant is that we're you better than other people at, identifying the trends that were emerging in what people wanted or were you better at getting people to want what what you liked. Mickey: [49:19] I think it's a little box I think our industry is lacking. Merchants today as much as I've seen over the last many many decades. I don't know what it is but I think you have a sense of seeing around corners you must see around the corners, I believe except if you're a seller if you're a Discounter and you're good at it you don't have to see around the corners just have to Source right, and I have the right price and have a great way to view or but those businesses are out there I don't really know them well. But that's important in most business not enough you know, worthy I think mostly eyeglasses they sell what's true of all of us most of what we sell, are what we would call her oh it items iconic but you have to feel it you have to see it. You have to have an inch and in the instinct is incredibly. [50:39] I think I was talking to a friend yesterday and he said in his 15 year old is now color rather than know what need p is. The expanse was something I said you know it's interesting I said to Henry I said do, is there anyone in your family who is musical I always ask someone that question whoever I interview, and sure enough Henry's wife plays very good these though and Henry was a musician. [51:13] Growing up. And now here's their son they are very talented musician artist creative there's always some kind of. DNA is connection is fine and it always also depends on who works I was very lucky, I started working for a woman named King Marcin I didn't work for she's the best Fortune taste Isle and when I got to Bloomingdale's like this young. [51:42] And I was after the first day in the house was checking on what they gave me a department to run, Stand start that's it you're the buyer one department and Katie Mercy was my mentors go off to Europe together factories and I guess I learned from her, and she the best merchants in the company if she wasn't a woman she's Co she was fantastic but there is something you get. Fun styling taste that you were born with and I think that's true in stinking with anything in the world. Tonight and it's not a scientific illusion but I everyone I interview I kind of want to know what their parents did. [52:30] For what this family that might have been a grandfather and a lot of especially creative it. So so I think that's really important the other part of the question is mostly was what you're going with and then creating your maker, well there's a lot of things under the radar and if you go after it you create demand for the people just don't expose it so we have recording a items we bring in, old mr. white we doing that way of doing this and they take off like crazy because someone wanted. And understanding what someone might want and Steve Jobs has tasks. [53:17] Is all part of the skill set with meeting. I'm not too bad Commodities during this price I thought would worry Parker bids was absolutely brilliant at figuring. What's out there with the stylish kind of cool pumping where people are going to pay $95 for their eyeglasses the only thing I say that Neil and Davis I think we need to at times. Balance or if you read Tales they could probably leave me come to my newest company of record I said I think you can have one more fun and I prices and however Orange. But the most important so then just like friends but no I think you you kind of born I see, I see him every time you sit down and look at it woman and she gets it it's in her blood why she has. And she's had a chief Merchant and see something and feels it and knows it and you know and then you have to be go to the message you're not quitting. [54:23] You have to know numbers you have to get Four Kings you have to figure out how long it'll be around you know has has everything. To the end of the numbers of databases we've been doing data since with 23 years old, whatever you always needed you need to know how much to buy anything happens to the forecast and you need to know how many sizes you do but now they have another fancy name for it. Act like merchandising second you're not going to succeed in affection. Jason: [54:58] I think you just answered my next question but that's like so obviously the traditional merchandising you have this science part which is the math and the forecasting and open a by and all that good stuff and you have the intuition which like to a certain extent seems like a god-given talent the, what's interesting to me is lately some of these new companies that have been born and Amazon being a great example like they used to hire a lot of merchants in every category so that have a, pet food buyer and you know and apparel buyer and a battery by or whatever they've kind of gotten rid of the merchant title and they've gone all-in on the data so they call it hands off the wheel and they let the computer decide what to buy, instead of a merchant and I've told lesser extent I think Katrina it Stitch fix, has that model a little where she uses data to inform her product a lot more and then you think of like she in and the Uber fast fashion space is, is that a future Trend like do you see that mostly working for these discount categories is that. Mickey: [56:03] Well I think you can argue Amazon but you know I thought when when I was I thought Amazon should have purchased J.Crew. I thought it would be really smart purchase they get a culture fashion and style. I think they'd be dangerous if they could figure that out. [56:30] And so we had someone approached them and of course it was done yeah not the personally I won't be there. I think that. If you look you can't even Stitch fix success but you cannot argue with kind of goods they sell if you. I like what I do I love I love what I do and it's about taste and style and if you do that for. Many have a point of view you'll probably do well so I need you to it is really good at the Bronx Science I couldn't get arrested enhanced you G I was always really good, I think you have to be good so I guess I do all the stuff they do I do. We're just hiring people do single stitch. We haven't been there but then again we are you know my choices to be the style formation with fun and emotion I give credit to any company. Whatever they do is stand financially successful of your poems but I don't know enough about Stitch fix lots of opportunities and Stitch fix. Jason: [57:50] Chien have you follow them at all. Mickey: [57:52] Like they're wildly successful I don't follow them when it's but you know. Jason: [58:00] It seems like they're a lot more about like plugging into all the social media you know like picking up the latest trends on on Instagram and Tick-Tock and things like that and then like you know super fast supply chain 2, didn't get those Trends in. Mickey: [58:16] Yeah and then again I care about quality and I care about all the stuff maybe bit different but if they're really from Julia. Jason: [58:25] It is it's a Chinese company they don't love for people to know that. Mickey: [58:29] Yeah well you know I wanted but sourcing their secretary like giveaway Price is Right. Jason: [58:36] Yeah it's super inexpensive like some people call it disposable fashion which is probably a. Mickey: [58:41] Yeah this is not what we want to do it's a kid's business on young business. I don't know we'll see how I like you know my company's that well so we'll see. [59:01] But but no I think the maths we really need a good mind and and for me I'm a huge micro. I'm looking at. Right now jumpsuit made dead which is brand-new and we're going to sell a lot of it is you know we just put it it's kind of comes naturally if you have the big jumps in the cellar. And and so you know you always create but you're not creating months Salem I just looked at. [59:36] I'm just really upset I looked at it I see why did me five men were 87 and it's $295 I said that's important just came in yesterday to the bad mark. And usually they can get away with doing that as a rebuttal so when you got it. And right now syllables troops crossed because it's not being self so you kind of get something you kind of knowing side and sort of okay. It's just bad news and it's not us. And you have to have a sense like covers the same thing most of them look alike so that the finger it comes. I think it's an offender brand new bottle and it's made by making sure it's a really good looking car and. I looked at it I said I don't want to renew pop color something that's you know not everyone's driving it's a very good looking car and you can see it's going to be a big guy. Because it's really designed well you know part talking about it over. Jason: [1:00:48] No I'm trying to switch. Mickey: [1:00:50] It's called The Defender I like your car like this. Not to me but you work committee should whatever but you could see the second Network, Tina news needles and I think it is I see a lot of them and cars used to be a lot more interesting design, then they are too maybe it's because is definitely people decide on here maybe it's the vision see it's hard to find cars and is Towing it. You know you all have an interest in cars. No we talked to what good looking car and not a lot of them are right so and I used to collect isn't nice. But but I kind of collecting child fantasize you've been having some cool cars but they are all kind of well design. They were uniquely designed and today you know it's a different world. Marker 06 Jason: [1:01:52] Yeah no for sure and it's it, interesting there sort of both out there there's you know people that you know still go for that unique distinctive looking care about the Aesthetics and there's people that you know just want to take an Uber for, for transportation so seems like a parallel is going in the same direction as that there's you know strong stuff with a strong point of view and that's that's quality and unique and then you know there's some people that you know just want, affordable inexpensive sweatshirt. Mickey: [1:02:23] Sure was were those for sure but you know I like the integrity. And not expensive I personally don't like expensive too expensive you know I mean I know maybe this is for sure. Jason: [1:02:43] Yeah well is it Mickey we could go on for hours but it has happened again we have used up all of our allotted time and I actually think. Mickey: [1:02:53] I'm having so much fun here guys. Jason: [1:02:55] I know I know why we will record the Extended Cut and you and I can just keep chatting. Mickey: [1:03:02] Anytime seriously. Jason: [1:03:04] You're our new guest host you're in. Mickey: [1:03:08] All right listen thanks a lot I appreciate the time and the questions and the schmoozing you know I do like two shoes so this is a great shoes. [1:03:26] Never ever I was on that I was on Instagram for about a minute and I came off like I don't want to forget. Scot: [1:03:36] Okay well you if people want more you exclusively come to the Jason Scott show that's where you'll be going. Mickey: [1:03:41] Anytime. Jason: [1:03:42] We really appreciated the time and enjoyed chatting with you and until next time happy commercing.

    EP274 - Warby Parker and AllBirds IPOs

    Play Episode Listen Later Sep 3, 2021 63:43

    EP274 - Warby Parker and AllBirds IPOs  Warby Parker and AllBirds filed their S-1 registrations with the SEC in preparation of making an initial public offering. In this episode we deep dive into all the information revealed in the fillings. Surprising Learnings From Warby Parker And AllBirds IPO Filings ( Episode 274 of the Jason & Scot show was recorded on Wednesday September 1st, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 274 being recorded on Wednesday September first 2021 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot: [0:40] Hey Jason and welcome back Jason and Scot show listeners Jason we have a lot of favorite things on this podcast but you know it's even cooler than some fresh Amazon quarterly results hot new Gadget. Even some exciting Star Wars news. Jason: [0:55] No what's God. Scot: [0:57] A fresh delicious hot out of the oven S1 and you know it's better than S1. Jason: [1:02] I'm guessing to S ones. Scot: [1:04] You are right that is right we have we're very excited this week because not only do we have one s one but we have two s ones so I don't know if that's an S 1 squared or S2 or how we talked about that I guess 2's ones, and what's really exciting is one of our favorite topics on the show is digitally native vertical brands also called dnv B's and we have two of them that filed within a week of each other so that's pretty exciting so the two are Warby Parker and allbirds and before we do a deep dive into those S ones and highlight some of the things that we found that were interesting for listeners I wanted to give everyone just kind of a reminder of a great way to read an s-1, so an s-1 is. [1:52] Haven't haven't done a gone public before it's kind of like a sandwich so you have three parts you have this kind of first part where there's all this introductory stuff and you're kind of like CIA in that part and then you get into the delicious sandwich part of the the meat and potatoes of this one which is commonly called management discussion and Analysis they called em DNA and that's the best part because really management actually writes that now they have a lot of guidance from lawyers and investment bankers and PR firm in all this Jazz but it's really most of the times it is the founders you know putting pen to paper and describing the business and their words then after that you have the lawyers kick in and then you have a pretty good chunk of risk factors and then the accountants kick in and you've got your your your Gap financials and all that stuff and all that's interesting but if you're going to I always start a nest one from the middle out so I like to read that mdna first because it's the best way to hear about the company from the founders. [2:54] Now Warren Buffett and his Charlie Munger they always kind of famously start at the back of this one and they like to start at the audited financials and that's kind of how they look at a business and that's important but especially for these I think it's pretty interesting because you know it tells us why the founders do this dnv be thing how's it going how do they think about their business what are the key metrics they're looking at inside of there and I think that's particularly relevant for listeners of this show because you can learn a lot you know these businesses may be there ahead of you or behind you and your scale but it I always learned a ton about. [3:34] You know what other operators are doing and thinking about their business and you pick up a lot of interesting new tidbits there may be things you like and don't like that you can add to your repertoire. Jason how do you how do you peel into a delicious yummy new S1. Jason: [3:49] Yeah well I mostly take your advice that I guess to two alternative views is just skip the s-1 entirely and wait for the retail Roadshow and so you can kind of watch a movie instead of have to do all this math and read. Scot: [4:02] Yeah I like the retail Roadshow too but sadly it comes weeks after this one so this one is like an appetizer before you get to the movie. Jason: [4:10] Yeah and II may be uniquely odd in this regard but I do find it amusing and humorous to read the risk factors. I know they have nothing to do with the business and weren't written by anyone that has anything to do with the business but I feel like. They're increasingly more creative in the voluminous wig west of apocalypses that could. Could strike the Earth and I want to say like of the hundred seventy one page Warby Parker S1 about a hundred pages of it is the risk factors. Scot: [4:42] Yeah, yeah and I mean it is fun to read but you're taking the right approach at it what drives me crazy is actually went through and looked at a bunch of the headlines for both these companies and I would say about 1/3 to 25 percent of the. Press that covers you things you know to be and I don't know if this is just lack of understanding or clickbait or some combination of those things but they always pull out the risk factors so you'll see you know allbirds is worried about Nike as a competitor and you know and then you're like what did they read about that and they've just pulled out a the competitor list of the risk factors well the lawyers are saying you know if anyone has ever sold a shoe put them in the risk factors you know it's not like it's not like the founders in their own words are staying up late at night worried about Nike but maybe they are but. Most of that stuff is not the founders words it's lawyers kind of saying you know here's a checklist list everyone that you've ever think you thought you've competed with now that's their guidance. Jason: [5:42] Yeah I mean the list of competitors isn't remotely shocking it's more of the zombie apocalypse that makes me chuckle. Scot: [5:48] Yeah and now there's all these, yes every time new legislation comes out you have to add a risk factors know it's like you know GDP our cyber security we use cloud computing that could go down we it's kind of like you have to think of everything that's ever happened and you want to cover it so that if you do get sued you can say well it was a risk factor you should have known we warned you. Cool so we flipped a coin and you are going to kick us off with a deep dive into or be. Jason: [6:21] Yeah yeah so we'll jump right into it and we'll start with some of the financial metrics per your point is pretty interesting because these are. Private companies they don't necessarily disclose a lot of this and so you kind of go from like a pretty vague view of these companies to a pretty detailed View and if you're some other DMV be that still private like there's great benchmarking data in here so Warby Parker. [6:48] 20/20 in this is all complicated because of course 2020 was an anomalous year 2020 revenue for Warby Parker was just under 400 million in sales so 393 million and kind of to give you a progression they were 272 million in 2018 then they jumped up, 370 million in 2019 and then you know a much smaller jump up to three hundred and ninety-three million in 2020. The more eye-popping number is they have six months of data from 20 21 and they're already at 270 million in 2021 so if you kind of compare first six months of this year to first six months of last year. Last year there were 176 million this year there are 270 so they're definitely seeing a nice clip of growth. And obviously as you grow bigger you would hope that that scale would help you with profitability when you're you know small and still you know in growth mode it's sometimes hard to make a profit, and in this case. It doesn't appear like they've achieved that escape velocity where they're starting to turn a profit yet like the gross margins are. [8:00] Are in a reasonable ballpark they're pretty consistent in the kind of 658 to 60% range and so they are generating. Net positive ebit has but they basically have had a net loss every year except 2019 when they broke even. So what's a little worrisome about that is. [8:26] You know you like if you look at 2018 you said hey they sold 270 million and they lost 22 million on it in 2019 they sold 370 million and they broke even. Like that's looking like a pretty good Trend that scale starting to help them with their profitability but then in 2020 where they had a lot of extra costs from covid and as we'll talk about in a bit they're somewhat store. They were even bigger 393 and they had their biggest loss ever 55 million, and they're doing better this year but they're not on a path to profitability this year either so they're the on the 270 million they've sold this year they've lost 7.3 million. Um before I jump further does any of that financial news sort of surprise you at all Scott or does that. Scot: [9:17] Now I have a different opinion but well we're going to do a little kind of analysis again. Jason: [9:22] I like it cliffhanger. Scot: [9:23] Yeah yeah. Jason: [9:24] So one of the interesting things well a all these digital native Brands you start off by like generating some buzz and selling some stuff to people that are already friendly to you and it's super easy sales and and cost to get those sales is very low but then pretty quickly all these companies go into digital advertising mode and they buy ads on Google and buy ads on. [9:47] To grow quickly and the first ads they buy a relatively cheap because, that they can you know Target a very specific audience and there aren't a lot of other people buying that exact same audience so the, the cost per ad is low and so the the customer acquisition cost can be pretty reasonable but as you get bigger. [10:06] You have to buy a bigger chunk of audience from Facebook and more people are competing for that same audience and it's a reverse auction so you have to pay the most to get the ad and so growing purely on this digital ad business. Pretty challenging particularly when Google and Facebook are so good at optimizing the the the maximum cost per ad and so. For almost every DMV be we've ever talked about they they have trouble scaling and they almost always Implement some new tactics later in their evolution to kind of scale beyond the digital ad phase and so in war Beast Partners case they were one of the first retailers to say, the MVPs to say hey we need to open a bunch of stores and stores can be really profitable billboard to help dramatically improve our customer acquisition costs so by 2018 they already had 88 stores, and right now they have a hundred and twenty-six or a hundred forty five stores so so they have a reasonable Fleet of stores that has grown pretty pretty quickly. Obviously there's a lot of extra costs for running those stores and obviously those stores didn't do particularly well in covid. [11:21] So some of the interesting things about the stores is that like in 2018 sixty percent of the revenue came from e-commerce forty percent of the revenue came from retail about the same in 2019 but as they jumped up there store counts and 2020 that. So in 2020 sixty percent of the revenue came from these retail stores 40 percent came from ecom's so the store is really are becoming the primary acquisition Channel. It's super interesting to look at the. [11:54] The unit economics of a customer how expensive it is to acquire a customer how much money they make on each customer has sticky each customer is and different s ones you know give, different granularity in case of Ori Parker they reported a customer acquisition cost so they said that in 2018 they spent $26 per customer to acquire customers. In 2019 they said they spent $27 to acquire customers and in 2020 and the pandemic influenced year they had to spend more they spent $40 per customer to acquire customers now put a big Asterix on that there's some controversy will get to in a minute but. If you take those numbers on face value those are pretty darn good customer acquisition cost for this kind of business other. [12:42] Kind of did you a native vertical brands that have have done it s one have disclosed some kind of eye-watering Lee expensive customer acquisition costs and so famously like Blue Apron was paying $400 a customer to acquire customers so so even $40 a customer it's pretty reasonable to kind of put that in perspective in 2020 they were getting about 218 dollars in sales per customer which is a little over two orders, um so the the the unit economics are potentially viable. Except for that sgna line and all the expensive advertising that they're having to do which is ultimately driving that those those net losses. So those were kind of my big. [13:31] Takeaways and I alluded to a controversy friend of the show and former guests Dan McCarthy who's a assistant professor Emery and one of the true gurus and in clv um he looked at this as one and at first he was like wow that's a really good customer acquisition cost they should be commended and then he like started reading the fine print and they've used a novel definition of customer acquisition costs they've divided all of their expenses by all of their customers and. About sixty percent of their customers are returning customers so in theory. You shouldn't be dividing all of your digital marketing by your total number of active customers you should be dividing it by the new active customers and that's kind of the traditional definition that Dan and most of the rest of the world use we don't know what that number is for Warby but it's probably a lot higher than the. Forty dollars that would be disclosed based on this kind of unique definition of customer acquisition costs. Scot: [14:39] They did they kind of elaborate on that or. Jason: [14:44] No they didn't at all. Scot: [14:45] And easier he just kind of picked it apart and like there was no. Jason: [14:48] Yeah like they like there's not enough data in the s-1 to try to estimate a. Revised customer acquisition cost now what Dan has done in the past is he's gone a hold of credit card panel data. And kind of backed into like customer acquisition cost by looking at the the. The spend from you know the from customers I haven't you know I don't know that he's done that analysis yet for these guys are the even has access to the data to try but. Yeah so at the moment we don't know what their khakis I have to be honest you like even if. You you kind of like double it because you say like oh they should have only been chart you know counting all these costs against the 40% new customers and not against the hundred percent active customers. You're still at like 80 dollars which is expensive you you can't make money spending $80 for a customer that you only sell $180 to. It's still better than a lot of these other companies that we've looked at. Scot: [15:58] The worse is Casper were the cactus a good couple hundred dollars higher than the mattress. Jason: [16:04] Yeah and I would say. Like these guys have about the most mature store model of any of these companies like Casper's up there too but the next company will talk about allbirds has a lot less stores so, you know if the opening your own stores is the way to lower kak then you would expect to see it in Warby Parker's S1. And my my takeaway from this is. Either you have to get to a much bigger and you're going to say something in a minute that potentially disagrees but either where we Partners hypothesis is you have to get to a much bigger number to get profitable. And so maybe you know instead of one or million run rate I need a billion dollar run rate. Or you need an alternative customer acquisition strategy beyond your own stores and digital ads which are the two tools warble uses and I would also argue where B is. About as good as it gets at sort of organic demand generation and they do they do great like social they do gritty like they do all the other guerrilla marketing tactics so like. [17:15] Um I would you know if they're not profitable on 390 million with their type of product it seems hard to imagine that someone else with the same type of product. Is going to do much better because they seem like a externally they seem like a darn good execute. Scot: [17:37] Yeah isn't in the die where category is dominated by the luxacore Oslo Exotica and they own like everything right so they do they have you know they have a licensed almost every frame like. Jason: [17:50] Yeah almost every designer brand you've ever heard of is a is actually like license to Exotica. Scot: [17:58] Yeah then they own the. Jason: [18:00] And they own a bunch of the chains of retail stores. But they also do wholesale so Exotica like both sell all those license frames to the third parties. And they sell through their own stores, and they sell at a way higher price point than Warby Parker so they have way more margin like you know part of the premise of Warby Parker is the eyewear should be affordable so their average per glasses is $95 whereas. Like that the aov firm exotic is going to be much higher. Scot: [18:33] Yeah I do I'm not a customer but I knew I do know people that are and they do tend to buy more I've heard him say is anecdotal but I've heard him say especially women they'll say you know the prices are low enough I can buy a two or three different pairs that kind of they almost become accessories at that just kind of interesting. Jason: [18:48] So that's what I was hoping to see right like you go man I've been part of a frame cost $500 I can't own that many frames but if they cost a hundred dollars I might have different ones for different outfits right or. Right and so yeah like. Could their average order value be much higher but on average they're only selling 2.14 pair of frames per customer. So they're like again frame is $95 their average revenue per orders $184. Um so they're not necessarily like seeing a huge kit I'm sure their customers like you describe but they're not there are apparently are not enough of those customers that that's. [19:28] Change dramatically changing the economics also where we park our his kind of expanded to be a vision care company rather than just eyeglasses so they launched contacts they have optometrist services in all the stores and you might go oh wow I wonder how those things are contributing and at the moment / this one they're not, like the the all the non glasses products cumulatively are about one percent of Revenue and all the Professional Services are one percent of Revenue so these the the eyeglasses are 98% of their business now maybe that means there's a lot more growth there. [20:05] But like my so my overall take away. These numbers did not surprise me in terms of Revenue it was about exactly where I would have expected I wasn't sure they would be profitable by now it wouldn't have surprised me if they were so it's a little concerning to me. That they're that they're not. Again if a ton of this loss in 2020 is because of the pandemic and they really did break even on 370 and if they find a way to end up profitable in 2021. Um I'm their biggest Revenue year ever then you know that that probably looks pretty good but I can tell you a ton of people were shocked by these numbers a ton of people thought Warby Parker was much bigger a lot of people were speculating that they were near or over a billion dollars in annual sales which I did not view is very likely and so I think this is kind of a. [21:01] Glass of cold water in the face of a lot of the DMV be Fanboys and d2c Fanboys that like these guys are, are basically the poster child for that whole segment and they're better than most of the other ones and you know even they do not have. Home run financials and so you know frankly like this this bodes poorly for the financials of a lot of other like apparel DMV bees that we haven't seen yet. Scot: [21:33] Well I guess my seemingly controversial take is when. You know when you talk to these investment bankers there's all of this data that indicates that you should really focus on growth and not profitability if you're if you're if you're in a category like this which you know the pitch is there's this new way to build a brand it's direct-to-consumer it's digitally native yeah we're having some stores so by focusing on ibadah you're essentially saying we were making profit and we, need this we don't have anything to spend it in essentially because it's just going to kind of move over to your balance sheet especially when do an IPO you're in a load of the balance sheet with presumably at least a hundred million maybe more so. When you when you look at the data especially at this scale it's much better to lose money or to not get profitable for years because. You want to pump all that into growth so every dollar you can drive into growth gets a much bigger multiple than a dollar that goes to the bottom line. [22:42] So yeah so that's that's why and then the other challenges once you're profitable. It's kind of hard to undo it the classic example is Amazon in our retail world you know how many times have you and I heard retailers complained that Amazon is a profitable this is when they weren't profitable today they are only say they're not profitable, eventually Amazon got to the point where they just couldn't not be profitable so but you know for a good kind of like, I don't know 20-year run their they weren't profitable so they were the extreme example of this and it gave them much more leverage over like a Walmart who had been printing ibadah never got used to it and got valued off eBay doc then you can't go in and say, there's a new disruptor and hey everyone we're going to we're going to stop being ibadah positive and growing even on we're going to focus on the top line to you know our spend. 500 billion on some fulfillment centers so it yeah I think it's appropriate and I'm sure you know the risk factors that's going to be probably one of the first ones is we. I don't plan to make money and we may never make money so yeah so I think it's actually. I would almost expecting to be losing more you know if I look at kind of 21 so a lot of these. [24:04] S ones they do a six-month view because they don't want to update it every quarter its kind of pain wdesk one while you're in process so they'll do it like a six-month you and I believe their six-month view was 270 million Revenue so that put them in a 540 anyone's is that what it was the okay. Yeah and then loss is 20 that's even a lost that loss of seven so losing 14 on that that's. Jason: [24:31] The well the even has our positive by the way the it's only the net loss that like so like they have they made 20 20 million ibadah on 270 million in sales in the first six months of this year so that's. Scot: [24:43] That must be the way you're some accounting the other thing that's really frustrating is a. Jason: [24:48] They have all sgna below that you badal line which is weird to me at least I don't like. Scot: [24:54] Yeah that is weird. Jason: [24:56] That's that's why you got from this yeah that's why you got get from this positive ebitda to this negative net loss. Scot: [25:06] Yeah this is one of the ways Amazon lost money for so long is they would capitalize the leases on now it's become an SEC rule I think this gets kind of the edge of my accounting knowledge. Jason: [25:16] Yeah and they didn't there was not like detailed disclosure about the real estate so I that is an interesting question how they finance these stores and do they own them and all that stuff but. Scot: [25:25] So I would almost say. As in a potential investor I'd rather get to a billion dollars faster and have a negative ebitda a light you know at a 500 million they had like a hundred million ebitda law side. I actually kind of think that's okay especially if they could grow faster. Jason: [25:44] Yeah and so I'll just say I generally agree with you and I certainly get the argument about profitability the the bigger concern for me is there an 11 year old company that's executed about as well as you can execute done all the things that the talking headset are smart to do and they only got two with a super compelling value proposition and very high MPS scores and they still only got to 390 million so I like my biggest cautionary take away from this whole thing is it's way harder to get to a billion dollars then people realize and none of these companies have done it not one have them have gotten to a billion dollars in run rate unless you call like white cloth digitally native vertical brand. So I do think scaling is hard and if it's hard for these guys it's going to be a heck of a lot harder for these why you know companies that want to be super Capital light and not have stores and and all of those things and I well I. Don't over worry about the profitability I will tell you the unit economics are mildly concerning their making a custom product like they have to you know make those lenses for each customer and if they're having to spend $80 to acquire a customer that only half their customers are buying a second time they're only getting a hundred and or 218 dollars in revenue from each customer and they have to make a custom product in that it just like. [27:13] I'm not saying they can't get to profitability at a billion dollars but it's. It doesn't look like a home run business I could it still could be a good investment right and I mean as long as there's someone that's willing to pay more for your stock after you own it not saying the stock won't do well at all but it doesn't look like. A company that's likely to just you know generate like obscene free cash flow like Amazon does. Scot: [27:40] Yeah I bet if you looked at a kind of store cohort you'd be happier with the profitability and maybe that was something. Jason: [27:49] Yeah I would have loved to see that in this one and obviously they didn't put it in there. Scot: [27:53] Yeah you know and and yes so they must have been advised that the institutional investors aren't going to be that concerned that I think. I think they're actually close enough with the lines are the lines are converging so you know you can kind of see if you just kind of. Plot them out you can see they'll cross no get profitable because they're already been up positive So eventually they'll get to that net loss off when the lines are diverging like Lyft and Uber when they went public they had to spend a lot of time in there s one talking about well we know our lines are diverging but it's because we're if you take our cities that are over a year old they're very profitable and the reason our losses are growing faster than revenue is because we're opening city so fast and that's how investors got comfort in that example. Jason: [28:37] Yeah and their lines are diverging from 19 to 20 now they're going to say well but that's covid-19. Scot: [28:43] Yeah yeah that's project I could see that. Jason: [28:44] No I'm sure does yeah and especially again because stores. So Scott what did you learn from the allbirds S1. Scot: [28:56] Yeah allbirds was it was a good read I enjoyed it it was different you know so I kind of appreciate that having read a lot of these it was less dry of any S1 especially the mdna section was felt like the founders had definitely put their heart and soul into it I don't know if you do you listen to the podcast how I built this they. A really good episode on there and you know the thing another thing I appreciate about allbirds is there's consistency there every time you every time I hear one of the founders I go in a store have an online experience Packaging. They're very purposeful and brand message is very very tight in and until you try to do that it's hard to appreciate how hard it is to execute on that so, so I just really felt like that was interesting that even this one kind of landed on me as if you know the same vibe that I got from the store and the product and everything so that was really cool and kudos to them on that probably the most interesting thing about the allbirds S1 is they try to kind of tilt it and they say look we're not going to do an IPO we're going to do an S peo and what they're essentially doing is saying we want to elevate the discussion and talk a lot about sustainability and so they call it a sustainable public Equity offering and spe now I'll get into more of that but I wanted to go into some of the numbers first. [30:26] So on the number side there 2019 Revenue was a hundred ninety-three million and then in 2020 they did 219 million so so that's 13 percent year-over-year growth. [30:38] So that was interesting to me and then they it has accelerated from 20 22 21 looking at the six month period to 27 percent, they unfortunately there they've got a fair amount of international business you've got this kind of no Financial impact of currency conversion the FX is what they call it so do their 25 or 27 depend on depending on the currency situation but let's call it mid-20s and. So that's interesting so they've got accelerating Revenue growth which Wall Street loves to call that ARG ARG and then they broke out digital and said that it was 89 percent of their business and in 2020 that was a hundred ninety-four did you see that going down because part of their use of proceeds is opening a lot more stores they have 27 stores as of the IPO so June. [31:33] June 20 and then I've been 21 and then they have the pretty much say you know one of the we're going to open a lot more stores and it's gonna be a big push for us they also are losing money they're losing about 40 million a year so kind of twenty percent of Revenue is being lost which kind of feels you're going to lose money you might as well lose you know twenty Thirty forty percent of of Revenue to accelerate so that felt more in line with kind of what I've seen is public-private kind of vc-backed company coming into the public markets couple highlights on the other metrics they talk a lot about how their nudging gross margins up they in 2018 gross margins were at 47% and then moving up to 51% and a good expansion there on the margin side that's pretty typical as you scale and you start to nail down with any kind of manufactured product there's definitely margin benefits of scale right because you're buying more pallets of wool I don't know what we'll comes in sheep's of wool and you're getting more you know your. Paying off your fulfillment centers and you're taking a lot of these fixed costs you just putting more stuff through them so on a unit basis it drives in Crete drives down your unit cost just driving up your gross margins. [33:00] They were they were much more silent on cackle TV than what you saw with Laura B and so some of the data they had was they try to repeat customers and that number has gone up and. 2019 it was 46 percent of their revenues from repeat customers and then that was up in twenty twenty two fifty three percent they last raised a hundred million on 1.7 billion and I'll come back to that and then let's see the biggest thing about their IPO I hinted at the top with this spe oh is there all about sustainability and it's pretty interesting because some people they just kind of throw that in there in the hopes that there's the public markets there are increasingly large number of either, purposely built vehicles for investors that want to focus on this area or. [33:55] There's a big investors that are moving this way one of the biggest public investors is called Black Rock and they run out, huge massive amount of capital most of it in mutual funds but I think they have some hedge funds and whatnot and their CEO is basically put a Line in the Sand and said by can't remember the year but let's call it 20 30 or something like that they are going to shed any investment it doesn't really have kind of a framework around sustainability and you know. What people uses This Acronym ESG so environmental social and governance in essentially everyone wants companies to to self report what they want to do across those three dimensions and even the SEC is started kind of hinting and recommending that companies that they're going to start doing some things here and requiring them in things like us ones and then, the thing that's really interesting in a public company that I didn't learn until I was kind of deep inside of one a lot of these mutual funds so you go public and you have this new set of shareholders that are largely got mutual funds you've got index funds and you've got hedge funds and then retail which would be individual people like buying to their Charles Schwab well the mutual funds in the index funds when you. [35:17] When every year you put out these different things that you want your shareholders to vote on well they they don't like to vote on those things they like to defer that to a third party and there's several of these third parties once called ISS and the other ones called, glass Lewis or something like that and these third parties therefore become very powerful because they aggregate a lot of the, you know because these decisions are referred to them they thus aggregate a lot of power from your shareholders and they are really starting to get where they are they're saying you know even that's going to be kind of the first Domino to fall I think where they're going to say hey the recommendations we make on your board and comp and all these things that they have to opine on to the, to to the shareholders that have Outsource that to them they're going to really focus in on ESG so so it's a big movement and there's a lot of even CNBC runs like a every other day segment on this topic because it's become such a big big deal and you know I actually think it's good I think you know you would as a as you know. [36:24] Public means transparency and I think companies should be transparent about this stuff and if if they say you know I don't know where we're a liquor company and we're not really focused on this that's fine or if they say we're all birds and this is going to be a huge differentiator for us that's fine too it just you know at least let potential shareholders know where you are on the spectrum of things okay so that's the background the. [36:51] So these guys say look we we think this is so important we want to put a stake in the ground and we've come up with 19 criteria that we hope we're going to be the first we're going to kind of self rate ourselves against these criteria and they fall against, cross effectively two categories for each of the es and the D environmental societal and governance so it's things like you know they want to be carbon neutral they're going to like an environmental they're going to favor vendors that that kind of have a similar carbon neutrality and sustainability mindset to them and on the governance side they're going to have more diversity on their board and those kinds of things. [37:31] One of the interesting things they do explicitly State and this caused a lot of noise on Wall Street is they when you go public you get all these people there's kind of this this literal they call it the book so let's say you're going to sell a hundred million worth of shares you do your Roadshow and then you typically end up with maybe a more orders than you have shares she'll get 300 million so one way to you have an allocation problem so one thing you can do is you can just cut everyone back to a third and you can say well you want to 10 million now we're give you three that's how you could Jam 300 million of demand into a hundred million dollar opportunity well these guys have said is we're actually going to your allocation is going to depend on where you are as an investor as it relates to ESG so essentially they're saying if you're like one of these companies like BlackRock that that is really kind of pushing the foundation there we may give you your full allocation but if you're this kind of hedge fund that doesn't really even have a website and no statement on this then you may get no allocation or a smaller size allocation so that was pretty interesting that's the first time that's been done and that that was kind of. [38:37] Pretty interesting on that so encountered an actually mentioned sustainability in the s-1 over 200 times which is it just shows how important it is to them and you know a lot of companies. Tried this out but allbirds was founded with this right the whole idea of allbirds was could you find sustainable products to make a shoe with and they started with the wool even the soul is made from a plant-based material, if it was obvious like she shows her something to remember what it is. Jason: [39:07] I Scot: [39:09] But it's not rubber it you know it's not a you know there's two types of rubber there is a plant-based rubber from a rubber tree but most rubber is obviously from a petroleum-based so the other thing I thought was interesting is the essentially layout they have five pillars essentially and they basically say hey here's our five pillars we're going to be product Innovative platform Purpose Driven brand with an inspired voice. [39:38] Connections with our repeat customers around the globe so so Global and repeat customers are important to them vertical retail distribution strategy robust infrastructure creating a platform for scale the sequence of those is pretty interesting because again the first one is product Innovation and then second one is purpose-driven and that's where they capture a lot of the ESG stuff. [40:00] The I thought for listeners this would be the most interesting one is vertical retail distribution strategies I just wanted to add one will highlight here are digitally LED vertical retail distribution strategy combines our digital offerings with our stores so we can meet customers where they are delivering value and convenience with our store serving as brand begins our company was born online from the outset we developed a direct convenient digital platform for our customers we opened our first store and 2017 have since been expanding yada yada so and then they wrap up and say in 20 as of June 30 we 20:21 we had the ability to reach up to 2.5 billion consumers in 35 countries across our digital and Retail platforms so I thought that was pretty interesting where they're basically saying this D and B, be thing even though we're at a relatively small scale we think it's still important part of our future and stores are really more of a brand, front face to the digital back and so I thought that was interesting, let's see that some data on repeat analysis but you know the. [41:10] Those are the highlights they that is really confusing table where people bought more than their repeat purchase rate went up. [41:19] I kind of get wrapped up in a chicken and egg thing there because like just by buying more haven't you already made your repeat purchase go up like I couldn't unpack that in my head but I need and up figure that one out for me look at a secret credit card data my analysis on this one so that those are the kind of highlights my analysis was this one was shockingly smaller than I would have thought you know I. I kind of backed in this because I had heard that valuation of 1.6 on their last they're kind of in this unicorn status here 1.6 billion in your like okay a lot of these Brands you look at kind of public comps you get 325 x as an e-commerce company so let's give them a generous valuation of 5x so they must be three or four hundred million and then. Turns out they're kind of in this lower 200 or 300 million scale so that was like well they must be growing at a crazy Pace because if you're going at a hundred percent then you can still get a really nice vault. A super-sized multiple like they must be that makes them hopefully even higher right so there like a times multiple but they're really not they were going 25% so it's kind of a bit of a head-scratcher for me and I'm really curious to see how the IPO does because I kind of assumed I'm not smarter than than all these investors have looked at this and put this price tag on it so I must be missing something so you know the things I think I may be missing. [42:43] You know there's there's a lot of talk they've partnered with Adidas and they're definitely going after the running category and so taking on Nike if you can build anything that's, no one 20th of a Nike that's a big brand so that could be people could be looking at this and seeing the optionality of that is this could be you know counter to Nike this ESG piece it could be that there is an supply-demand imbalance I think. [43:15] I think this is definitely the case where there's a lot more ESG aware dollars looking for places to invest than there are places to put them, so that could be a factor maybe there's some bullish bullishness on the store business where people have done models they say well if they're at, 25 stores and they go to 250 that's going to the growth is going to accelerate a tremendous base so you know I kind of swirl all those around and you know it is interesting so I then I kind of put myself and say well if I was going to be with Nike how would you go about them and Nike doesn't have a lot of weaknesses and yeah they're ten years ago you and I would have said while their weaknesses are not going direct to Consumers but they've largely fixed that right and you've got a lot of you've got a whole deck on that that's excellent so that's not a weakness anymore and but you know Nikes weakness is could be there is a, you know and I don't know any facts on this it's just there's a lot of noise out there right that there's these Chinese labor camps that their products are made in and these sweatshops and children making the shoes and then certainly so there's there's kind of that that they're kind of unclean sourcing if you will. [44:32] People claiming it I have no idea what's going on there and then you know there is an argument to be made that Nike to my knowledge hasn't done a lot to say wow our products are sustainable in these ways is just really isn't their thing so so it is a clever way to attack Nike and maybe it's actually a combination of all these things that investors see and they say we think this is a pretty clever way to attack Nike they're going to get some market share because we think it's important to Consumers it's important to us and they kind of scroll all that together and that's why it gets the bigger multiple so I may be curious to see how the IPO does to see if, that multiple holds up or in a there's definitely something going on there or maybe it was just an anomaly in the private Market. Jason: [45:20] Yeah and in both cases like the. The economics of the IPO aren't really revealed yet right like we're a ways away from from like Target prices and like understanding what the valuation is going to be for the IPO. Scot: [45:37] Yeah yeah you know these guys that could have effectively a Down Round where they essentially say hey we want. Jason: [45:42] Both have raised a lot of money at some like reasonably High valuations. Scot: [45:48] Yeah and you know they probably wouldn't be going public if the bankers weren't telling them they're going to get. Yeah I really nice mark up unless there was some desperation reason and I just don't they're not burning enough Capital that I don't think the existing investors couldn't sustain them for years so so mi bat is the bankers think that they're going to do really well and we'll see a big pop so it will say. Jason: [46:18] Yeah well if you think so a I would say like one of the things that encouraging so a one thing a few things to remember that are different between these two companies is allbirds is much younger than Warby Parker so I want to say Orbeez like 11 years old allbirds is like 5 years old so there earlier in their evolution that 27 stores versus a hundred forty five stores and that's a. A huge difference because a big expense in having stores is advertising to get people to your stores and you know. Beyond the digital advertising which is very expensive per customer like traditional advertising is much less expensive but you have to buy traditional advertising. Based on a metro area and when you only have 27 stores it means basically you're buying an ad to that getting amortized for a single store whereas when you have a hundred and forty-five stores you can have six stores in a a big Metro and that same ad is driving customers to six doors so my first thing I would say is. It seems like they're committed to a store strategy but they're early in the face like they could get an ice pop as they open more stores because all of the marketing and advertising that they're already doing spending money on, will work much harder when they get to a little bigger feet of stores and the. There are economies and scale of running a fleet of stores versus at 27 stores they're probably pretty inefficient. Scot: [47:48] Yeah they talked about how they've had they've invested in some distribution centers into the store so they're probably over distribution Centered for you know 25 stores. Jason: [47:58] So I do think the stores thing is encouraging, um I always am uncomfortable on the whole Purpose Driven thing so because I guess I'm going to mines and you didn't mention it but I think one of the novel things about them is they're one of the first companies to go public that's a certified B Corporation. Scot: [48:16] There's several others so there's that brand for girls nothing to you. Jason: [48:28] Okay well it's I mean regardless a hundred percent think as a marketing tactic that you're a hundred percent right like there is a cohort of customers that really care about a variety of these different missions and Nike doesn't particularly appeal to a lot of them right and so. Kind of providing a viable alternative you know is certainly a way to win a segment I do think. They're very credible like they've been talking about this this sustainability purpose since the very beginning they've invested in it the shoe is more expensive to make because of some of the sustainability choices that they've made so it's not just kind of. [49:12] Ecology washing on top of a you know a greedy brand and like I think their claim in their in their last one is that the the shoe has a like 30% less. Less ecological footprint than a traditional shoe and I think traditional she was code named for Nike by the way. So so I do think they are they are credible in their Purpose Driven thing and there's a. At the moment there are all these surveys of consumers that o gen Z is way more purpose-driven and and way more so than older cohorts they say that you know they really care about a brand that aligns with their goals and they care about the ecological issues and ethical issues in all of these different things and it feels like Auburn's is well positioned to cater to those customers so superficially you go oh nice it's a. It's a growing favorable Trend in there a strong executor at it and I think some of that is legitimate. [50:16] But in the back of my head there's this this famous academic paper from like 8 years ago called the myth of the ethical consumer and basically all young consumers have always said in surveys that they care about these various missions but when you look at their spending habits, there their convictions are a lot less strong than their stated preferences are and so I do I worry. [50:43] About completely hanging my hat on consumers doing the right thing when they're there. [50:50] Happily buying a lot of Nikes obviously I did also think it's interesting. Obviously the unit economics are wildly different than Warby Parker because of the nature of the product but they have 3.3 million us consumers worry Parker has two million consumers despite the fact where we Partners got this way bigger Fleet of stores and has been marketing for six more years so, so they are getting decent reach, both companies disclose their MPS scores their net promoter score and and they're both astronomically high and allbirds is even higher than Warby Parker so they. They're making their customers happy. They're doing well the one thing that jumped out at me as a opportunity is for allbirds that would be harder for worry Parker is. Okay you start out purely online and you're growing through digital ads and then you start opening stores and you invest a bunch in opening your own stores what other levers could you pull if you need to get your customer acquisition cost down. And it's not obvious to me what the big ones are for for Warby Parker, a play that some similar companies to allbirds have run is expanding in a wholesale once once they sort of reach a plateau and allbirds absolutely could do that as well and so it again my takeaway from both of these companies is. [52:17] Scaling is way harder than the the Twitter DTC Universe realizes they all want to imagine these companies are much bigger than they are because they've raised a bunch of money. It turns out raising a bunch of money doesn't equal winning a bunch of customers not saying these two companies can't be wildly successful in win a bunch of customers, I'm just saying it's really hard it's a huge competitive advantage to be a big company that already has a bunch of customers. And it's hard to start a new brand from scratch and catch up and these both of these are examples of that and it's going to be really interesting as they keep trying to grow to see what. What new things they try to accelerate that growth. Scot: [52:59] Yeah absolutely and I was curious I just looked it up allbirds is an 86 net promoter score and War B's latest measure is 83. Jason: [53:08] And those are both astronomical and side note there's some controversy about how people measure it in the inventors of the metric. Our kind of annoyed with how everyone's misusing it so it's not guaranteed that that's perfectly Apples to Apples but. That those numbers kind of fit with the consumer sentiment that I've experienced for both brands. Scot: [53:32] Yeah yeah we do a whole show on the purity of net promoter score. Jason: [53:37] That would be awesome. Scot: [53:40] But that in with some attribution man that's a party right there. Go well it wouldn't be a Jason and Scot show if we didn't have a little bit of. Jason: [53:52] Amazon news new your margin is there opportunity. Scot: [54:04] That's right we got a couple in lausanne news items the one I wanted to chat with you Jason is, Amazon announced they are partnering with buy now pay later firm a firm so that was an interesting one did that take you by surprise. Jason: [54:21] It did it totally did not it didn't surprise me at all that they're getting into buy now pay later it's a huge trend. In a way like I knew they didn't have one but it kind of when I heard it read it and I said it to myself out loud I was cut it's kind of shocking. That they're just now adding it now they have dabbled in the past. With with much earlier iterations of these sort of installment plans but what totally took me by surprise is that they chose a firm like a a firm is working with a lot of. Direct Amazon competitors that aren't going to be happy about this I'm thinking of for example Walmart. And so I'll be curious to see how that flushes out and have a firm can successfully keep both of those clients happy that would be impressive and frankly there's just so much money to be made in this space and an Amazon scale I'm somewhat surprised that they didn't do it themselves. Scot: [55:14] Yeah that shocked me to the thing is I've been digging into these being the combi and pills and it's really interesting so if you look at a firm karna and a bunch of these, you know what they're finding is the under 30 year old consumer, doesn't like the way credit card debt Works where you have this pool of you know that you can pull down and then it accumulates they much prefer to match it with a purchase and pay off the purchase and it's really interesting to read about that and then the the both the firms in there s ones they have a lot of data around us and increasingly even after they've gone public there's more data coming out about this trend so I was I was thinking. You know why Amazon has they if you're a seller though and you money you know they've got their own credit card there's got to be like. What is the larger Banks kind of effectively inside of Amazon that doesn't really Market itself as a bank because it doesn't want to be regulated like a bank maybe that's part of what. Triggers them not doing it. Jason: [56:16] Dress fear about yeah Fair. Scot: [56:18] Yeah there's any trust thing but it is funny you know we've been at this long enough I remember. I'm old enough to remember there was this startup called bill me later and they came on the scene and Amazon used it and you know loved it and was actually giving them quotes that conversions were up 20 percent and then eBay bot eBay / PayPal but Bill Me Later and Amazon ripped them off the site the next night it was controversial and we're all like holy cow I can't you know I think we're all shocked how quickly Amazon turned that off after seeing his praises so it is kind of funny to watch now Amazon jump back into it you know probably been 15 years at this point back into it and partner up with the firm so I almost kind of wondered if. Maybe there was an investment phase but also doesn't Shopify own a chunk of a firm like there's an alliance there too which is another it's unlike Amazon to lay down you kind of have connections into. Competitors even one degree away with a firm in the Middle With both Walmart and Shopify it all. Jason: [57:22] And there is Juicy data at play in this service so it is it is interesting. Scot: [57:28] Yeah days was famously he wouldn't ever he really didn't want to buy any Google ads because he didn't want them to see what they're up to. Jason: [57:36] No I mean part of me would almost suspect that Amazon is like trying to learn on a firm and that it wouldn't be a long-term deal but I entirely speculation. Scot: [57:46] I think both of our Spidey senses are tingling on this one and we'll keep an eye on it then there was a battle of press releases where Amazon Walmart said we're hiring 20,000 people and then Amazon du ha ha we're hiring 50,000 so that was that was the other Amazon news I saw. Jason: [58:02] Yeah I saw that too I got to be honest to me those were nothing Burgers it's super complicated both of those companies hire a ton of seasonal Labour way more than that right and. Sidenote like targets hiring a hundred and thirty thousand people for Christmas so those numbers just didn't seem that impressive and if I was if I was Walmart my press release would have said hey we've hired 500,000 people since covid-19 like that seems that's true and that seems a lot more impressive than than the 20,000 I guess what is interesting in both cases is, this is not seasonal labor these are full-time jobs just dedicated to fulfilling e-commerce orders so that's kind of interesting. [58:42] And two other tiny pieces of Walmart news in the the time that we don't have left Walmart did announce. An enhancement to their advertising echo system so they have a thing called the Amazon or Walmart connect and they launched a DSP for that. Demand-side platform it's a way to use Walmart data to Target segments and by ads both. On Walmart so and in Walmart stores but also um across the the interweb using Walmart's first-party data and as we talked about in our privacy show as it's harder to use Google and Facebook targeting because of all these privacy concerns. It makes sense that that retailers are trying to maximize The Leverage they have with their 1p data Walmart has the most customers so they have the most wimpy data and so that that's kind of an interesting evolution of their ad platform and a potential competitive Advantage for Walmart. [59:47] And then another one that's just kind of interesting that I didn't necessarily expect Walmart launched a new delivery platform. Which is delivering goods for other retailers. So they call it Walmart Go Local and essentially you can be independent owner operator you know, in a town and sell stuff for home delivery and Walmart will use their network of owned delivery. People in vehicles to pick stuff up from your bakery and drive them to a customer for a fee. Scot: [1:00:19] Yeah we'll see how that goes I don't know if I want my bakery to be delivered by Walmart. Jason: [1:00:27] Yeah I mean there's a number of issues it just to me it's interesting because obviously Walmart used to be a pure retailer you know you're seeing them lean into a lot of services they it was a few weeks ago but they announced this deal with. With Adobe whether they're they're selling software to Adobe and now they're selling delivery services to you know Main Street when you know used to be the narrative was that Walmart was putting Main Street out of business so it just it's interesting to see the evolution of Walmart. Scot: [1:00:57] I've whenever Walmart talks about some of the services they show kind of a low WalMart delivery vehicle that looks a lot like an Amazon Prime van. Jason: [1:01:06] Yeah they have a lot of different they have kind of a patchwork Fleet of delivery services and some of them use different vehicles but you you maybe more expert in the Walmart delivery Fleet than I am. Scot: [1:01:20] I just see this picture and it I think a lot about Vans everyday and it resonates with me. [1:01:32] I appreciate it thanks for looking out for me well we are out of time and one of the topics we wanted to cover but what with all the juicy IPO news didn't get to this time but will dedicate neck so to it is there is a lot coming up we're kind of coming in to wear it the past the halfway point of Q3 and all eyes will turn to Q4 with the holiday season it's going to be really unique this year because we cut the covid thing we've got the Delta variant we've got all kinds of crazy weather going on with hurricanes so as a retailer it's a really wacky time and one of the things we want to talk about next show is ship again so we coined that here on the show last year and turned out to be probably bigger than even we anticipated what's going on with that and 2021 I see a lot of time thinking about Vanagon there's also chip again so which which caused Vanagon so with want to talk about all the geddens that we're seeing out there. And then also you know there's a lot of interesting things going on the supply chain we've been you know the team here at the Jason Scott show and our many analysts have been listening in to the quarterly results and and talking to retailers about this and we have a lot of information to share on that kind of T up what we think the holiday is going to look like from from those angles. Jason: [1:02:55] Wow that sounds like an awesome show I can't wait to hear it. Scot: [1:02:58] I know I cannot wait for us to make it. Jason: [1:03:01] Will Scott it's happen again we've totally used up our allotted time as always if this was valuable we sure would appreciate that five star review on iTunes and only takes a second it's easier than ever before to leave it jump over there give us a review and make sure you're subscribed to get that next podcast Scot teas. Scot: [1:03:21] Absolutely thanks everyone and until next time… Jason: [1:03:24] Happy commercing.

    EP273 - Amazon FBA Roll-ups with Alex Kopco of Forum Brands

    Play Episode Listen Later Aug 25, 2021 60:08

    EP273 - Amazon FBA Roll-ups with Alex Kopco of Forum Brands  Alex Kopco is the Founder and COO of Forum Brands, a roll-up of digitally-native consumer brands selling via Amazon. In this interview we discuss Alex's experiences at Target and Amazon prior to founding Forum Brands. We talk about Forum Brands specific business model and their unique tools and expertise for Amazon sellers, the Amazon FBA Roll-up trend in general, and the future of commerce. Episode 273 of the Jason & Scot show was recorded on Thursday August 19, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 273 being recorded on Thursday august 19 20 21 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 Scott showed listeners Jason as you and mr. snow two of my favorite topics are Amazon and Entrepreneurship lately there's been a lot of exciting intersections in that area as different companies have been started to kind of quote-unquote roll-up Amazon FBA Sellers and explore a. House of Brands kind of concept leveraging Amazon so we're going to dig into that topic tonight and joining us on the podcast to help us explore that is Alex kopco he is the CEO and founder of form brands Alex welcome to the show. Alex: [1:18] Thank you so much super excited to be here guys. Jason: [1:21] Alex we're thrilled to have you and Scott, that Scott wasn't just giving you lip service these are his two favorite topics so he's going to be super annoying to talk to, but before we jump into form Brands which we are excited to get to we always like to give listeners a little bit of a taste about our guest, backgrounds and how you came in your role and if I have it right I think you have kind of a perfect background for your current role. Alex: [1:48] I do yeah it's true I have spent, really the last decade in e-commerce I got my start working for Target specifically for at the time when was actually still being powered by Amazon Target, little known fact was the largest seller on Amazon's Marketplace back when I was there and I was part of the team, that was rolling off of the Amazon platform, which was a great first experience in my career to see what this whole e-commerce thing was about working for especially a big box retailer and one is well respected as Target and is good at merchandising and all the great things that Target does it really did feel like the wild west despite it being a 50 year old company and then I transitioned was looking for just a change in life a change in scenery and you know the winters in Minneapolis can be pretty brutal and so I actually had the opportunity to go work for Amazon and Seattle where I over a number of years had basically every retail job that you can imagine at the company also did a stint at Amazon as a product manager where I was working on Amazon's physical retail stores team. [3:08] The non grocery version which was super super interesting a ton of Technology went into powering the Amazon stores as well and so I oversaw some of the technology aspects there and really, over my course of my career at Amazon fell in love with the power of data the power of. [3:26] You know under understanding customers based on what they do as well as what they say and being able to provide you know surprise and Delight moments for them regardless of whether they were online or in stores and for me you know my passion for entrepreneurship since these are Scott's two favorite things Amazon entrepreneurship. [3:45] Sort of nurtured at a very young age and happy to delve into my memory Palace there but, the the impetus for really leaving Amazon to strike out on my own was predicated on they just ongoing shift to e-commerce and the adoption and of course you know the covid-19 pandemic has, greatly sped that up but it was always a fascinating space for me and so really just had that itch and decided that the time was right at my career to make that leap. Jason: [4:15] That is awesome and so just just so I'm being perfectly clear that our listeners you loved Amazon so much that when Target stopped working with them you quit and joined Amazon. Alex: [4:25] In as many words yeah sure let's go with that hahaha. Scot: [4:32] Jason you are the chief digital officer of Target right do I have that right. Jason: [4:35] Yes one of yes. Alex: [4:37] Wrong Jason Goldberg goldberger. Scot: [4:39] Oh gosh I get that confused. Alex: [4:41] I have to confess Jason I did a double take when I first saw your name and was like this can't possibly be goldberger and then realized that I was adding an ER to your name. Jason: [4:50] Alex to make matters more confusing a you should know that the day that Jason joined Target I got three 800 LinkedIn invites from from target employees. Alex: [5:01] One of those might have been me Jason. When Jason joined he and I I forget how this happened but he and I was basically in the first meeting he ever had it Target and. Then I was in a number of subsequent meetings and so we just sort of kept running into each other and it became a running joke over the rest of my time at Target which was not that much longer that every time you ran into each other it was just you know one of those moments so it's been fun to watch Jason's career evolve. Jason: [5:33] Yeah yeah. Nobody cares but like the overlaps are are super complicated I've actually worked with Target for an awfully long time in fact I was in a conference room in Minneapolis on 9/11 with Jeff Bezos. Doing the Amazon contract the the day that the Twin Towers was hit and did a lot of work with Steve Eastman and Michael Francis and although. Alex: [5:59] Yeah yeah. Jason: [6:00] So I do have a sort of a Target history and then of course I'm at publicist which owns Sapient which was the big team that helped stand up when you guys moved off of them. Alex: [6:12] That's right project Everest. Jason: [6:14] Exactly so lots of overlaps but, as per usual I just talk about all this stuff well you actually did it so so we're excited to hear about it from you but I think Scott is undoubtedly going to ask you some Amazon trivia questions first. Scot: [6:33] Yeah yes so it must have been interesting you know I haven't been as deep as you guys have at Target but I have spent a lot of time at Amazon seems like a big culture difference there what was that like. Alex: [6:46] Yeah it was a big culture difference I think the biggest difference in my experience was I was. [6:56] Well there's two two components to this first and foremost I felt like I had a tremendous amount of responsibility from the very very first day at Amazon Amazon having built much of its own technology internally you know there were there were safeguards there were checks and balances you couldn't really screw anything up but I had a lot of control over, Mi Piel which you know when I would interview people or when people would join the team I would sort of like in my business too and I was a better manager and video games for a number of years and I would liken it to my little video games or my little comic book shop on the street corner and you know we would talk about what is our window front look like today we've got to walk our store and make sure that you know some kid didn't spit gum on our floor and so it was it was very much that feel and I had the power to keep things clean and sort of do what I thought was in the best interest of customers. [7:54] Target on the other hand it is a company that has one of the most iconic brands on the planet you see that Bullseye and you just instantaneously know even if you're not, from America we pretty much know what Target is and so with that you know with, with great power comes great responsibility with great branding comes great responsibility and so my experience at Target was a little bit different in that, a we were big you're really big when I joined Amazon we weren't that big at the time and I work for Amazon Canada so we were really not that big. [8:27] Target was big and so the the conversations with vendors the responsibility that we had two guests You know despite being, working for the e-commerce arm of Target we took. Sort of the brand very very very seriously and everything was in the spirit of ensuring that people when they, interacted with that Bulls I had the best possible experience and so it was it was just a different ethos right it was a different mindset, and one worked great for one company for the last five decades the other was kind of making it up as they went along and now have become one of Earth's largest companies and there were no guarantees either way but it certainly was a very interesting, mindshift and I learned a lot of both to be totally honest with you and a lot of my reasoning for going to work for Amazon was not because Target rolled off Amazon and then I went to work for Amazon but it was because I felt like I actually wanted both sides of that coin I wanted to both have the big box retail how do you how do you take. A legacy brand and bring it into the digital world and, what about that disruption what what about that company that is leading that disruption leading the efforts of bringing retail into the digital world and so. It was a little bit selfishly I just wanted to be as well as well-balanced as I possibly could be. Scot: [9:55] So did you work for Amazon Canada the whole time are you kind of bounce between the u.s. and Canada. Alex: [10:00] So I work for Amazon Canada when I was in retail eCommerce retail for the whole time I did work very closely with my US based counterparts I worked on the initiative which is now known as narf but internally was known as Naf n which was the unification of the North American supply chain I supported the launch of Amazon Mexico and so you know one of the benefits of working for a smaller, arm within a big company as you have a lot of resources at your disposal but you also have a lot of latitude to try things I launched which prime in Canada when we bought which I brought virtual bundling technology to Canada's a twenty-five-year-old no nothing in the tech space which was incredibly interesting and again really started to give me that feel for the power of Technology, and and and Building Technology that can enable anybody in the company to be successful not just the people who know how to wield the technology. Scot: [11:03] A lot of people that have worked at Amazon that start companies they bring a lot of the management principles over is that something you plan on doing or you're just like starting with the clean white board. Alex: [11:15] Man yeah Amazon's culture is it is definitive and we certainly have borrowed, in many cases inadvertently a lot of the principles you know one of our our core leadership principles is bias for Action we have one that is called act like an owner we have one called the best ideas when which is you know, hybrid of is write a lot and invented simplify and we did this sort of inadvertently but you have to admit the principles are pretty darn good. And you know Dave Glick and I saves over at Flex we often and he does a lot of post on LinkedIn talking about the impact that Amazon's culture had on him and how he brings that to flex and I a lot of what he talks about resonates very deeply and we kind of joke about you know once an Amazonian always an Amazonian it always comes back up in some in some fashion. Scot: [12:09] Yeah someone that's an outsider and having interacted with all the different tech companies the other ones have these like little Pro way things like, yep what does it do no evil or be don't be evil or something where's the Amazons when you know and they end up being mocked by all the employees at the end of the Amazon ones they just seem so much more solid and and you know I've seen the document where they give case studies and then what not to do and what you know Jeff Bezos little stories around the principle so it it just has so much better thought out than any of the anything else I've ever seen. Alex: [12:46] Yeah yeah you know we. Even the most resistant employees I think drink at least a little bit of the Kool-Aid when you get there because it's impossible to avoid you can't not be in a meeting. Especially when tensions are high and this is the whole purpose of having strong leadership principles is so that when you can't be in every meeting and every discussion, you want people working for you to behave and make decisions in a way that are consistent with how you would do it that is the Hallmark of that of strong leadership principles and like you can read the everything store which I did when I was interviewing with Amazon and they say you know. Jeff has this thing about like oh the customer's always in the room leave the empty chair like we talked about customers as if they're actually in a room that's not that's not a lie that's not like a thing that you know has been spawned at like we literally do that we say, like what would the customer think about this how's that going to impact the CX like we care very very deeply and that's just one of the principles and so people use them in their vernacular and actually my wife still works for Amazon, and our friends sometimes get a little bit annoyed because occasionally she and I will be talking about a hard thing at work and we'll just default to, sort of the Amazon lingo and they're like you guys have to know how you sound to outside people which is. Not great. Scot: [14:14] Amazon Romance. Jason: [14:15] I do think the Amazon leadership principles are legit and you know have certainly contributed to their their culture surviving even as its scale, but just just a counter-argument to Scotts point they did add two new leadership principles this year and one of them basically is don't be evil. In parentheses it says two employees. Alex: [14:37] Yeah I mean. Scot: [14:40] That's just an overreaction to crying at the dust particle. Alex: [14:43] That was yeah I was there during during the infamous New York Times article it got some things right I got some things wrong. Scot: [14:55] Were you crying at your desk. Alex: [14:56] I was not personally crying at my desk no and I don't know anyone who did but I also would not say that I knew every single person at Amazon either. [15:13] Um It's fun fun for me not that much fun for probably listeners but I'll just give you the anecdote, Jeff is like a rare unicorn around Seattle and anytime you see him it is a Jeff sighting, and people will like stop what they're doing and immediately run back to their desks to tell everybody that they had a Jeff sighting and my only judge sightings really came from from the stage, at the All Hands meetings I was fortunate enough to work on some projects that one just do it Awards which is one of the awards where Jeff gives out a Nike shoe and there's a whole story behind that and so my interaction was limited to the. Jeff announcing a thing on the stage in my face being up on a on a wall that was those are my only sightings. Scot: [16:12] Nice to get picture of you and Jeff. Alex: [16:14] I did not yeah yeah yeah. Scot: [16:15] We can Photoshop at Jason's of Photoshop Drupal will create one for. Alex: [16:21] Yeah you can you can put my face on. Jason: [16:22] I'll put all three of us. Alex: [16:24] There you go yeah with chassis so when I was at Amazon actually co-founded an internal employee network called connected Amazon. And it really sort of started actually it started from Target honestly because one thing that Target does exceptionally well is they have all of these sort of like. [16:46] Affinity groups isn't there like employee networks and there's like an acapella group and there's you know the women who ride motorcycles group, and so I was a member of all these different sort of Target networks and I got to meet the global VP of Lego and I got to meet you know higher-ups at LinkedIn and it just was always really fascinating to me and sort of. [17:09] Made me feel really happy that I work for Target and when I started at Amazon they had a finity networks but they didn't do a lot. I mean they were they were sort of identity based and it was not. The programming just wasn't as robust as what you got from the Grassroots Target organizations and so a friend of mine and. A couple of other people got together I must have been there for months at the time, and started this group connected Amazon to try to provide some some amount of programming for that and Andy Jesse was actually kind enough to be one of our fireside chat speakers, and we booked the biggest room that they had on campus at the time I think it could fit about 400 people. And we had 400 people like an hour and a half before the fireside chat even started and so we had all these people live streaming and all the like conference rooms and one of the buildings there and from there you know it kind of took on a life of its own so I credit Andy for you know really making connected Amazon as big of a deal as it has become which I think now they've got 30 40 thousand amazonians are like registered members of connected Amazon and they've got a nice big budget and full-time people doing programming and that all came out of the grass roots. Jason: [18:28] Very cool so truth be told we could probably do Amazon stories all night and be perfectly happy but I do want to talk about foreign Brands obviously so before we jump into that into much detail Scott kind of alluded to the business model but can you kind of give us the foreign Brands elevator pitch. Alex: [18:48] Yeah so you know Scott is right in that there are a number of groups really around the world now who are looking to acquire Amazon FBA businesses do a sort of brand of Brands roll them together we fall into that but we think about ourselves a little bit differently I think the moniker that gets thrown around a lot is is aggregator. We don't see ourselves as that and you'll. Probably based on my background understand why you know our model is not to do a high volume of deals it's too it's to be principled and disciplined. In the deals that we do do and we are much more focused on building, a concentrated portfolio and specific categories that we believe we can turn into like household Staples and so actually as much as I love Amazon and again you're right we could probably spend you know two hours just swapping stories about that. Our goal is to. [19:52] Take fledgling brands that we believe have a lot of potential and put them wherever the customers who want to shop for those products are shopping and that maybe on Amazon and we hope that it is but even if it's not, we'll find ways to make sure that our products are available for the customers who want to buy them and so, what that means is we might review a thousand deals a year and will acquire a handful of them rather than you know. Does it meet our basic minimum criteria if yes then we'll proceed and so it's just a little bit of a different a different mindset for us and it causes our employees to make decisions differently which is. And literally the document that we have when we due diligence is called the what you have to believe document it's do we actually believe in this brand can it actually become a consumer household staple. If yes then there's a whole bunch of other criteria that we review if no we're okay passing on a deal and it's nothing against the brand owner it's nothing against the seller we're just very disciplined for what we're looking for. Scot: [20:58] And then so it is a busy space so how would you help help me kind of have a mental map of how you guys fit in so there's there's thrashy oh there's like one out of Austin whose name I can't remember there's a couple others, how would you kind of feel that you guys differentiate from from the pack. Alex: [21:20] Yeah we're we differentiate in two ways first and foremost like I was describing where operators first. Right we my two co-founders both come from the investing World they run a very efficient Ma, process the other kind of oversees the holding company in the structure within I oversee all things related to Brand growth and I have a team of probably fifty percent X amazonians who have have a similar mindset as me which is again we build we believe in the power of a brand and we believe in, brand Equity we believe in the direct-to-consumer space as a way of making sure that were able to reach customers who get genuine value out of our products, and so that's us was the most exciting thing so we're again very selective in our deals secondarily is our Tech and Scott we were kind of, bantering about this you know before we started recording but we are, highly highly highly focused on building and integrated omni-channel system, internal to form Brands and this is not this is not meant to be a knock to any of the software out in the world but my belief is that. [22:39] Is that there is value to Building Technology that suits the company that we are trying to build rather than having to build a company that suits the technology that's available to us today. And again it sounds like a semantic difference but it's a big mindset shift, from my team where every single employee regardless of whether you're in Mna Corporate Finance or marketing you're all product managers every single person is tasked with finding ways to automate the automatable use data to make decisions ask for systems that we either don't have or that are underdeveloped so that we can build something that works for form Brands and makes each and every one of our employees more efficient. Scot: [23:23] Give us an idea of the scale like where are you guys maybe Capital raised or number of Brands kind of in your your pack if you will anything you can share but obviously don't want anything super confidential. Alex: [23:35] Sure sure so we're not disclosing the number of brands that we have right now but we did recently announced a 27 million dollar series a equity raise led by Norwest Venture partners are seed was done by and FX at a Palo Alto and so you know that that 27 million that we recently raised is is being put two purposes one hiring hiring like crazy building out the team of world-class operators first and foremost and then secondarily is to a focus on technology and that is you know scaling up our Tech stack hiring a high-performing you know World Class Tech Team, we've got a number of data scientists and we're already finding ways to optimize our businesses that we do owned by way of machine learning it's also we actually use machine learning to help identify high quality Brands to potentially reach out to as well and so again it sort of tech underpins everything that we do and we're investing very heavily in that space. Jason: [24:43] Awesome and you kind of mentioned that you were being selective on Acquisitions like do you have. Any specific criteria like are most your criteria around Financial metrics to other particular product categories or particular. Go to market models are things that like sort of play into your your preferred portfolio companies. Alex: [25:06] Yeah so we are focused on certain categories categories that we refer to sort of colloquially as. I thought I was going to put your that word and I totally got it colloquially as consumer durables so we steer clear from food and beverage, we steer clear from you know fad related items we I mean you could really like an us to sort of, New Age Procter & Gamble where we're focused on you no pets and home and kitchen, patio lawn and garden we have you know we play in the fitness space the outdoor space and so these are really things that are like, you know you would go, to your cousin's house and open up their cabinets or look in their closet and you would find a bunch of our products there that's what we're really focused on so we will stay away from like clothing we don't do fashion brands, um and from there you know we have what we call the four pillars because as a good Amazonian I love my Frameworks, but you know it's are sort of M A decision-making framework which you know we're very transparent about when we get, into the conversation with Sellers and it's something that you know our approaches to be very seller friendly we. [26:32] Over index in the hand-holding because we want to make the deal as comfortable as possible. My co-founder Reuben who leads all the MMA efforts he still personally gets on all the calls with Sellers and so Financial profile matters category matters but again a lot there are a lot of other considerations that go into that what you have to believe what we have to believe collectively as a team as an investment committee as operators as brand builders, and so were we are. We view these deals as puzzle pieces that we look to fit together. Scot: [27:13] Is part of your strategy to so you acquire these Brands you get them you know I think there's probably some consolidation where you know what we've seen with other players is a review of the packaging bringing them over into a Consolidated marketing team usually some consolidation around sourcing and fulfillment, and then you get your technology platform let me play pause there is that is that you guys do all those things. Alex: [27:41] Yep absolutely I mean I think a lot of that is you know and most of the players us included are what at most two two and a half years old so these are like there's still a lot of table Stakes stuff. To be done with these with these Brands as we're fitting them into our process and our portfolio for sure. Scot: [28:00] Gonna think I know the answer this one but I'll ask anyway so then you know one strategy and I'm obviously a big proponent of this is if you can do acts on Amazon you can do you kind of typically do you know the same amount call it you know X again over on other channels is part of your your plan to then go across different online channels with the brands or do you really want to just kind of focus on Amazon for a while and DoubleDown based on on the platform Super Bowl. Alex: [28:31] My Amazonian this is about to show here so we have what we have the concept of Amazon's day one we have we have play books which we called a0 and A1, and the day Zero playbooks are sort of that table Stakes stuff can we consolidate at ports, can we you know is are there opportunities for us to redo the packaging, will get deep into the reviews and apply NLP to reviews to make sure that we have a good understanding of what customers like and equally important what they don't like about the products that were acquiring and so we'll do all that day 0 stuff, to sort of get our house in order and that is predominantly Amazon focused right most of these businesses, do the vast majority of their sales on Amazon and so. [29:20] For us to be world-class operators like we must be world-class at Amazon that that is core to the strategy. From there we move into day one because at Amazon it's always day one, so really it's day forever but we call a day one and those are the things that a our technology Powers right and Scott you know the power of optimization of being able to have an integrated platform where, data from one part of the business marketing. Informs actions in another part of the business product development and design packaging pricing right and so our ability to tie these things together these sort of disparate data points actually build a mental model and I, I'm sure that my team is so tired of the phrase mental model because I preach it constantly but that's really what it's about for us as building that mental model so. [30:10] That was a long-winded way of answering your question which is yes we will be opportunistic brand by brand, um in channels off Amazon and you know we're operating in eight countries right now we are operating across five or six channels and so our footprint is already, diverse and you know were a year old at this point. Jason: [30:37] Awesome side note you can always tell a tech first company when they start counting at day 0 instead of day one. Alex: [30:45] Exactly I'm so glad Jason that you picked up on that. Jason: [30:49] I'm tracking and so that reminds me I do want to kind of. Cook down into your Tech stack for a second but before we do I'm just always curious like it seems obvious like one of the big. I'm sort of investment theories here would be you acquire these companies and you have. Unique expertise capabilities and Tech that then causes those companies to be more valuable. You help them become more efficient on Amazon more successful etc etc and that that accelerates the value of your investment. Each of those companies probably had some unique skill sets like I'm always curious. Like does it work out that those companies are able to help each other very much and are using like. Are you providing most of the value-add or are you acquiring a lot of value-add from these individual companies that then benefits the rest of the portfolio. Alex: [31:48] Yeah yeah you know currently it has been. The former we are providing most of the value-add. So where we are actually seeing things move is as the space becomes. More well-known I mean there are so many sellers right so many many many of them do still do not know that an exit. Is an option for them many still are under the misconception that e-commerce. I don't want to do this anymore I guess I'll just shut my store down I'll go on Permanent Vacation mode and that is tragic to me. Because they have loyal customers they're generating real cash and so it's a shame for companies to shut it down what we're seeing more and more in the conversations that we're having with. [32:42] Perspective Cellars is. [32:45] This desire to remain plugged into the brand and frankly this is how we win deals. In a lot of cases is because we care very deeply you know Simon sinek has one of the most viewed, TED Talks ever right we should start with why and that is how we start we start with why did the entrepreneur start this business, and sometimes it was like I don't know I was in college and needed some extra beer money or I had to pay rent or whatever other times it was you know my mother had this malady that caused her not to be able to do a certain thing and so I found this product and decided that maybe it could help other people right and every single story is different and so we learn a lot in the stories but we also do learn a lot from the sellers and we're super flexible with our pricing structure we don't have sort of a. We don't really have like a take-it-or-leave-it style we want a suit. [33:44] Sellers in the ways that that works the best for them and so some are willing to take a little less up front but they want to benefit and participate in the upside over the next year we're happy to do that and the extent that they want to be plugged in and. Launch more products and use our Tech and you know get support from our team, we're happy to do that as well and so it really is a case-by-case basis there's no sort of one sweeping, you know this is how we do it forever flexibility is kind of the name of the game for us in a lot of ways. Jason: [34:16] Got it and so let's talk about that that Tech stack for a second I'm always curious what people. Decided to build and find the most value and building like are you mostly building tools around. Catalog management and digital shelf for you doing like magic pricing logic are you doing like ad. Buying and placement and all that like what what sort of problems are you trying to solve with the tax debt with your Tech stack for to the sellers. Alex: [34:46] I'd be curious to hear what your next two items would be Jason because everything you just said and more actually where we started was we started with an engine that I alluded to earlier that helps us identify high quality assets that meet our criteria that's where we began, and so we you know started plugging into a variety of datasets from a variety of companies, tying it together you know applying our own modeling on top of it and now use that to identify brands, the tertiary benefit from that is when you have a lot of data at a category level. [35:30] You can start to also Benchmark yourself, and so we've been able to you know build benchmarks and say what should what should this company be doing what could this company look like what what if scenario A through Z happened where would we fall, in this space and from there it's kind of grown organically and so catalog management I mean you can't run a direct-to-consumer business. On one channel let alone many channels let alone in multiple GEOS if you don't have a strong sort of item master so we certainly, started their focused very heavily there in the early days to make sure that we had, a sound way of tying all of these data points together across customers across orders across products and brands. [36:17] And from there yeah I mean there are natural extensions in all facets right pricing drives forecast, and our forecast drives our inventory Buys in our inventory buys Drive how much warehousing space we need or our consolidation at various ports are ordering Cadence and. Guys let me know if you want to talk about the state of the supply chain right now around the world but that is a huge problem in and of itself and so we've invested heavily in, Tech in Building Technology that gives our people visibility to every single step of the supply chain so that we know, day by day minute by minute where goods are. Because as I'm sure you guys know if you fall out of stock like falling out of stock especially on Amazon as a really really really really big deal, because not only is there the Miss sales from that but you also have to then reinvest to you know get your advertising spun back up and to reclaim potentially your spot in Search and that's really expensive to do and so, The Economic Opportunity there is not just well we have you know Air Freight. For extra holding costs or Miss sales but it's also advertising its also customer experience it's also, bundles which also fall out of stock if a component is out of stock and so the blast radius is wider but we have a way to tie that all together and be able to make smarter economic decisions based on that. Jason: [37:46] Yeah that's a super important point and I'm still shocked how many people don't don't get that but if you're out of stock for three days out of a month at Target and you was three days worth of sales. Um but you're out of stock at Amazon and what happens is you fall to what's called page 2 of search which is equivalent to being delisted. And then you've got to earn your way back and so that's funny like my, question about your text deck I'm always curious how people answer because well in the old world those were all separate tools and you could kind of buy best-in-class tools from all these different vendors and each one did a point thing but my hypothesis in like, Dynamic digital shelf world is. All those tools have to be integrated because they're all totally dependent on each other like you like I'm shocked how many Amazon sellers are buying ads on out of stock. Alex: [38:43] Oh my gosh. Jason: [38:44] And like you know I mean it like just all these things are so so interrelated in a in a way that, that is a very different model than traditional brick-and-mortar retail. Alex: [38:56] That's right you know we were opening up our office and one of the. Super lame ideas that I had for a decoration was to build a physical value chain of paper chain and. I thought it'd be really fun to you know first and foremost has have everybody's names on it because Dan the day you don't have a company if you're only as good as the people that work for you that is. That is true without exception. Over the long run at least but but you're absolutely right right like the interrelationship between every single. [39:33] Touchpoint of a company whether you're again MMA marketing for and growth supply chain. Every single decision that you make has a ripple effect on every other person and so you know when we think about our organizational structure we try to be as flat as we can be we purposefully encourage people to meet, their counterparts in other organizations so that they're not just sitting in a silo and saying well I'm on the marketing team, and that is a supply chain problem not my problem actually it is because you're about to blow your budget getting that thing back on page 1 off the page of Doom because this thing went out of stock so you need to be in lockstep so you can pull back on the spend so that you're not buying spending 40 percent of your budget on out-of-stock, right especially if it had a sin God forbid falls out of stock it's a big deal and people need to be talking about it but my biggest thing and I beat this drum constantly is the problem with having. You know 25 Point Solutions is then you have 25 dashboards you have to look at you have 25 systems you have to log into and you have to make the connections yourself and sorry but like human brain it gets tired people have a bad night people have a bad day and you make mistakes but by being able to pull it all together visualize it in one space. [40:55] And see. How pulling lever a effects object Z like that that is what we constantly push ourselves for and constantly drive toward. Jason: [41:07] Yeah yeah and so you kind of answered you ask me like what would the next things on my list be for your road map and you kind of the name them right its supply chain and analytics for those, for those very reasons you just covered sidenote are you hosting your Tech stack on Azure did you did you go Google Cloud platform or azure. Alex: [41:26] Wow I think you're kidding but no Amazon Amazon web services all the way. Jason: [41:33] I'm shocked that makes a lot of sense now but as soon as you try to expand off of Amazon to those other platforms your that's going to become a. Alex: [41:41] Yeah I know we use some gcp products we use looker we use five Tran for some API connection so we're you know we started on AWS because frankly. They gave us free credits and so why are they sticky with that. Jason: [41:57] Yeah yeah that I hear that's a decent business. Um the you open the door to a super interesting topic right now which is like supply chain and product liability particularly around holiday this point. Um earlier this week Target and Walmart both had earnings calls and they both assured investors that they were well positioned for holiday but why. You hear from any of the suppliers and it sounds a little dicey no one can hire anyone everybody's Factory workers are on strike. Um tons of disruptions in Asia right now going the wrong way I'm on pandemic stuff like what what your POV for Holiday are we are we in for some pain or is it overblown. Alex: [42:44] I mean by your gifts now is my POV you know it I think it's going to be tough I think it's going to be tough I don't think, well I don't know covid is the big. The big asterisk to everything I'm about to say because we've already seen in Ningbo for example the poor shut down for a couple of days because of a couple of covid cases they're one of our factories got completely flooded by the typhoon I mean, there are already so many issues beyond the fact that there are at any given time 50 boats trying to get into the port of LA and. Some of those containers belong to us some of those containers belong to Target and Walmart and so we're kind of all collectively in. This for lack of a better term we're in this boat together the difference is. [43:40] The Big Box retailers and a lot of the big players have you know a much much larger physical Warehouse footprint where presumably. They have seen these potential issues coming and have you know, bought Goods in advance of meeting to get them on store shelves you know we certainly have but as early as we thought we were, we probably could have even been a month or two earlier because we're still seeing delays really across the board. Um and it's and a lot of it is international a lot of it is domestic right like will get bumped from you know delivery from point A to point B and you know Kentucky to New Jersey and you know UPS won't show up. And that's not a knock on UPS like maybe their truck driver got covid right I mean there's so many small things that compound the delays. I think it's going to be tough. And I hope I'm wrong like I'm saying this but I really hope I'm wrong I hope we all get to sleep very happily at night because we had, great holiday season kids are happy and we're all happy I really hope that's the case but we're preparing for the worst. Jason: [44:53] I know that it's possible for both to be true right like Target and Walmart could have enough leverage that they do believe they're going to be okay from a supply chain and it could be the rest of the world that. Um struggles but right side note on the demand I think Home Depot also had an earnings call this this week and they mentioned that they got there first. It's mid-august they got their first shipment of Halloween goods and they're already out. Alex: [45:22] Oh man oh man. Jason: [45:25] Yeah so / your shop early comment I think yet not only is availability a problem but also. As you know everything's just getting more expensive because the cost of those containers and shipping and everything just keeps, keeps going up and that that leads me to part 2 of why I'm not going to sleep this holiday period last holiday Scott coin This this term that got a lot of Attraction ship a get in, and we talked about you know the fact that like obviously covid drove everyone online and so there was this you know. [45:58] Outsized demand for for e-commerce fulfillment and you know UPS and FedEx have a finite ability to flex to meet that. The I'm curious like it seems like it's going to be an equal or bigger problem, this year and I'm chuckling because the United States Postal Service just announced that they discovered this new business practice, the FedEx and UPS have been doing called surcharges so now even even US Postal Service is looking to do holiday surcharges and they're you know all the quotas for Holiday are already out, and of course your friends and Amazon are you know largely the one and only, retailer add scale that owns their own a lot of their own Last Mile so I do you is is that an advantage for being on the Amazon platform are they likely to run out of capacity and constrain fbas like do you. Worried about fulfillment this year and how that's going to impact holiday at all. Alex: [47:02] I am less worried about outbound fulfillment as I am inbound because of what you just said which is capacity constraints. And you know any listener who has an Amazon business knows that. [47:16] There was a change this year we're while because last year Amazon started imposing, skew level caps right and so even if you had a portfolio that was concentrated around one or two top selling products that do 85 percent of your sales you know at least you could probably be okay on those even if you hit caps on sort of your tail selection they moved to a model which is, it is at the account level now a cat and we were all super happy about that because we said well we have all these new products that we're launching and because they have no sales history we can only Trickle, 20 units in at a time we followed a stock another 20 units we fall out of stock in the problem with the domestic delays is we could be out of stock for three weeks. On that right even if our warehouse is next door to the Fulfillment center, we could still not have our products sellable again for 3 weeks and there is nothing that will kill your cold start product launch faster thinking out of stock, right and so that that has been an issue throughout the year and they kept saying you know July 1st the Caps will be lifted and they were and some cases and they weren't and other cases and so my big concern is just that we won't have the capacity, available to us at FBA to get all of the goods in that we need to get in and so even if we are have a dozen two dozen. [48:40] You know, thousand shipments waiting there's nothing that you can really do there's no one that you can pick up and call and say hey can you like you know nudge nudge wink wink get my stuff in faster you just can't do it and so you just wait. [48:52] And that's a really uncomfortable spot to be in so you know and then and so we operate in Canada right we have seen on Amazon Canada where, the whole fulfillment centers have shut down due to covid and you see promised dates go from 2 days for Prime shipping to seven days for Prime shipping no matter which zip code you put in no matter where you say you are in Canada we've had some of our products that. [49:17] The prime delivery date is a Six-Day window and that has been the case for months. And so outbound from that perspective it does depressed demand that's why I'm saying by stuff sooner because you might get a Six-Day promise, but yeah I'm more concerned about the inbound and being able to keep Goods on the digital shelves through the through the entirety of the holiday season, because you can't you can't remanufacture that demand and if we come out super super heavy like, maybe it helps us through Lunar New Year which was also pretty tough last year but yeah it's going to be really interesting and so again we're doing everything that we can to try to. You know make sure that all of our ducks are in a row all of our goods are Stateside everything's ready to go. On the chance that we can actually get you know Goods moved in but it'll be a struggle. Jason: [50:14] Yeah yeah and as you alluded to the Canadian Supply chains even more fragile because one of those sled dog teams get sick and a whole Province gets cut off namjoo. Alex: [50:24] I had I had Xboxes the year Xbox One released idexx boxes on a train. In the middle in the dead center of the country and we literally sent a helicopter to pick the Xboxes up, the train and fly them to Toronto so that we could actually meet because we took pre-orders right and we had to meet release date delivery on those Xboxes so we've done some crazy stuff to make it work in Canada. Jason: [50:52] Yeah that's a whole new new definition of air air freight geez. The the drones will hopefully sell help with that I did want to you mentioned that you were seeing kind of the the caps and quotas moving from from skews two categories, one interesting hypothesis I've heard from a bunch of like reasonably high volume Amazon sellers at the moment is. As the catalog has gotten so huge and there's like some counts like 800 million skus in the catalog now, um there's a hypothesis that Amazon is strongly preferencing new skus and so a lot of people have said that they feel like. The the caps and quotas that they're getting on, mature skews that in the old days like your quota would have just gotten bigger every year based on your sales history that they're now running into this new problem, Amazon is reserving a fair amount of space for new stuff instead of the old stuff and I can imagine, that's scary and or problematic in in your business model have you seen that at all is that viable. Alex: [52:03] I have seen shatter about it that is we have empirically not seen that to be the case for our brands. We also don't operate in every category you know I'm sure there are plenty of higher-volume you know on a brand by brand. Basis sellers out there who are seeing crazy stuff, for us like I said we're launching a whole host of new products and it's 20 units at a time and then you sell out but now your cap is 60, you're like awesome I have three times the cap but it's still 60 it's not 6,000 which is what we would need to actually you know generate the volume that's going to get us on page one and so. While our you know top-selling products we are running up against caps there as well it has not been. [52:56] The issue really comes from when you have a brand level cap your best selling products are inevitably going to take up most of the calf. And in order for us to hold a rational level of Safety stock it doesn't leave a whole lot of extra space for the new products and so you know again we're not really seeing that that. You know thought bear out in our businesses doesn't mean that they aren't. But yeah it just we don't we don't pun intended we don't put a lot of stock in that right now. Scot: [53:35] The, one question we've been following this kind of Amazon versus Shopify debate and we've had some folks on talking about headless Commerce, have you guys thought about you know another big strategy for anyone selling on Amazon is it open up your own website have you guys chosen a platform there or do you have any opinions about kind of where the e-commerce platform Wars are going. Alex: [53:59] I have a lot of opinions we are so the direct to Consumer space, is is what we firmly believe is like very core to our ability as a company to build long-term value. To have a website that customers interact with engage with our loyal to no no to find products from we believe that score for some Brands more than others right, we have inherited. By way of acquisition most people just spin up a Shopify account and then fulfill the FBA and so we have predominantly leaned into Shopify as a platform for now I think. [54:51] We are still so focused. At this time especially at this time in making sure that we're in stock on Amazon and that we have sort of that nuts and bolts Day Zero operational excellence with Amazon which is core to our portfolio that we haven't, we haven't we haven't dedicated a tremendous amount of resources and fully kicking the tires on all of the Headless options all of the other platform options we've had conversations with all of them we haven't actually, made a concerted effort to say we are 100% doing away with Shopify in favor of X for these reasons we haven't seen the need quite frankly. Scot: [55:35] And then so you've been in the retail game for quite a while one of our kind of favorite ending questions is if you kind of think forward let's say 3 or 5 years kind of take you out of the, the current where do you where do you see e-commerce? Alex: [55:52] Wow I asked a flavor of this question when I interview people. Scot: [55:56] We're turning it on you. Alex: [55:58] So What this is bringing up is feelings reactions to a lot of the changes around consumer privacy you know iOS 14 and all of their for the platforms, that were. You know I'll say hoovering up data and applying it and sometimes great ways and in other times may be less great ways I. [56:29] It hurts me a little bit inside because what I believe is that actually. [56:36] The the ability for us to build like to use data to build products that Delight customers. That is core to again building long-term value and I also believe in this is getting back to the question that the ability. To reach customers where they want to shop with the products that they're most interested or that that suit them the best I think we've taken a step back from that. And my hope is that we will continue to evolve responsibly. As a society and as companies as Leaders of sort of this new wave of retail in a way that can still surprising Delight customers that can deliver product innovations that are meaningful and they're not just you know we, wiggle a little here we do a little dongle there and today it's a new product because it's actually fundamentally not like I love you. The next 3 to 5 years as an evolution toward getting even smarter about the products that were building even better at, reaching consumers who are actually interested in what we're, selling so that you're not just on your endless Scroll of social media and you're getting hit with ads that are is completely irrelevant and it sort of degrades your experience on that platform and the degrades the brand experience and that's what we care about we care about the brand experience. Jason: [58:02] That would be awesome if it plays out we'll have to see ox. Alex: [58:05] We will see. Jason: [58:06] Exactly well hopefully you'll be like retired and fabulously wealthy so you'll just be be watching it from Jeff Bezos jot but that's gonna have to be where we leave it because it's happening again we've used up an hour of our listeners time. I know it goes fast we've certainly enjoyed chatting with you if listeners have any comments or questions they're encouraged to, hit us up on Twitter or leave us a note on our Facebook page and as always if you enjoyed this episode we sure would be grateful if you jump on iTunes and give us that five-star review. Scot: [58:41] Alex we really appreciate you taking time out of your busy schedule dominating the Amazon aggregation world and if folks want to find you online what's kind of the best place to you are you on the the Twitter box are my spacer where do you hang out online. Alex: [58:58] Oh my gosh do I still have a MySpace account that's kind of scary. Jason: [59:02] He has a Twitch account he's he's twitch he's a twitch streamer. Alex: [59:06] That's right yeah no you can find me on Twitch no I am predominantly on LinkedIn you can connect this me follow me on LinkedIn shoot me a message there feel free to drop me a line Alex at foreign otherwise I am on the Twitter box but I am. Sadly not as much of a contributor as I wish that I that I wish that I could be I'm just not that funny. Scot: [59:28] Well I think you did pretty good here on the show you were funnier than Jason which is what's actually kind of a low bar but. Jason: [59:33] Yeah don't I don't let that stop me for god sakes. Scot: [59:35] Do you think is the most activity out of his grumpy old man tweets. But that's a topic for another show but thanks we really appreciate the time and. Jason: [59:49] Until next time happy commerceing.

    EP272 - Q2 Ecom Data, Earnings, and Amazon News

    Play Episode Listen Later Aug 20, 2021 44:31

    EP272 - Q2 Ecom Data, Earnings, and Amazon News US Dept of Commerce Data In July retail sales were up 13.3% from previous July (down 1.1% from June). Year to Date sales were up 21.1% vs. 2020. Apparel is in the biggest recovery, up 63%. At peak of pandemic, restaurants lost nearly $51B/mo of sales to grocery stores. In July the gap has closed to $4B in sales. Restaurants sales for the past two months are higher than two years ago. Retail sales for all of Q2 2021 grew 28.2% from Q2 2020, e-commerce in Q2 grew 9% during the same period (due to the very high covid driven e-com last year). E-Com was 13.3% of retail sales for Q2. Q2 Retail Earnings Reports Walmart – US Comp Store sales up 5.2%, E-Commerce up 6% Target – US Comp Store sales up 8.9%, E-Commerce up 10% Home Depot– US Comp Store sales up 3.4%, E-Commerce flat Lowes– US Comp Store sales down 2.2%, E-Commerce up 7% Stores selling essential goods are comping against a very large 2020 basis in Q2. Most stores saw increased foot traffic driving store growth. Concerns about Covid resurgence and supply chain disruptions loom for Q3 and Q4. Amazon News NYT wrote that people now spend more at Amazon than Walmart – Jason says the number are debatable and that's besides the point. WSJ wrote Amazon Plans to Open Large Retail Locations Akin to Department Stores. We discuss Episode 272 of the Jason & Scot show was recorded on Thursday August 20, 2021. 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: [0:24] Welcome to the Jason and Scot show, this is episode 272 being recorded on Thursday august 19 20 21 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 sure listeners Jason we had a little bit of a break in there you had vacation and I got to focus on car washing and it's good to be back together. Jason: [0:53] It is I had a great time but I did miss you. Scot: [0:57] Oh I did see that while you are on vacation your company won a big Walmart deal so I think they would like for you to go on vacation more often. Jason: [1:09] Yes that is the general consensus the like I have great empathy for anyone in these spaces where you have these like huge drawn-out pitches but this was like. More than five month pitch and. Not shockingly it took the the client a little longer to pick a winner then they they promise so I you were kind of. On pins and needles for a long time and then I went on vacation and we got a good result so I think all my my co-workers my the hundred of my co-workers that were involved in this pitch with me like are all eager for me to work even less than I already do. Scot: [1:48] Well I heard it was because Doug mcmillon listens to the podcast. Jason: [1:54] Yeah amongst others so Chef to all of our listeners from Walmart thank you so much for putting your trust in me and all the mean things that get said about you on the podcast all come from Scott please remember that. Scot: [2:08] Absolutely not I love Homer I probably spend more time in a Walmart than you. Jason: [2:13] That is debatable but I do know that you are a legitimate Walmart Shopper and and you have an awesome use case for Walmart. Scot: [2:25] Which one are you referring to. Jason: [2:26] I feel like Walmart is your go-to for hard to find Star Wars collectible toys. Scot: [2:34] That is true I have spent many a midnight at a Walmart waiting for the pegs the toys to be hanging from the pegs and it's just the best time to be at Walmart is the best people people watching that 12:00 to 3:00 a.m. period. Jason: [2:47] Yeah they're there are some interesting shifts that go on at a Walmart store especially the 24-hour ones. Scot: [2:57] And then I'm super jealous because on your vacation you've got to go two galaxies Edge before me and that is for the non Star Wars fan folks in the audience that is the new Star Wars attraction at both the California and Florida Disney parks. Jason: [3:16] Exactly and it was awesome we went to California Disneyland as many listeners will know I'm a dad in the body of a grandad so I have a, almost six year old son so we took him to Disneyland for the first time and generally, my my Advanced age is a disadvantage but in this one case it was an advantage because I had a much better excuse than you do to take time off from work and go to Galaxy's Edge. Scot: [3:43] Awesome well I'm bummed was it fun how would you rate it. Jason: [3:48] I highly recommend it I mean yes the whole trip was fun Galaxy's Edge lived up to my expectations and there's. Kind of too wet in the old days we would have called e-ticket rides in Galaxy's Edge. Smugglers Run on the Millennium Falcon and this much more extravagant ride called rise of the resistance and they were both awesome I would say rise of the resistance is the best ride I've ever been at an amusement park so so, totally cool totally worth it and you for sure have to go and I'll go with you when you're ready. Scot: [4:22] All right strong words were gone we'll take we'll take all the listeners will take your mom and you know some of the other folks with us. Jason: [4:31] I'm sure a lot of listeners would love to go the one that wouldn't would be my mom because my six-year-old dragged her on every roller coaster at Disneyland and he had a blast but she was like white-knuckled the entire time. Scot: [4:43] Okay so she's already checked the Box. Jason: [4:46] Exactly exactly you're not a big enough draw only the grandson is a big enough traffic to your bed. Scot: [4:53] Well I'm glad you had an awesome vacation and the last time we recorded a podcast was one of my favorite days which is Amazon earnings and today is one of your favorite days of the year this is when the US Department of Commerce who sidebar has been on the podcast they drop a big load of data what did you discover in the data. Jason: [5:15] Yeah so just side note I just to be jealous of my my month Disneyland. Got got invited to keep working with my my favorite client for for the foreseeable future and I got quarterly e-commerce data from the US Department of Commerce so that's what I call winning. But yeah let's jump into it so. We're recording this on a Thursday on Tuesday the US Department of Commerce released their monthly retail sales data so super brief. Primer recap they published data every month. For the previous month and that's called the advanced retail monthly data it's kind of a quick look at the the month it was 15 days prior. And then they publish more comprehensive set of data for two months back which would be like 45 days prior. So so that's the data that we got on Tuesday and of course we're all pretty interested in what July looked like because there was this whole kind of. [6:19] Covid recovery and people rushing back to stores in the pivot from online back to stores and then there you know had been a lot of like negative news and rebounds because of Delta and so you know it's kind of interesting to see. See how the the data swung and so in general, if you were someone that looked at month-over-month retail sales it was a Debbie Downer month so Joel I was about one percent lower than June, but as I have counseled many times on this show that's not a very important number to look at what we really want to look at is July 20 21 against July. 20/20 so so year prior data and retail sales for for this July were 13.3% higher, then last July so ordinarily that would. Um cause for a party that's a huge growth like ordinarily we see like kind of for to unit three to four percent growth year over year in total retail sales so 13% is huge. But of course. Last July was still pretty impacted by by covid so we have this weird basis and as we'll talk about later that's why most retailers are talking about year over two years at this point but so first data point. [7:44] July was a good month it was up 13 percent from the previous July. [7:51] We I also like to look at year-to-date sales so I add up all the months and January through July of this year is up 21% versus January through July of last year, which is also very healthy and again half of that period would have been pre covid versus last year so that's that's encouraging and then, there isn't a. [8:14] In awesome measurement of e-commerce in the monthly data especially the advanced monthly data but there is this thing called non store sales which is kind of the closest proxy we have to e-commerce and that's where things got interesting it was about 5.9 percent up from last year so way slower growth. Then you would normally expect for e-commerce so you normally expect retail the girl about four percent in e-commerce to grow 12 to 15% so so retail growing 13% is unusually fast and and Ecommerce growing 6% is unusually slow. But again if you think about the fact that last July a lot less people are going to stores and instead spending online. It kind of It kind of fits so I would from my perspective, there was nothing there was nothing like super anomalous in this data it's kind of where we would have expected it to be and then I like to dive into the categories and see if there's anything important in the categories and again the categories are kind of where you would expect, by far the category that's most up this year versus last year on a monthly basis and a year-to-date basis is a Peril so the apparel industry is like. [9:32] Sixty-three percent better this year than it was last year because they were just absolutely creamed by by covid last year restaurants and bars or up thirty percent over last year but then there's some some categories that actually did well in covid but are still pretty significantly up so things like furniture and home, Sporting Goods those and consumer electronics are all up significantly. Even though they generally got a covid boost so. That that is pretty interesting and then the thing that I most look at specifically related to covid is. In covid everyone bought all their food from grocery stores instead of restaurant so restaurants got creamed grocery stores did really well and so we've been watching to see if that. [10:26] Goes back to pre covid levels and it's getting awfully close so you know in. March of last year seventy percent of the calories got sold by grocery stores 30% by restaurants and that's a that's a that meant 60 billion dollars a month in sales that used to go to restaurants were going to grocery store so that's huge. And in July that Gap it became kind of, 52 versus forty eight percent so only a 4% Delta and pre covid-19 t-50 so that's that's about four and a half or five billion dollars a month, that grocery store still winning that they didn't win before covid but not surprisingly. Like people were eager to go back to restaurants and they are going back to restaurants and that's one of several indications we've seen that while. Digital grocery grew a lot during covid and it's going to keep some of those gains it does not appear to keeping all of those games and we are seeing some backslide and we're seeing that in things like like instacart sales as well. Scot: [11:40] Yeah there's been wasn't there a rumor that instacart was looking to be acquired. Jason: [11:46] Yeah yeah there's a few things out there there is a rumor that instacart was talking to doordash. And then Super interesting this week and I'll put a link to it in the show notes former guest and friend of the show Dan McCarthy who remembers the, the professor at Emory that specializes in in customer lifetime value and cohort analysis he got a big. Set of credit card panel data from Ernst research and he was able to use it to kind of. [12:20] Back into the gmv which in the restaurant business or the grocery business they actually would call govt Gross order value um and he was able to kind of figure out the size and stickiness of doordash and instacart and what he found was, instacart got a bigger covid bump than door – but that door – is much stickier and and has a much higher rate of repeat customers than instacart in fact. About 30% of he found that about 30% of door – Shoppers repeat and only about 20% of instacart Shoppers repeat and that that difference, is is very meaningful in the financial outcomes for those two companies and he kind of estimated that insta cards govt is probably around twenty three billion dollars on an annualized run rate so he kind of looked at it and said hey instacart does appear to have significant weakness versus door – and and so it kind of lien when the some Credence and some tangible Nest to the. The rumor that you know instacart might be on a covid peak in trying to sell at it's at its high we've also heard just some rumors that they're you know struggling to retain some of their there, customer Sellers and some things like that so so it's going to be an interesting space to follow. Scot: [13:48] Any other surprises from the dinner. Jason: [13:50] Nothing wildly surprising in later in this podcast we're going to talk about earnings and we're going to talk about Home Depot and Lowe's reported and so sort of a preview I would say like. Um the do-it-yourself category was a category that did really well in in covid-19, um and so you you know it's interesting to see like if that sticky if have you know as people are starting to go out more are they are they stopping the investment in their home and or are they reinvesting in their home this year is that a new habit so I've been watching the do-it-yourself space and it had modest growth. From last year so I want to from memory I want to say it was about eighteen percent up from last year and last year was a very. Hi year so that that's interesting and I won't spoil it but it's going to be that number will be even more interesting when we talk about how Lowe's and Home Depot. Scot: [14:53] Let's jump into it. Jason: [14:54] Okay so the next thing I wanted to talk about is so I mentioned that this monthly data doesn't have awesome e-commerce data in it. The US Department of Commerce publishes much better e-commerce data but they only publish a quarterly and that's why this week is so fun is because this is one of those quarter months when they publish both the monthly data and the quarterly data so we just today got the cue to e-commerce data from the US Department of Commerce and the top line here is Q to 2021 Drew about 28% from Q2 2020 and e-commerce. [15:38] I'm sorry tale so that's all of retail which like that's way higher growth than you normally see and eCommerce growth was 9% for that period so lower. Then you would normally expect to see right and again that kind of follows the trend here. E-commerce was artificially High last year and so you know even though it's growing it's growing against a bigger base and so the growth this year does not look as big. So a lot of people are you know trying to talk about. Growth on a two-year stack but that 9% growth becomes super interesting when you think back to Amazon you know Amazon got beat up because their rate of growth slowed a lot they were down to 22 percent but 22% still means you're more than growing more than twice as fast as the industry average. And as we're going to see you later like much faster than most of their competitors so so that that is pretty interesting and then a ton of news then writes like e-commerce is down. Because nine percent is lower than we would usually expect but I just want to remind people. That down doesn't mean what you think it means like like we sold more stuff online in Q2 of this year than we did Q2 of last year and Q2 of last year was amazing. It's just the rate of growth is slowing down. Scot: [17:02] This is where I always get confused because the headlines that came across my CNBC trackers were retail sales were down 1.1 percent and worse than expected. Jason: [17:14] Yeah so that was. Scot: [17:15] How do I reconcile that with 28%. Jason: [17:18] Yeah well so the 1% is monthly and it was that mean that was down month over month so that's June to July so, July 2 July monthly going back the retail sales were actually up by 13 percent which is much more healthy and Q2. Versus last Q2 retail sales are up what did I just say 20 that's the. Scot: [17:48] But okay but then the month-on-month is interesting because why do you you know if we're still coming out of covid you would expect it to be kind of climbing up even if we were heading into the fall or. Jason: [18:00] What you have to remember about consumer spending patterns and Retail is there it's all heavily driven by these purchased occasions and there's a bunch of purchase occasions that are tied to date and so the spending patterns you'd expect to see in July are different than the spending patterns you'd expect to see in June so there's there's more people spending on summer activities in June than July and there's more people starting to spend on back to school in July then in June and so there are all these factors that make it really hard to. Compare month-over-month in West you you do some like heavy seasonal adjustment gymnastics and even that tends to not work because, some of these these purchase occasion shift from month to month from year to year so sorry it's complicated. Scot: [18:51] Got it dads and grads will scrap it up two dads and grads being in June. Jason: [18:57] Yeah but so I mean my biggest takeaway is like as a retail I guarantee you every retail team I work with care a lot more about there. Their sales bases from last year than they do their sales bases from last month. Now the Miss versus analysts expectations that's a separate story and some you know obviously is you know like investors tend to get squeamish when, when the recharge missed the analyst expectations but it's super hard to predict analyst it's a tough job for the analyst right now given all the uncertainty around health and covid and we simultaneously have states where they're throwing parades because covid over and people are opening up and then we have states where their reinstituting Mass mandates so it's. It's like high degree of uncertainty at the. [19:51] Um so in that climate some poor companies had to report their earnings and face investors and so this was to me a fun week for earnings calls, Walmart reported their their Q2 earnings Target reported their Q2 earnings Lowe's and Home Depot reported their Q2 earnings and then TJ Maxx reported their cue turning so it's a pretty fun week in retail earnings um and. Again I tend to focus more on the operational metrics and less on the investor metrics so you know there were some beets and some misses in there that impacted stock performance and I don't pay that much attention to those. [20:33] As a reminder because Amazon reported a couple months ago and we did a whole show a couple weeks ago we did a whole show about it, Amazon is predominantly e-commerce and Amazon's Q2 was up 22 percent from Q2 of last year so so, put that data point in your head and then you go okay home Walmart and Target how did you guys do Target was up eight point nine percent. Which was a beet and Walmart was up 5.2% which I want to say was a meat if I'm if I'm remembering right so so both those retailers did pretty well they sold a ton of stuff last year during covid and they sold significantly more this year. Um with less of a covid impact and less of an economic stimulus impact and so that that. Was pretty encouraging both retailers throughout cautions about. Their performance the rest of this year and so both retailers I think had some negative movement in their stock based on there, um on there like forward-looking expectations but not based on their performance so so again. [21:53] Amazon twenty two percent Target at eight nine percent will call it and Walmart at 5%. Um that's their total sales e-commerce was a much more interesting story targets e-commerce grew ten percent. [22:09] And Walmart's e-commerce grew three percent and those numbers are tiny by historical standards right so Amazon is all e-commerce so their 20% growth means their e-commerce grew 22% so the so Amazon's e-commerce grew more than twice as fast as Target and more than four times as fast or about four times as fast as Walmart so that that makes Amazon's performance look even more impressive if you think about Target like last year. [22:41] They grew a hundred and ninety-five percent so, so again like really sucky to comp against that that huge huge Peak and last year Walmart grew a hundred percent so they're comping against a huge Peak so the, the story of Q 2 for all these retailers is going to be, you know how do they hold on in their total retail sales can they kind of beat the industry average and then. You know where do they fall on e-commerce and candidly like. Target Walmart and Amazon kind of don't surprise me what surprised me was Lowe's and Home Depot so remember I told you earlier that, the do-it-yourself category is crony US Department of Commerce is performing reasonably well it's like up like eighteen percent so. Home Depot with retail sales for the quarter were only up 3.4 percent and lows sales were down 2.2%. [23:52] So Kind of hard to reconcile that in my head like there are many other do-it-yourself retailers besides Lowe's and Home Depot. I almost think this is like highlighting a problem in the US Department of Commerce categorization because it just, I can't put together a model where Home Depot only grew by 3 / 3.4% where lows went backwards 2.2% and yet the whole do-it-yourself category went forward, yeah but that being said Home Depot's e-commerce and super cheesy how they report this like they Home Depot totally tried to bury this but Home Depot's e-commerce growth was flat, they did not grow from last quarter from this quarter last year again off a big basis they grew a hundred percent last year and then was grew seven percent. Which you know again that that's actually better growth than Walmart and Lowe's also had a big basis they had a hundred and thirty five percent so on an e-commerce standpoint you'd say like glows actually kind of out performed in e-commerce but then the bad news for Lowe's is they way underperformed and in terms of a brick-and-mortar thing which is of course much more meaningful to them. [25:11] Um so those were kind of the monthly earnings so. That I you know I think that is a trend the other thing that came out in these earnings calls is both Walmart and Target talked about how last year retail traffic was way down but ticket size was way up people came to the store to last and they bought more in each, trip almost all the retail growth we saw this quarter was from increased trip frequency, so it was almost all tied to more people walking into Targets in Walmart like there's probably pent-up demand go shopping from people that were we're doing more of their spending online so this is kind of, all of these data points are converging to say that people are are had kind of online fatigue and we're happy to go back to stores and we're seeing that in the industry data we're seeing that in the earnings data and you know it's going to be really interesting to look at Q 3 because. It's not clear that that trend is going to continue based on some of the the health news and. State restrictions that are getting imposed and certainly based on some of the international news. Scot: [26:22] Yet it was this time last year when we kind of coined the ship again, I wonder if we're teeing up for you even kind of a tougher holiday this this may be kind of teased out of the date a little bit like maybe maybe Lowe's was down because of supply chain issues of you know they just couldn't stop the stores I don't know that that's one way to explain kind of why one retailer would be doing bad but the category did it better, and yeah so you know the supply chains are all jammed up there's just all the way from Manufacturing to hear stories of you can't get room on boats and certainly planes and then when it gets here you can't get it off the dock because there's not enough trucks and then you know I'm living the nightmare scenario where you can't buy vehicles and I have a business built on being buying Vehicles so you know there's you know. The whole system's and need to add capacity for delivering more and there's literally no vehicles to be had due to this tube shortage so it's gonna be really interesting next four months to see how this plays out. Jason: [27:35] Yeah no a hundred percent agree I'm super concerned about holiday the inventory levels like wouldn't really show up in the, the kind of reported earnings like where it would come up in is the transcript of the investor calls and I'll confess I didn't listen live to I did listen to Walmart and Target I didn't listen live to Home Depot or Lowe's I kind of skimmed the transcript so I can't I don't I did not see, then calling out supply chain as a reason for this quarter's performance it definitely was called out as a risk factor for there. Their future performance and what was a little interesting is Walmart and Target vote both went to Great Lengths to express that they felt like they were going to be in a good inventory position for holiday and I say that because none of us are expecting them to be in a great inventory position for holiday so they're they're trying to. Push back that narrative and it like obviously those are two of the biggest retailers that have a lot of Leverage over the supply chain so it's like, you know if anyone can buy inventory it's going to be them and they're saying they've invested early and they think they've got the inventory they need for Holiday locked up. Your points are all, super valid like every step in the supply chain is more expensive and more fragile right now and the one that you didn't mention is. [29:05] It's also just harder globally to get stuff made and you know if you look at the global, like flow of covid there's really only one economy economy that completely recovered and got a hundred percent of their retail foot traffic back for example and that was China and guess what China is, like in the throes of a Delta pandemic and foot traffic to retail as way down like they've had a back slide and that has impacted factory production and productivity and you know you mentioned one tangible, way that's playing out as these chip shortages but like there's a bunch of them and then we also have this Global labor shortage, and a place where it's been particularly hard to hire people is in warehouses and factories and so I here in the United States we've got like a bunch of Labor shortages we've got a bunch of labor dispute so I want to say Mondelez has like three big factories under strike so Santa may not be able to get Oreos this Christmas like there's a lot of those things playing out right now so I would say, that Walmart and Target may have locked up enough inventory but there's. [30:21] Severe uncertainty about the holiday and I think everything we talked about for ship again in last year's going to be worse this year. FedEx and UPS have both announced their surcharges for holiday and they've already informed most of their customers of what there, how they quotas will be so that's going to for sure come into play the US Post Office which historically has not had surcharges is adding surcharges this year so lots of stuff going down and again, I'll be shocked of Amazon has as much capacity as they want but you know Amazon unique amongst all these retailers owns a lot of their own capacity and in fact. They're huge Amazon air Hub in Cincinnati just went online so. Yeah yeah and even when you can get stuff it's just more expensive like I want to say that like average price of a container with six thousand dollars last year and it's 22 thousand dollars right now so. Scot: [31:19] Effort Amazon Seller say 40,000 I don't know. Jason: [31:23] I think yeah it depends on what you know but yeah and so I again I've seen like. Retailers by part of a porch in Canada I want to say, um Canadian Tire like literally bought a shipping Port you know we've seen lots of retailers including Home Depot by their own container Freighters like, we're seeing all kinds of crazy reaches up into the supply chain to try to protect capacity so it's it's definitely going to be interesting. Scot: [31:54] We will keep listeners posted well this is the place to go to where we're called it last year early and we're going to keep tracking it and calling it early this year. Yeah and then since we're doing a news episode it wouldn't be a Jason and Scot show without a little. Jason: [32:15] News new your margin is there opportunity. Scot: [32:23] That's right Amazon news Jason I saw this one got your dander up a little bit on on the the Twitter there was a New York Times article where they talked about how Amazon is now officially a hundred percent without any argument bigger than Walmart and an article what they do is they use a third-party source for GM v data which I actually appreciate this because for a very long time I was trying to help educate people that that you can't just look at Amazon Revenue numbers that their impact is bigger because there's this kind of Iceberg neath the surface of gmv that matters because if someone buys something from a 3rd party seller for $100 other retailers lost $100 they didn't lose the around $10 commission that Amazon shows us Revenue so I thought this was pretty interesting and when you you gross up now the number they used was pretty aggressive I don't know who this this Source was I don't have a subscription but it seemed a little aggressive and the lines are definitely going to cross I thought maybe they had pulled it into your to what we're I know this kind of got you a little agitated what what do you think about this. Jason: [33:39] Yeah yeah so it's super interesting it's a great article it's it prompted a lot of conversation I am mildly annoyed so first of all the I have seen as a result of this this article got written in the New York Times and it's a very accurate article. But it then got echoed by hundreds of other Publications and it got. Progressively worse so a I thought that would warm your heart is a ton of these articles go to Great Lengths to explain why revenue is in a valid way to compare these retailers and what gmv is and it's like. They all have discovered this year what you've been been teaching all of us for four. Probably 10 years now at this point we're old but so that was kind of fun so the New York Times article the headline first of all was people now spend more at Amazon than at. [34:33] And then the subtitle is the biggest e-commerce company outside of China has unseated the biggest brick-and-mortar seller. And so what this article is saying is, they're using a gmv estimate from a data company that sells data to investors and so it's a Wall Street analyst firm called factset and facts that said, Walmart's trailing 12-month gmv, was 500 Global GMB was five hundred sixty six billion dollars and Amazons 12-month gmv was six hundred and ten billion dollars so for the first time Amazon's Global gmv is higher than Walmart's and so Amazon has finally passed. Past Walmart and you know we've hit this big milestone that everyone should be talking about right like so that was their article and nothing in its wrong I would argue that the fact that data tends to be on the aggressive side but, maybe aggressive for both and, facts that is not estimating gmv for Walmart just you know like they're using revenue for Walmart and they're using GM V for Amazon and as you know, Walmart now has a meaningful Marketplace why got you know I don't think they've disclosed what the. [35:59] The ratio of 1 Peter 3 p is but Walmart has said they're going to sell 75 billion dollars online this year so. That you know their gmv is likely significantly larger than their revenue but the biggest reason this isn't an apples-to-apples comparison is these two companies don't sell in the same countries right so Amazon's and many more countries than Walmart so you know their incontinence that that Walmart isn't in and, the there India is a quite large Market both of these companies are significant players in India, the Amazon includes India sales in their gym in the fact that Jim V there are the facts that GMB includes am India for Amazon Walmart revenue does not include any India sales because Walmart owns a minority majority interest in Flipkart. [36:53] Um but that's that's really the way Amazon does business in India as well like if you're doing Apples to Apples I would argue that it's probably true that Walmart is still slightly bigger than Amazon of you if you put India back into these numbers and and do a gmv estimate for Walmart instead but I don't, even really care about that what's annoying is everyone that read the New York Times article then wrote a new article saying Amazon's the biggest retailer in the world and that's, wildly untrue because. Ali Baba's gmv is bigger is like 1.3 trillion right so its bigger than Walmart plus Amazon's estimate in these articles and that's why the New York Times had to write the most awkward headline ever that's like, outside of China even and you go well why are they saying outside of China when both Walmart and Amazon are competing in China well it's because they don't want to talk about the fact that they're both way smaller than Ali Baba. [37:51] And so so again like I just I kind of don't think this is a very big milestone I think Amazon spins more time and effort trying to sell more stuff in the US than anywhere else and Walmart spends more time and effort trying to sell in the US than anywhere else it's the whole market for both countries for companies it's highly likely that Amazon is going to pass Walmart for sales in the US in the near future I don't think they have yet and when they do that will be a big milestone that will be like when Walmart passed Sears Versailles in like 1990 but to me that's the big milestone that this, this kind of facts that data thing that New York Times is trying to spin and then you know everyone else misreported like to me it's. Not that interesting and so I'm kind of annoyed how much Buzz it's gotten but I just blew it and gave it a bunch more buzz on the podcast. Scot: [38:44] Okay another one Amazon this was kind of the big big topic today there was a leak or someone figured out that Amazon is going to open a department store. How do you feel about Amazon departments course I feel like they're going to have put Target out of business in six months. Jason: [39:09] I just sold all my Target stock it so it's over. I'm kidding yeah so I mean this is interesting news the. I would say it's very vague news at this point like I don't think it surprises anyone that Amazon is interested in and is probably moving forward with trying a bunch of different retail floor mats I do think Amazon realizes that. That brick-and-mortar is important I don't think they think of themselves as purely an online, retail and they've been investing a bunch of brick and mortar and a category they want to do better and is a parallel and they have been making a lot of progress in a parallel so it's not shocking that they would be trying to experiment with some apparel formats so so this news is kind of exciting I'd be eager to see what they what stores they do open and I'm aisle you know quickly go visit them when they do to see what see what they're trying but. From this article it's hard to know exactly what they're talking about so the the leases that the. The reporter found in this is an exclusive article from Wall Street Journal. The wheezes they found were for thirty thousand-square-foot stores so the first thing is again everyone saying like Amazon's getting into the department store business. There are almost no 30,000 square foot department stores most department stores are much bigger than 30,000 square feet. [40:33] Whatever it's worth the the article says that apparel is one of the categories that's likely in this new store from Anonymous sources that talk to them. So does that mean it's primarily an apparel store so that would make it like a Kohl's or T.J.Maxx eyes store and that could be interesting and meaningful or does it mean it's a general merchandise store that has some apparel and also has a full grocery store because there's a lot of 20,000 25,000 square foot grocery stores so 30,000 square feet. Isn't that much different than the the bigger store formats we've already seen Amazon starting to experiment with so I guess I'm just saying. Any brick-and-mortar news from Amazon is interesting I'll be super eager to follow it but there was nothing, to me and this announcement that goes man my mind's blown this is a major Game Changer or some some new industry that wasn't worried about Amazon last week should be super worried about them this week like I think all those Industries should have already been worried. Scot: [41:35] Yeah and a lot of people I saw coming and we're saying they're abandoning the bookstore this means the 4-star store doesn't work they're getting rid of just je wat technology the Amazon goes towards and I think people just kind of, Amazon. At the heart of their DNA is to experiment with stuff doesn't just because they're experimenting with something doesn't mean the other things failed they can run they have the resources to run 300 experiments retail store experiment simultaneously if they want to and that you can't really read that kind of stuff into them I think that's really jumping the gun. Jason: [42:12] No I would a hundred percent agree with that and again it's built right into their leadership principles like small autonomous teams right so it's not like it's one big entity and they can only do one thing at a time. They've got you know a ton of entities that are doing a ton of things at a time so I I certainly. Scot: [42:28] Purposely don't talk to each other because it was a slow not yeah. Jason: [42:31] Yeah absolutely. So excited to see them doing new things I do think when they open new store formats they tend to be more Innovative than than traditional retailers that are opening new format so I hope they open them and I will be there when they do. Scot: [42:48] And then while we were on the podcast Tesla announced they have a new robot swiped will have to you have to order one of those and then give us a gadget unboxing kind of walkthrough of how that goes. Jason: [43:02] I feel like you are higher on the Tesla waiting list than I am so we may have to leverage your status but I'm all for doing a robot Deep dive at our earliest convenience. Scot: [43:12] Yeah humanoid robots kind of freaked me out so I think I'll lose my status to send it to your hostel we'll see if it a skynet's you or not. Jason: [43:20] Yeah isn't is there another Terminator movie coming out I think there is. Scot: [43:23] There's always another Terminator movie coming out sometime. Jason: [43:26] Fair enough awesome we'll listen we set a goal for ourselves to do a shorter concise show and I said I think we can knock this out in 30 minutes so I totally blew that this feels like about 45 minutes but hopefully it was valuable to listeners if it was we sure would appreciate, five star review on iTunes if you have any questions or we got anything wrong in the show you want to talk about we would encourage you to hit us up on Twitter or Facebook. Scot: [43:57] Yeah I like to think we gave everyone 50% more for their money today so you're welcome. Jason: [44:03] Yeah and you and I earned fifty percent less what's 50% of zero awesome well until next time happy commercing!

    EP271 - Amazon Q2 2021 Earnings Recap

    Play Episode Listen Later Jul 30, 2021 53:38

    EP271 - Amazon Q2 2021 Earnings Recap  Jason is back on the road and has some retail store visit reports: Bed Bath & Beyond Flagship in Chelsea Harry Potter Store New York Google New York Neighborhood Goods Starbucks Reserve New York Amazon Q2 2021 Earnings Recap Episode 271 of the Jason & Scot show was recorded on Thursday July 30, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 271 being recorded on Thursday July 29th 2021, I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-hosts Scot Wingo. Scot: [0:40] Hey Jason and welcome back Jason Scott show listeners, Jason is one of my favorite days of the year and what's exciting is it happens four times a year yep you guessed it Amazon earnings but before we jump into some pretty dramatic earnings this quarter you are coming to us live live live from New York city so it's good that you're out there on the road again and word has it you have some trip reports these are their first trip reports you've been able to give our listeners for last 18 months. Jason: [1:14] Yeah they like this feels like a little bit of normalcy for me is talking to you from a hotel room like I used to do this all the time and I think the first show in 18 months we recorded from a hotel. Scot: [1:28] Nice what's jump into I know you've been on many many store visits let's what's what what are you been seeing. Jason: [1:35] Yeah it was fun I mostly want to focus on stores that had opened for the first time during the pandemic and surprisingly. There are several of those in New York City so I'll start with the one that is closest to my hotel and therefore the first one I went to this morning there's a new flagship Bed Bath & Beyond store that opened in Chelsea. [1:59] And ordinarily folks might say why do we care about a Bed Bath & Beyond store that doesn't sound very interesting and I get it but. The reason it's a little interesting to me is because twofold, they've had a major management and Leadership change at Bed Bath & Beyond they the new CEO is a guy Mark Triton we've talked about a little bit he was responsible for a lot of the new product development at Target before he joined Bed Bath & Beyond, and he announced that he was. [2:31] Doing a dramatic story design and so this Chelsea store is that store and I wanted to check out how he's changed it from what we traditionally think of as a bit Bath and Beyond and it is. Pretty substantial change. Bed Bath & Beyond traditionally is a pretty chaotic treasure hunt so very hard to find your way around people complain that they get lost and can't find an exit the, the lines of sight in a Bed Bath & Beyond or horrific so they stack product to the roof so you can't see very far in any direction in the store. Um and you know it's usually a cluttered mess and so this store. From a visual merchandising standpoint is a much more organized attractive store they it's dramatically more open it has clear lines of sight it has, um like a nice wayfinding system in a visual hierarchy you know it doesn't feel as much like everything's about to fall on top of you or you do it you when you walk in the store so it. [3:36] Visually is more impressive and it's more important it's a more pleasant environment to stand in. Um and so I'll be curious from a pure retail design standpoint I would say it's way better. [3:49] It's pretty off-brand for bed but for what we traditionally have thought of as Bed Bath and Beyond and and because of all those, those sort of clean cleanliness approaches it actually has a fairly significant SKU rationalization so there's fewer skus in the store. And there's probably some Bed Bath & Beyond loyalists that are like you know looking for some of those old products that they no longer have so I'll be curious how the, if they successfully attracts a new Shopper that didn't used to shop Bed Bath and Beyond and whether alienates any of the traditional Bed Bath & Beyond shoppers. Part two of that store is that as he did it Target Mark has launched the first. [4:35] Owned brands for Bed Bath and Beyond and those brands have sort of significant. Prominence in this new store design so so there's I individual vignettes for every one of the Bed Bath and Beyond Brands they're all like, very prominently signed as exclusive to Bed Bath and Beyond and their well executed with attractive. Packaging and visual merchandising that makes them easy to recognize and differentiate so. A bunch of sort of traditional things right that you kind of you know things that are that targets well known for doing well like you're now seeing and Bed Bath & Beyond, um a fear is that people could walk in the store and say wait this is starting to feel like a Target store. Um so we'll see if how that all plays out but I would say if I had one knock on the store. It seems like they've changed the design team but they haven't really changed the store operations team and so, the thing I noticed as well the store was quite well designed and in the product layouts all made sense the store was still starting to feel a bit like a cluttered mess because of the same employees that used to work at the old store are working in this store and their parking shopping carts full of product that they mean to restock on shelves like out in front of things and blocking things and. It just it doesn't seem like they've. [6:00] Um Extended the the new visual merchandising approach to to the Staffing and store operations yet so maybe a work in progress. Scot: [6:10] Well how did they decide from the shopping carts Niles big decluttered it you mentioned they have less cues but did they go to kind of more of like a kiosk kind of a much more clear, kind of Department kind of orientation or how. Jason: [6:26] It's very it's segmented by department and it may not be a fair representation because well, this is a huge store so it made it easier to kind of reconfigure things it's a two-story store so you know you have a home section you have a bedding section you have organization section, um And you know there aren't all these like random nooks and crannies amongst other things I'll bet you shrink as way better in this store than Bed Bath and Beyond because it's super easy for shoplifters to hide and a Bed Bath & Beyond. The end and what they tended to have is like a featured. [7:06] Product display for every department so you know the there's a. Um a sparkling water Cafe sponsored by SodaStream for example. And you know SodaStream was a fast turn product and in bed bath and beyond that here they have a woman working behind a counter, pouring samples of Sodastream and they've launched all these SodaStream launch this new product at Bed Bath & Beyond all these. Branded flavors you can add to the water so IQ can get the bubbly branded flavors and so she's she's sampling different flavors for people they have a coffee bar where they're making you know Keurig copies. Um the other owned products again had their own like featured display where they you know set up a bedroom or a kitchen display that, was was featuring those Bed Bath & Beyond products one of the Bed Bath and bringing Beyond Brands is about green cleanliness and so they you know they have like a cleaning display and stuff like that. [8:14] I would also say they leaned into Mobile in the store and qr-codes more than they have in the past so I all of these feature displays had a big QR code you can scan that took you to a. Sort of a product specific landing page on in their mobile app. In-store pickup was was much more prominent with like a dedicated area for for Bo piss pickups in the front of the store you could do self checkout with scan and go using the mobile app and there was a lot of. Merchandising promoting you to download the mobile app and scan things with your your scan QR codes with your phone. Scot: [8:54] Very cool indeed I know you love QR codes and I think you love more is digital fact tags any exciting digital fact eggs. Jason: [9:01] They did not have any digital fact tags again they are using a lot more QR codes then Bed Bath and Beyond has ever used before and it kind of makes sense because you know, all the restaurants taught everyone how to use qr-codes. During the pandemic and side note I've been getting a lot of complaints from people that the restaurants are not. Give going back to paper menus and I've certainly noticed that here in New York City is that like things are open up they're not requiring people wearing a mask but they still don't have menus and they expect you to order your own food from that app. Um in a QR code on the table so I wonder if that's going to be a permanent thing I've talked to several people that kind of miss the. Paper menus and ordering from a waitress. Scot: [9:47] Cool what a where'd you go after Triple B. Jason: [9:51] So that's in Chelsea and around the corner from this store is the Wizarding World of Harry Potter, in this store opened during the pandemic as well about six weeks ago I actually had a chance to visit the store before it open but this is the first time I got to visit it with people in it. Um And you know this is a super well done themed store we've talked a little bit about it but you know it's the same. Sort of team that that did The Wizarding World of Harry Potter theme park experience so it's. You know they use they use the actual like tools and dies for props for the movie to make everything they have a. [10:38] A bunch of cool experiences that there's a bunch of personalized products you can get your name engraved on a bunch of stuff you know you can get your own admission letter to Hogwarts, um they have exclusive products like there's a particular version of the the Juan that golden finch one that you can only get from this store so if you're a collector of the ones. There's some product scarcity they have they have food they have a bar essentially for sailing it's selling the. The butterbeer which is from the the movie and is a horrible sweetened alcoholic beverage. There's a non-alcoholic version as well they're in the movies there's a there's a magic candy store so they have a magic candy store. And then in so the merchandising and stuff is really good what's interesting about this store is, that you have to get in a virtual line to get in the store so you you scan a QR code on your phone and that reserve your place in line and then you get texted when you're allowed to come back to the store and go into the store and so I showed up at like. 10:30 scan the qr-code and it said that I was 231 first in line to walk into the store. [12:02] I had to wait for about 45 minutes so that's you know two or three Starbucks for me and then I got to go in the store and. In the store are two virtual reality theme park rides, and sadly I have not gotten an opportunity to try either of those you buy tickets for those online separately from entering the store and, the the tickets sold out for the entire window that they're selling tickets for like the first week that the store opens so so it'll be a few months before you you can get a ticket and do one of these virtual reality rides. Scot: [12:39] So you just there's no motion the Motions all VR or there's like a combo your. Jason: [12:44] My so I don't know my understanding is one of them is a is like a sit-in VR so I do think it has motion but it's like. It's not forward motion it's like the jerkiness I don't know what the right word for that is but it moves a few inches in every direction is my. Understanding and you're looking through a VR headset the other experience you're walking and you wear like a backpack and a VR headset and I'm people say it's amazing I'm curious how that works because. From previous VR experiences you know first time people are not super. Comfortable in the VR environment and like people tend to like fall and stumble and do all kinds of things so I'm. I'm not exactly envisioning how this works so I'll be curious to try it one day. Scot: [13:36] Yeah yeah a lot you'll get nauseous from this viewer thinks do so I'll have to wonder how toned down it'll be. Jason: [13:43] Yeah yeah and I wonder what what cleaning protocol issues. Scot: [13:48] What well since it's magic that can just flick the wand and they're good to go did what house did you get sorted into. Jason: [13:55] Yeah so I didn't visit the Sorting Hat I did you know get my picture taken in Hagrid shoes and in the. It's quite a bit taller than me I'm about as wide as him but that's a separate issue, the the I got my picture taken in the phone booth and I got Steven a griffin door, Jersey and some unlimited Flavor jelly beans. Scot: [14:27] Nice very cool Bertie Botts. Jason: [14:31] Yeah exactly. Scot: [14:33] So you left their half drunk off butterbeer and where'd you go. Jason: [14:39] Exactly so then I went to the Meatpacking District which is just a little south of Chelsea. And my main destination there was that there is a new Google Store for the first time so Google has had pop-up stores and temporary stores in the past but this is their first, permanently open store, and it's open in what still is a Google office but was formerly the Google headquarters in in New York and so it just took like the ground floor of that and turned it into a retail experience. Scot: [15:16] So it's all the just mostly the Google what do they call it the Google home or Google Talk stuff. Jason: [15:22] Yeah it's so mobile so all the the Androids and pixels it's Google home so nest and and the. Google version of Alexa which is I think called Google home and then some some. Like miscellaneous stuff like there some gaming products and some things like that. Scot: [15:47] Cool are they still making Nexus phones haven't seen those in a long time. Jason: [15:52] Yes and I don't I don't think Nexus is them their version is called the pixel so the Google pixel is a Google branded Android phone. Scot: [16:01] They went from Nexus to pixel urgent. Jason: [16:03] Yeah and they might have a tablet that still branded Nexus but I'm not super current on the Google Hardware ecosystem, I would I would say I was a little underwhelmed by the store like it's a perfectly reasonably executed store it frankly doesn't feel any different than their pop-up stores it seems like it has a very consistent, um merchandising approach that doesn't feel like they invent anything new there's no digital fact eggs there's no qr-codes there's very limited product information and it feels more like a showroom than a store so like. There's you know one of everything kind of locked down and you have to talk to a person to get help you can't like. Pick up your own products and pay for them and I bought a few things from the store and they struggled to take my money like they. They all have mobile point-of-sale all the sales associates have mobile point-of-sale systems but like. Didn't seem like they mostly knew how to work them and this is a story that's been open for five weeks and none of them were logged into their point-of-sale terminals so they had to like take it out of their belt and go through like a five-minute like authentication process before they could take my money which, kind of tells you that they're not doing a high volume of selling stuff out of the store. Scot: [17:18] Did you try to pay with Apple pay. Jason: [17:20] I did in fact I didn't try I succeed. Scot: [17:23] Whoa really. Jason: [17:24] Yeah the in so I literally like looked at and then I might can I pay with Apple pay and then he like looked at me and said you mean NFC payment sure. [17:39] Yeah so that did work eventually once I found someone that had was logged into their point-of-sale terminal I would say the best part of this store, was that they had several vignettes in separate little rooms that were kind of great retail theater that was kind of telling the story of a particular genre of Google products so like I said down on a couch. In a in a little room that's you know kind of designed to look like a small house. And they teach you about all the Google Home Products so so they have like a projector that projects text down on the coffee table in front of you and they come up with all these scenarios like in the window, you see the silhouette of a UPS delivery driver come up and you hear someone knock on the door and then the table says you know teaches you how to use Google home to look at the front door camera. And so you can see the UPS driver and an approved the package and then, a woman in the background answer of your cooking lunch and the table teaches you how to use Google home to find a recipe to cook and you know the table teaches you how to pick some music to listen to and how to turn up the lights and run a good night routine to get ready for bed stuff like that so it was nice retail theater you know I can only serve one group group at a time and so again it feels like. [19:00] You know exactly what it is the stores you know mostly focus on sort of being a. In education showroom for for these Google Technologies more than like a high-volume retail. Scot: [19:14] Colts after being quote unquote that guy that had to pay with Apple pay at the Goodwill store where where did you go next. Jason: [19:21] I think they were just thrilled I was bad guy that paid for something, but yeah so then to other stores that are kind of kitty corner from the the Google store that I had been to before but like I really only opened just before the pandemic so I wanted to check them out again while I was there. The there's a neighborhood good store so we've talked about neighborhoods this is like one of these um d2c department store Concepts where it's like a shared retail space and Brands rent rent. Space primarily like DDC Challenger Brands rent space inside of this this department store so there's a bunch of vignettes in the store we visited one in Texas I think you were with me. And so this is a the Manhattan one and you know as I've discussed before like this it's reasonably well executed I actually think neighborhood Goods does. The best job amongst the companies that do this but I'm I'm not super bullish on the concept. Because it's the big problem is it's kind of a chaotic hodgepodge of Assortment like there isn't a merchant saying customers are coming to our store to solve problem X and so I'm going to have these products that solve that problem, so it's kind of a. [20:42] You have to go to the store you know willing to be completely surprised by what they have in the store right and it might be beauty products it might be a parallel in might be Beach where you know you couldn't go there with any specific need and have any confidence that, that there was going to be a product that match that need their but I would say. Neighborhood Goods feels a little more curated and a little more focused than with a point of view than some of these others. [21:10] And then I visited the the most important retailer in Manhattan which is the Starbucks Reserve store so, they're this is there's a small Fleet of Starbucks stores that are called the Starbucks Reserve stores they all have working, Coffee Roasters in them and have you buy the premium beings from any Starbucks anywhere in the world that come in the black bags they're getting roasted on premises in the stores, these doors all have like alcohol and unique coffee bars, in a bunch of drinks that you can't get in a regular store and they usually have some like third-party restaurants in the stores and their huge extravagant beautiful architecture. Um stores so the largest coffee shop in the world is a Starbucks Roastery in mine in my city in Chicago the first one of these was in Seattle which is home of Starbucks, the only other one in the u.s. is this Manhattan one in flat iron which is. Um well we execution but I would say nothing that I haven't seen in one of the other. Starbucks reserves and then there now is like a Starbucks Reserve in Shanghai and a Starbucks Reserve most controversial of all in one of the cities in Italy. [22:28] And I say controversially because the Italians like their coffee and don't necessarily appreciate the American coffee brand so it was kind of a bold move on Starbucks part to open this. Ginormous Coffee Emporium in in Italy. Scot: [22:42] Read teach them how real coffee is made. Jason: [22:45] Exactly my favorite feature of the Starbucks Reserve stores is I mentioned they wrote their own beans in the store and then they have these fancy coffee bars. So what they've done is they they have a Willy Wonka style vacuum tube or a series of tubes, so to me it's a metaphor for the internet that runs from the the Roasterie to the coffee bar and so the you literally like if you're there when they're roasting can watch beans. Flow through these tubes straight from where they've been roasted to the bar where they get ground into coffee drinks. Yeah yeah it's very very Willy wonka-esque and again the startx folks do a great job of visual merchandising, this kind of reminds me of the first time I walked into a Nike Town and it was kind of this like. Temple to the Nike brand and they did all these things that back then were not common like they you know design the door handles of the store to be swooshes and all these cool little touches, and in many ways this these Starbucks stores feel like the modern successor to that. Scot: [23:58] I noticed you didn't mention one of our favorite stores beta and that made me think about one of the big buzzes before the pandemic was that Hudson yards event is that right yeah is that what's going on with with those guys. Jason: [24:12] Um well so I don't have super first-hand information Hudson yard is still open a giant floor of Hudson yard was a Neiman Marcus the fanciest Neiman Marcus and that is out of business. Um I don't think they have another tenant for that yet but I didn't go to Hudson yard and this visit it's actually in this area so it would have been. [24:34] Possible to walk too but I just didn't have time and that Hudson yard does have a beta. You know I think beta struggled a little bit in the pandemic they kind of were optimized to be pandemic unfriendly like most of their stores are in malls like heads in yard that had. Significant decline in trout in traffic, and they're kind of the opposite of Essentials right like so there they have a very curated point of view their Consumer Electronic gadgets but again you wouldn't go there because you need a Bluetooth headset like you'd go there to find some new. [25:10] New Gadget that you didn't know existed that you wanted and I think that kind of shopping you know was particularly impacted by the pandemic like you tended only go to the store when you really needed something so, um you know I think some of the founders of beta including bib who's been on our show I think at least once, we're kind of public during the pandemic about some of the the challenges they were having trying to take care of their employees and you know stay open and generate Revenue, and I would say you know one thing that I've been a little critical of beta I think they do a bunch of things very well they've always been slow to embrace omni-channel in the web so they really focus on the in-store experience and I've been kind of critical that they don't have a, equivalent online experience and I have a feeling that that that deficiency probably you know was extra painful during the pandemic so hopefully they're starting to recover now. Scot: [26:05] Yeah yeah hope they make it too because this one of my favorite favorite gadgety places to go. Jason: [26:09] Yeah I have to be honest because I also I didn't even mention it because they're so boring but I bounced into the Flatiron Apple Store, and it like it dawned on me how fun I used to think it was to walk into a text or or a computer store or even a Best Buy because you would always discover something you didn't know existed that you wanted. And that doesn't happen anymore like there's there's very few sores that surprise and Delight you with their product assortment like you know because of the. The you know all the digital pre-shopping like you're way more likely to know about all the cool products from from the web before ever before you'd ever you know stumbled across it in the store and in the case of Apple. There you know rationalizing their inventory to exclusively Apple products so they just have less interesting accessories and you know lesser-known things than they've ever had before. Scot: [27:06] That sounds like a busy day you're missed. Jason: [27:10] Yeah yeah I'm a little tired and then of course I had to spend about eight hours deep diving into the Amazon earnings. Scot: [27:17] Yeah that's a good set of well thanks for doing those trip reports for so no enjoy hearing hearing your exploits as you're out there and hopefully you can keep exploring this Delta variant won't shut you down so let's jump into the Amazon quarter. [27:45] So Amazon released calendar Q2 results and I'd say it was the toughest Amazon quarter and quite a while so, you know the headline here is in Wall Street vernacular companies put out their own projections and then Wall Street Khan does their own math and which is called consensus a lot of times based on the history of how the company does Wall Street will either go above kind of what the company says or below it or whatnot and I would qualify and when you when you exceed wall Street's expectations that's called a beat and then when you then Wall Street always looking out it's a what have you done for me lately or in the future coming so then they're always thinking about you know what's going on in Q3 and they already have consensus for that so you either beat or miss the current quarter and then raise neutral or lower than forward quarter or the years Viewpoint and this is this is kind of the the worst scenario here is it was a myth so they missed wall Street's Revenue expectations and then they lowered Revenue expectations going forward so so that's no good and we'll dig into what happened there and then the Silver Lining here though is the in this part is really isolated to the on What's called the segment called online store which is effectively the e-commerce part of the business which was Amazon obviously is pretty big and important. [29:13] But they actually exceeded expectations on the high margin parts of the business that everyone really values even more than when you see the sum of the parts kind of things so things like the advertising piece we talked about AWS and some of the other the third party Marketplace they actually exceeded expectations on those side so if there's a silver lining it's that they kind of you know the e-commerce year-over-year comparisons were really tough and we'll go into why but then the other non e-commerce parts of the business did really well also as a reminder this is the first quarter where Jeff Jesse is taking over to the new CEOs taking over so the timing. [29:56] Yeah sorry yes I do Andy Andy Jesse is taking her so, you know the timing is tough for him because he gets to kind of reside over you know what feels like a long time since the company has missed a quarter but in a way, you know it's a chance it's kind of what a lot of Wall Street people are also called kitchen sink quarter so you kind of like if you're going to have a little bit of a rough quarter you might as well sweep everything into this quarter lower expectations and that resets the bar hopefully so that you can then start to get back to exceeding that those expectations so a lot of folks were kind of saying yeah. Projection didn't felt pretty aggressively low compared to the quarter so a lot of people were kind of framing it as maybe that's what's going on there. Jason: [30:44] Yeah it's interesting I listen to the the webcast. Where you know reporters and analysts get to call in and ask questions and you know one of the questions was kind of critical asking like what they what they missed in terms of pandemic trends that that adversely affected in this quarter and and I don't remember who the Amazon employee was that answered but he's like we've been pretty consistently bad at predicting the impact of the pandemic he's like you know in the in the good quarters we wildly underestimated what would happen and you know this quarter we over it we underestimated the the counter Trends and so you know he's like. At least we've been consistent in being being wrong. Scot: [31:33] Yeah it is hard to predict even now you know it's hard to predict what the second half of this year is going to look like right you can you know the data the immediate data is telling you everything is like on fire in but then you know this Delta variant you know there's always talk so shutdowns and stuff again so the cone of uncertainty is quite large right now for everybody. Jason: [31:55] Yeah and go ahead I was just going to say I had I almost wonder if. Amazon like is taking a little extra hit for being one of the earlier Q2 earnings calls. Because I feel like everyone is going to have a kitchen sink quarter it's going to be super complicated and they're going to be ups and downs. You know for a for a lot of retailers and I think you know the analysts are kind of learning about the factors through these first couple earnings calls but you know the, the Amazon quarter may not look as bad you know once once we get through the whole learning seen each season and see how everyone shook out. Scot: [32:35] Yeah I think what we'll do is we'll kind of track this through the next couple weeks and and maybe it actually won't look bad in hindsight but kind of been one of the first ones to report the only one that I saw that came out earlier was Shopify and they had a pretty rip-roarin quarter they exceeded that was a beat and exceed so so you know it's kind of kind of weird of the mix of what's going on here and, I can't hundred percent parse out like why would Shopify do better than Amazon and you know why would smbs do better than big old Amazon so maybe maybe it's just a comp thing you ever your butt will dig into that for listeners. Jason: [33:15] Sad no my hypothesis on Shopify would be that the pandemic taught a lot of small businesses that they needed a website and, ideally if they were in one of these categories where they were Outsourcing digital to Door – or instacart or you know my web grocer or someone else, that they started thinking about needing their own website and if they were you know mainly selling through marketplaces and then you know Amazon throttled FBA, like they suddenly realized they needed their own direct sales and so I do think. There are a bunch of the pandemic trends that would particularly cause small business this is to invest in their own website for the first time and so that that could have could mean that a bunch of, customers on boarded onto Shopify which kind of helped Goose their number. Scot: [34:08] Yeah they don't break out new net new. Jason: [34:11] No no I wish they did because that again like they had a huge GMB growth but the problem is we never know if that's because the stores that have been using Shopify for a while doubled in size or because they doubled the amount of stores they host. Scot: [34:25] Let's dig into the Amazon numbers to kind of give the context is kind of one of the early results here and then then we'll follow up with some more details so overall sales increased 24% taking out the effect of currency and variations for the quarter 213 billion for the second quarter that is the slowest growth since 2019 and that's when I stopped looking back so you know Amazon's been growing much much faster than 24% for quite a while here so this was a very slow quarter which is kind of funny because pre-pandemic e-commerce is growing 15% so so it's all relative I guess but slow for Amazon. [35:08] Actually above Baseline for normal e-commerce I would say this cause them to miss the consensus so the number they came out with his 113 consensus was 115 and change and then Amazon they did kind of come within their own guidance but at kind of the midpoint and whereas for the last six plus quarters they've come in at the higher beat their own guidance and then another thing you know if as you think about these moving parts Q 221 had prime day and last year it was in Q4 of 20 so we should have had the benefit of prime day but then you know obviously, Q 220 covid-19 at its peak in Amazon was was going to be benefiting from that Surge and all the PPE stuff they were pushing out and Essentials and all that and then obviously we don't have that this year so lots of moving Parts going on and then Amazon does peel the onion a little bit with the segments and want you walk us through that. Jason: [36:13] Yeah happy to so the big segments that the Amazon discloses are North America international and AWS, so North America in Q2 of, 20/20 had grown 43 percent. Tends to be growing a little slower than International it's the biggest piece of the business I want to say it so I 62 percent of the business, and so this this Q2 it only grew by 22 percent so the rate of growth substantially slowed down. Um The you know a couple of the things we try to zero in on in that are the online sales and the brick-and-mortar sales so the online stores grew by 13 percent which again is, the slowest rate of growth for North America online stores in at Amazon that I can find in history. [37:19] So so that that's a pretty significant deceleration and you know pre-pandemic we used to talk about e-commerce growing about 12% a year, and Amazon was typically their store their online store sales North American Sales were growing in though I Thirty to forty percent a year so, um it we won't know yet the Department of Commerce data on e-commerce won't come out for Q2 until August, but it's very possible that this will be the first time in a very long time that Amazon's growth in e-commerce was slower than the industry average I'm going to go out on a limb and guess that that's not going to be true. The industry average is going to slow down as well but like you know they're those numbers are flirting with each other and usually Amazon as well above the the industry average. [38:10] Um and then also interesting and quite complicated is physical stores So Physical stores had a rebound they were up 10% Q2 of this year versus Q2 of last year, and you know. Previous quarters had been going down quite a bit so Q2 of last year was down 13 percent from the previous year so. [38:35] The the thing then think about here is physical stores that Amazon mostly means Whole Foods so that they have about 15 on Hall food stores or maybe 70 now, but most of the revenue is Whole Food stores and there's a quirk where when someone buys an online delivery order from Whole Foods. Amazon online sales gets the credit instead of Whole Foods so so for a long time the stores their number has been declining and and the hypothesis has been that's because. [39:10] More people are learning how to shop online and that makes the, the people that are buying from the cash registers at Whole Foods look smaller and so this was the first quarter in a long time that Whole Foods had a net growth, which is interesting because that's grocery is not necessarily one of the categories that you would you know. Grocery had a huge quarter during the pandemic and so you would you would expect not to see real Healthy Growth in grocery stores this year comping against the pandemic quarter from last year so, I found that interesting so then the next category is international it was a little more, robust versus usual it was up 26%. Which I guess I misspoke because that's that's actually a lot slower than usual. [40:09] So so that also was kind of a downer and then AWS, um what what Drew quite robust so it was up 37 percent versus for example being up 29% the same quarter last year. So so the rate of growth of AWS accelerated and you know the funny thing is how this plays out because of these diverse businesses Amazon has and the fact that, you know a WS and some of the other businesses are so margin favorable when, you know retail is the biggest piece of their gross sales so so when retailgeek us down there grow sales go down but their profitability goes up basically. And conversely if retail has a gang Buster quarter likely is going to have a negative impact on their on their margins so. So you know there's always happy and unhappy news and in a company as complex's Amazon these days. Scot: [41:07] Yeah the International Center success scanning the results on a psycho 36 percent that's good but then it was like X FX was 26 percent so 10 points you know which is a pretty material chunk of that growth was due to currency so that was interesting the dollar must have been strong a year ago and then quite weak now to have moved ten percent against the basket of currencies they're measuring against. Jason: [41:32] Yeah in the press conference the CFO called out that this is like one of the, most complicated highest fluctuations of the international currencies and so he was he you know he was trying to exclusively talk about, the the normalized numbers because he's like you know this was a very unusual quarter from the currency standpoint. Scot: [41:53] Yes I've done this having operated. On the international side it's super frustrating because you're like oh man we had a great quarter and then you get the results of the taking out the currency then like knocks like half of the work in there and you're kind of like that's not fair I'd have no control over that but it is what it is. Jason: [42:12] Indeed and it is part of the cost of doing business on that scale unfortunately so a couple of things kind of Sub sub numbers within those numbers that were interesting. You know increasingly Amazon makes a lot of money selling services to the third-party Sellers and so the 3rd party seller Services number grew quite robustly that group 34 percent, that's a nice high margin business and I think the third-party Sellers as a percentage of total sales hit a new high mark, 422 they were 56 percent of all sales so I that's the highest number I remember because I want to say was 54% last quarter which was at the time the highest number. Scot: [42:57] Yeah that's interesting it's been for longest time it was just a fifty percent for years and years and then it seems to be on a bit of a take off right now just which is interesting I wonder if it's. Conspiracy theorists would say hmm I wonder if this is a way of further insulating themselves from scrutiny from from any Trust. Jason: [43:18] Yeah and then when number that I was curious to get your take on so subscription Services were up for 28%. And the thing that's interesting to me about that is I have always assumed that the bulk of subscription Services is prime. Um and I actually think there's some data points from outside of the earnings call that point to the. The growth rate of Prime members slowing substantially for Amazon so I think you know there were a bunch of forecast that that, you know they may have only added to % Nu Prime members on Prime Day last year which. You know the there over half of all the households in America are prime numbers so they're kind of is the law of large numbers kicking in here but you know they used to get. Very robust double-digit growth in Prime members just from Prime day and it felt like those things are slowing down so I was surprised to see subscription services so high do you have a. A take on why that might have been. Scot: [44:19] Yeah so let's see so we had to Prime days in the last under a year so we had October and then June, most people would be in there free window isn't there free window of prime still we get 30 days free. Yes I don't think June would have really moved the number so it must be residual from. Q4 now that does show up they'll kind of start in q1 I don't know that that's interesting I do I have read reports that there you know some of the international Prime was kind of slow to take off and they've tweaked the offerings in some of the countries like the UK has been popular but other parts of Europe like maybe Italy and Spain has been a little sluggish and then I think they've tweaked the offering and then India I think they've been doing a big push there if I recall so so maybe again it's kind of it'll break unfortunately don't break down that that piece by North American International like the other pieces we can kind of see my bet would be us as slow and maybe a lot of it came from. Jason: [45:24] No that's a great point I wasn't I wasn't thinking about that but you're probably exactly right in a reminder for listeners the prime offering in a lot of other countries is, significantly different than the North American offering the North American offerings the most robust so there's a lot of things, that you get in that North American offering that they're they you know they're not doing same-day delivery and every Market they're not doing Prime Video in all 22 markets where they offer Prime so. It said that the the offering is more compelling some places than others. [45:56] Um and then the most important number of all Scott you know the number I always focus on is the super descriptive other Revenue, and so as a reminder other Revenue we think in Amazon's case is mostly their advertising Revenue in this this has been a rapidly growing number of for them every quarter and it was rapidly growing again, it had 83 percent growth to you know just under eight billion dollars for the quarter I did some quick math and I think my math ended up being slightly different than you so I wonder if I did. Not trying to see adjusted and you did currency adjusted or something like that, but I think the Run rate at the last four quarters for other is now 28 billion. So that they are they are like the clear number three advertising Network in the US and they are they're rapidly gaining on Google and Facebook. Scot: [46:56] I think the trailing 12 would be that number and then I think the Run rate would be about eight times four which would be 32 would be the run right yeah. Jason: [47:05] Fair enough yes yeah although I don't think that's completely even so yeah. Scot: [47:10] Yeah that assumes that they're going to at least do that as well as they did this quarter 24 now this this is one of the things that would have had a in the quarter bump from Prime day yeah and I I heard anecdotally you probably have a better kind of quantitative data on this that this Prime day people get like really Knives Out fighting for customers and spinning out a ton on ad dollars as did you hear, some similar stuff. Jason: [47:36] Yeah and I think like every other advertising platform out of the world in the world like that Amazon is getting better and better about optimizing, the pricing for Prime which means that it is less profitable for the advertisers right because they're getting as much as they possibly can so the kind of the the return on ad spend is going down as the revenue to Amazon is is going up, um and increasingly like there is no visibility for your deals on Prime day like unless you support them with ads. So in the same way like no one's going to see your organic content on Facebook if you don't buy an ad you know nobody is going to see your product listings on on Amazon without add support. Scot: [48:26] Yep pretty amazing how fast they made that go from a hey if you want a little bit extra traffic do this now it's like hey if you want to sell anything you better run some ads. Jason: [48:36] Yeah it's the bane of my existence because every retailer is trying to recreate that you know on a smaller scale and. It creates all kinds of complications as a brand it's really hard right now because you're getting extorted for retail advertising dollars from all these retailers there are many cases don't have the reach to justify the money they're asking for but in some cases you can't say no because they're your wholesale partner is going to kick you out of the store if you don't give him the money so it's interesting. Scot: [49:06] Of course those were the segments and then so I would say well she was kind of looking at that like kind of a mixed bag you know we wish they had at least meet expectations there but it's nice that the high-margin things kind of beat our expectations and then the guidance came out and that's kind of like where it was like a this is this does not look good so what happened here is a guided to 106 to a hundred and twelve billion so at the midpoint it's 109 that is 13 percent year-over-year growth consensus was at 119 so they're off by kind of 10 billion there they, lowered the expectation by 10 billion and then during the Q2 results we didn't go into it in super detail but the they missed the Top Line because those high margin businesses exceeded the overall profitability of the business was decent right so it wasn't wasn't terrible. [49:58] But here they've now lowered the bottom line to pretty considerably below expectations and then that brings down the whole year so you know I looked after hours the stock was down 8% I think it'll be a little bit of a bloodbath tomorrow as everyone kind of like real lions towards you know this well what is it is a 13% grower I don't think anyone had modeled out 13 percent growth for Amazon this year so so that will be a little bit of a blood bath and a resetting them expectations which I think again if I'm the new CEO this is might as well go ahead and do it now and and then hopefully he can kind of like use that Foundation to start beating exceeding expectations but that was that was kind of the ugliest part I think that really kind of you know everyone's kind of mix quarter you know hopefully the guidance will be kind of you know not really impacted and it was kind of like a little bit of a shock at the end there about how low they did Diamond Stone. Jason: [50:58] Yeah yeah and again Amazon was one of the very first retailers to report their Q2 numbers and so I think it is going to be super interesting to follow the rest of the earnings. And see where the rest of retail lands. You know and whether they're adjusting their guidance for the end of the year because pretty good point that this fear of uncertainty is huge. And you know nobody knows like are we going to be back in the pandemic behaviors in Q3 and Q4 as variance get worse are, you know is they're going to be spending their money on weddings and vacations that you know had been deferred and instead of in retail like how does the. The you know tweaks in government stimulus and the childcare credits and all those things impact spending like there's just so many factors. It's really complicated and it's going to be interesting to see how those all net out for the Walmarts and targets and Best Buys of the world. Scot: [51:55] Yeah and you know for listeners we're going to this is kind of one one data point and we're going to keep track of other retailers as they report and kind of sort through it for you so we can figure out what's going on in the data and you know here in retail Land by the time July rolls around and we had in August we're all thinking about the fourth quarter so what we're trying to do is parse these tea leaves and see if we can help you think through any strategies for the fourth quarter so that's going to be where we'll start to lay down some content here in the next several episodes. Jason: [52:26] Yeah now a number of listeners asked me to ask you like because Amazon had such a soft quarter it's presumably going to affect the stock is that going to slow down your plans to buy a ticket on Virgin Galactic at all or. Scot: [52:39] I have no desire to go to space so I'm more than happy to watch the billionaires do their thing and you know and I'm glad they're not spending my tax dollars so I'm all good with what they're up to. Jason: [52:53] Fair enough I think the listeners will be thrilled to know that you're staying safe. Scot: [52:58] Doing my best. Jason: [53:01] Awesome well I think that wraps up this this quick take on Amazon earnings as always if this was valuable to you we sure would appreciate that five star review on iTunes. Scot: [53:16] Thanks everyone for joining us and… Jason: [53:19] Until next time happy Commercing.

    EP270 - MicroService based commerce with Kelly Goetsch

    Play Episode Listen Later Jul 16, 2021 60:17

    EP270 - Micro Service based commerce with Kelly Goetsch  Kelly Goetsch (@kellygoetsch) is Chief Product Officer at CommerceTools a leading MicroService based e-commerce platform, he is also the Chairman and co-founder of the MACH Alliance, a non-profit organization formed help enterprise organizations to take advantage of open tech ecosystems that are Microservices based, API-first, Cloud-native and Headless. Kelly is also the author of four books. Topics covered CommerceTools Mach Alliance State of Microservice based e-commerce platforms Amazon's role in e-commerce platform ecosystem Shopify's role in e-commerce platform ecosystem Future of e-commerce platforms Episode 270 of the Jason & Scot show was recorded on Thursday July 15, 2021. We're taking a summer break next week, so no show the week of July 19th. 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.

    EP269 - New CEOs at Amazon and Instacart, Other news

    Play Episode Listen Later Jul 9, 2021 47:15

    EP269 - New CEOs at Amazon and Instacart, Other news  Breaking News: Instacart has appointed Facebook executive Fidji Simo as its new CEO Amazon News Jeff Bezos steps down Amazon offers it's multi-channel fulfillment (MCF) to Big Commerce customers Other News Shopify Unite 2021 Instagram leans into commerce Nike earnings Warby Parker IPO Episode 269 of the Jason & Scot show was recorded on Thursday July 8, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 269 being recorded on Thursday July 8 2021, I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot: [0:40] Hey Jason and welcome back Jason Scott show listeners Jason I hope you had a nice restful July 4th. Jason: [0:49] I had a great July 4th my poor dog that doesn't like fireworks cannot say the same but. Scot: [0:56] I love you tried the Thunder shirt. Jason: [0:58] We've tried all of those homeopathic remedies and we're now on doggies ionx and the last time we talked to our vet like he actually said inadvertently suggested that both the dog and my wife should be on Zan. Scot: [1:11] An unrelated news he's no longer but awesome I'm glad you did well we wanted. Jason: [1:20] Primary care physician exactly. Scot: [1:25] We had some breaking news and pretty exciting and I'm going to kick it over to you because it is your category of grocery. Jason: [1:33] Yeah Scott says that like he doesn't use groceries but the some news from earlier today that instacart announced that they had poached, a senior executive at Facebook and I'm I'm already telling the story wrong but they they've appointed and I'm sure I'm going to butcher her name, fidji Sumo who's a former Facebook executive that is now the CEO of instacart. And the reason this is potentially big news instacart has you know been one of the primary beneficiaries the pandemic, they're they're going gangbusters at the moment there's a lot of speculation that they're about to announce an IPO, and the founder of instacart is now stepping into an executive chairman roll out of the CEO role, and Fiji has actually been at instacart I think for like half a year from Facebook but or, I guess she was on the board of directors and so now she's coming on as a full-time employee. Scot: [2:36] Yeah it was interesting I was watching CNBC as I want to do and they did a breaking news alert and what to a live shot of of her with the apoorva who is the founder and now exec chairman of instacart and they were they were pretty directly asking the IP o– question they had to be kind of coy about it because you don't want to. [2:58] You can't control the timing of that there's another article out from the information that revealed that this seems to be a deeper strategy on the instacart side because they have taken over 60 folks from the Facebook side of things before this this kind of high-profile one and what's interesting about that is the article went on and kind of dug into it and a lot of them come from kind of the korad part of Facebook so you know what what I'm reading between the tea leaves there is you and I have not only talked about this new ad Network on instacart but we had one of the leaders there is a next Amazonian and on the show and yeah I've heard a lot of Buzz around this ad Network getting a lot of play and you can imagine that that would be a really nice thing to start having grow at triple digits post covid-19 as a way to continue to monetize thing so my theory is that this is a concerted effort to really beef up the ad Network part of instacart and add a second leg of monetization the first being consumers paying either extra or a delivery fee for groceries and it's gonna be interesting to see if that you know then maybe that rippled all the way to the top where they said hey would it be great to have someone with a really good ad Network chops in here and thus the addition of the G. Jason: [4:20] Yeah no I think your speculation is probably spot-on you know groceries a tough business to make money like in way instacart isn't really a grocer that are. Multi-sided market place and so it's a little easier to make money but still the best way to make money is with that ad Network and. I feel like more than half my life right now is retail media networks so they are super trendy and the dirty secret is most of them. Are not very high volume yet right like the retailers are investing all this money and collecting ad dollars but they don't actually have. Um enough eyeballs to have real scale and instacart is one of the exceptions to that so so they are a viable place to put your. Your digital ad dollars especially as they get more complicated in the Privacy Wars, so it makes sense that they want Executives that are good at that and I would also argue the instacart. Advertising products could stand for some. Some Evolution and some mature zation and so you know maybe that will be one of her focus is there is two two. Make those products more mature and friendly to advertisers. Scot: [5:34] And it wouldn't be a Jason Scott show without some. Jason: [5:43] Zon news new your margin is there opportunity. Scot: [5:51] Well the news that popped out at me this week and this is kind of a recurring theme that we promised listeners we'd keep track of and this recurring theme I like to call Amazon versus Shopify so you know we started out this year with a lot of kind of back and forth between the two companies on social media there was some talk of Jeff Bezos re-engaging to help the company come up with a Shopify strategy and so we've been watching this one really closely so I thought this news was pretty interesting and I'm curious what you thought about it as well so big Commerce announced that they are partnering with Amazon for mcf which stands for multi-channel fulfillment and you know I wanted to read this quote so this quote comes from the head of the omni-channel at Bigcommerce Sharon GE GES, and then the code is convenience and fast shipping expectations have become the Holy Grail of the online Shopper with demand forecasting becoming harder to control he G said in a press release Amazon mcf will help our Merchants to better plan purchase fill in a much more efficient way so I thought this was pretty interesting because first of all Amazon multi-channel Fulfillment has had kind of a rocky rocky. [7:05] Road not the ice cream but the you know so Amazon introduced FBA and they kind of introduced this ability to ship to other channels and then they got really rigid with it like then people said well that's good but we want you to ship in a different box and your fees are too high for off Amazon shipments and this that and the other and you know what if we want to use a carrier that you don't really lean into right now like a FedEx or something like that and if so then Amazon you know I don't know well the official stances but it became very hard to use that service in volume because the filament system got full and Amazon kind of prioritized FBA over M CF so mcf had this kind of like up and down Rocky thing so I thought this was interesting because it does seem like to getting more serious about it and then it also you know. [8:00] My theory is if you were going to sit down on a whiteboard come up with 10 to 20 things that can start the Box Shopify in this is one of them and then if you if you think back to the clubhouse we hosted that had Faisal on there he actually kind of said if I was the Amazon I would throw Logistics out on because they'll never figure it out and then I'll use that as a wedge to if I could get all shopify's customers using my Logistics then I could wedge out Shopify so I think that could be part of a you know I don't think this is going to be the Silver Bullet by any means but I think it is one of these silver shotgun pellets that Amazon is going to start firing at Shopify so I found that pretty interesting. How was your day. Jason: [8:43] Yeah I generally agree I'm not confident that it's I'm sure. Competitive factors against Shopify is is one aspect but to be honest it just good business for Amazon. [8:58] Two. It's another service where they get to make a higher percentage of the to the worldwide gmv and all the markets that they're in, um you know because Amazon's already the biggest digital platform in most of the markets they play in that they're shipping the majority of packages for most of these these sellers anyway and so it's just a way to grab the rest of their volume almost every you know the majority of these sellers selling other platforms besides Amazon, the majority of them now have recognized they need to have their own website and so it's kind of foolish of Amazon to I force them to open their own warehouses for those alternative channels or, hire another 3pl so I just think. [9:39] In the same way it made sense for Amazon to rent a WS capacity to others and you know provide some of these other services it's a way to monetize their delivery Network and their fulfillment Network so I think it's super smart. Um I do think Shopify had some aspirations in the 3pl side of things and I assume. Amazon will you know being quite a bit ahead of Shopify you know then making this ubiquitously available will cause some problems for Shopify the one thing that still gives me pause and we give me pause if I were a merchant. Um is that Amazon as you alluded to already has a checkered track record for supporting this service right so, um even if you're just an FBA seller and you put your inventory in FB a Amazon is a notorious for constraining how much of your inventory they'll accept. [10:36] Based on their demand capacity right so there was a lot of Buzz, um leading up to Prime day that a bunch of vendors just couldn't get inventory into FB a because Amazon had dramatically curtailed the amount of inventory that they would keep. Um there and there's all this speculation in the Amazon preferences new skus versus old skus and so a bunch of vendors. Found themselves having to go to other three pll's to sell on Amazon because Amazon just wouldn't accept all of their goods and so if you're going to say oh you know what I'm going to put all my eggs in Amazon's basket and have them ship all of my. I need to be certain that when they get busy when they have holiday Peaks they're not going to, preference their own their own stuff and what's going to sell best on their platform against my needs and at the moment Amazon doesn't have great credibility there so I think they have some reputation. Repair they need to do but assuming they do that like this makes a lot of sense and as you well know. Fragmentation of inventory is super expensive so you know having having some of your inventory and radio or or you know some of these other three pll's and some of your inventory and Amazon totally sucks because, you sell out of one place while you have slow turning inventory in the other place in that car. Scot: [11:57] Yet kind of invites Murphy's Law to come bite you in the butt because the second you send a thousand widget somewhere then you'll need a thousand widgets the other place it always happens that way it's super frustrating. Jason: [12:08] Yeah so I think this is a super appealing service, Amazon has a slight credibility problem that they'll have to overcome and historically they they're pretty good at overcoming those. Scot: [12:17] One last one is I know eBay and Walmart all, you know they got super frustrated that someone would come to eBay to buy something it would show up in an Amazon box so I know that there's been a lot of talk of them either putting up rules or thinking about it or on again off again with rules around that so I think Amazon would have to look at it and also think about the Amazon box and and. Not ship the stuff out and kind of normal Smiley Prime box that everything else comes out and. Jason: [12:49] Yeah no I think that is a TBD and again it's one thing if I'm, indigenous on Amazon and Amazon you know doesn't is super careful about what they let you even put in the Box because they're again trying to disintermediate you from the customer, but if it's my customer if I sold the you on my website and then I'm going to ship you a box and I'm just paying Amazon to ship that box for me. Like I of course want and expect to be able to put my promotional materials in that box and that you know figuring out all of that kind of thing. It is part of the mcf we haven't we haven't seen them as on solve it. As a side note this whole category is just ballooning there was an interesting article in. CNBC last week about how demand for warehouse space is at unprecedented levels and new cities like Columbus and Savannah are emerging as the new shipping hubs because. The traditional ones like Memphis and Kentucky and stuff just don't have have any more space to rent. Scot: [13:55] Carson and then I saw some of the stairs like a next generation of 3pl that's kind of like F ba of vacation / we work on vacation of 3pl like ship hero we've had some of these folks on the show talk about shipping carriers a lot of them are raising hundreds of millions of dollars right now so the VC dollars are flooding into the space to so it's gonna be really interesting to watch the overall fulfillment Wars continue. Jason: [14:21] Yeah and I something we've talked about a few times every week the virtual 3pls right and just you know it's super interesting. Scot: [14:29] And in that vein I put a little LinkedIn post I kind of tied this to fundraising it spiffy but the overall, thing I was trying to get across is. One of the friends of the show Brian Fitzgerald he's one of the internet Analyst at Wells Fargo they did a bricks and clicks day and this was last week and in there they had Rob Williams who's a former Amazon GM of global vendor management and he kind of made this off comment off off-the-cuff comment that I thought was interesting he said Mr Williams emphasized the sheer scale of the Amazon is logistics filled out over the last two years with over a hundred forty million square feet added which is the equivalent to the Distribution Center capacity added by Walmart over the past 50 years so that you and I have remarked several times about how how much infrastructure Amazon is building out and it's just hard to even, compare what they're doing I thought that was an interesting comparison. [15:27] Benedict Evans pointed out that he kind of argued is that a fair comparison because it doesn't count the retail stores I had a clever counter that that I can't remember but you know Amazon has pixels instead of physical space so so it's kind of apples and oranges in a way but yeah the my point in bringing it up with spiffy is I'm out their fundraising all the time and I get this feedback from VCS that say oh wait a minute you have fans and infrastructure yeah we don't invest in any companies that have that and I was want to facetiously say well well you would have missed Amazon because you know they they clearly have if asset heavy is a thing they are the most heavy and assets company out there that that I can think of that doesn't count all the the compute centers that they're building out for AWS but that's a whole nother story and then, there's a famous Jeff Bezos ISM that he has someone asked him this kind of question around this asset heavy thing he said you know one way of thinking about it is if you build a big enough castle that is the moat I guess the question he was asked is you know what's Amazon's competitive, and his answer was we're going to build such a big castle we don't need a moat and that this is this kind of reminded me of that quote as well and I tagged you in this you get the fun benefit of getting all the LinkedIn notifications for people commenting. Jason: [16:51] Yeah I was gonna say you're way more popular LinkedIn than me because that my insight through this is you get like dozens of comments every morning so I get up every morning and I'm like you've got a hundred new notifications and I'm like nice I finally became popular and then it turns out it's all, Scot Wingo levers commenting on your thread. Scot: [17:09] Wait till you live too two things so wait till you're working anniversary that's a always a big day on LinkedIn and then you should put a post up this as I really need an explainer leader explainer video and automated lead generation and I think you'd be very popular. Jason: [17:26] Yeah being slightly facetious I said the notifications are popular the emails I get I get plenty of unsolicited LinkedIn email yeah trying to sell like custodial services to pupusas. Scot: [17:40] Hey some there's a lot of garbage cancer that I imagine you damn thing. Jason: [17:45] Yeah yeah I wouldn't know because the haven't seen enough is very much lately, yeah so that that but that thread is super interesting there's been a lot of good conversations there and I've seen some of your your debates a slight. I don't think this changes the spirit of this at all like Amazon has this huge advantage in logistics it's the biggest advantage and, that it's something that despite the law of large numbers they're still growing and investing way faster than anyone else but Rob's comment was slightly off on Walmart like he what what he meant to say was, in the last two years Amazon has spent as much as Walmart did in their first 50 years not the last 50 years and so it is true, Walmart has dramatically accelerated their spending to not as much as Amazon but much more so than they did in their first 50 years. And / Benedict's point like I do think. These omni-channel retailers are leveraging their stores as a clever part of fulfillment so I to me it's not either or but I do think we're seeing Walmart and Target and Best Buy invest a lot in store fulfillment and in many ways that is working, as a competitive oil to Amazon any other Amazon news caught your attention this week Scott. Scot: [19:07] Well it is we've covered this before but Jeff is stepping Jeff Bezos I should say is stepping down as CEO and they updated some of the company leadership values I didn't see that as big news and a lot of people are you know the headlines are coming out already is this day too and that kind of thing yeah I feel like. Having met a lot of people at Amazon I think the culture has locked in every every both deep and wide there and I think it's going to take at least five years for us to see any kind of change in the culture there so I don't think you'll see them slow down there if people are counting on this to be the moment when they stopped feeling pressure and they can stop worrying about compete with Amazon that would be a mistake. Jason: [19:55] Yeah no I tend to agree I don't think we're going to look back in history and say oh man Jeff Bezos stepping down July 1st 2021 that was the inflection point right. The I would argue it's been day to at Amazon for a while like everything's on a spectrum so. [20:13] Amazon is an amazingly agile company that overcomes a ton of institutional inertia I think it's one of the most impressive things about Amazon despite their enormous size, they have a bunch of politics and institutional inertia and sacred cow syndrome at this point just like everyone else there I mean you know it's a 30 year-old company so you know as much as Jeff Bezos has some great slogans. Like some of that had already said in before Jeff left and you know Amazon is just too big one person like can't. Like be making that day-to-day impact on Amazon that he once did so like clearly his impact is. The culture he created and again I'm with you the company values I think what's interesting is that they changed it all right because, you want these to kind of be pillars that that are not trendy and don't change every year you know based on fads, um and so it is it's interesting that they amended them for the first time in a long while and the way they amended them is that you know to New Missions that Jeff Bezos announced in a shareholder letter right so you know they added. Value around being a better employer and a value around being a better. Ecological. Scot: [21:36] I am concerned about him going off into space that's going to be yeah I kind of questioned the logic on how there's a nonzero chance that doesn't work out. Jason: [21:46] I'll be ya as an investor I like him going in that rocket a lot I care a lot more about that and it makes me a lot more queasy than him stepping down as the CEO. Like there's an argument that his biggest value to Amazon will increase as he like. Stops reading customer service letters and more focuses on big-picture issues as executive chairman and largest shareholder but Rockets are dangerous man. Scot: [22:13] Yeah yeah yeah I'm worried about that but it's going to be exciting as well so we'll see how that goes. Jason: [22:21] Yeah no for sure and then the only other thing that jumped out at me that's a little interesting in this hole. Shuffling of the deck of Executives and things is it. You're starting to see you know those Amazon executives are their Amazon experience is really valuable to other companies so it's not surprising that people are trying to recruit them, I think with Jeff stepping down in a succession plan you know getting implemented, I think it's going to be harder to hang on to some of those other senior Executives so it's going to be interesting to see. If the biggest impact of Jeff stepping down in the long run is less retention from the other s team members and along those lines I notice that Rent the Runway which is getting ready to do. They're their IPO and they you know had some, some challenging leadership Optics grabbed one of the. The senior Executives from the the Amazon supply chain Tony Clark to who is. VP of fulfillment and Amazon to kind of take over Rent the Runway so you know I think those kind of stories could become more common. Scot: [23:40] Yeah yeah there's definitely a lot of poaching going on across the industry is some of these next-generation things are scaling up and looking at going public and need to tap into the. Jason: [23:49] Yeah and the two stories this this week I think people leaving Amazon and people even Facebook I have to believe it's easier than ever before to peel off Executives from those two companies. Scot: [23:58] Yeah one on Amazon thing I wanted to pick your brain on is assume your Instagram person came out and said hey our new kind of going forward we're no longer a kind of square photo company we have a new Focus area in fact there's for number one creators number two video number 3 shopping and number for messaging I thought that was pretty interesting because we've seen Instagram kind of crank up the amount of activity around shoppable ads and incorporating extending their partnership with Shopify and we've seen shop pay being added all over the place and I thought you know that's pretty interesting what did you make of that. Jason: [24:42] Yeah well so not surprising a those were those are basically. Mark Zuckerberg zwei like priorities from from 2019 f8 so it's not. Totally surprising that they're they've kind of propagated to Instagram at this point it is interesting to me that. You know at least three and maybe four of them are all like cumulatively what I would call Commerce right like you taught you know. [25:10] What big trends am I talking a lot with with clients about it since its creators as micro influencers its video driven Commerce its. Social commerce and the the sleeper is. You know customer service phone lines are going away and they used to sell an awful lot of product on those phone lines and all that is pivoting to the these various chat services and you know you talk to Consumers no one wants to use their phone for voice calls anymore so, so you know Commerce happening via customer service on these messaging services also is a big thing and so, for all those reasons I would say I have a lot more clients that are a lot more interested in piloting things on these social networks and Instagram. Are you we may have the most robust Commerce tool set right at the moment so, makes total sense for them to leaning leaning in I would say the one bomber if you're at Instagram today is that for some good and some irrational reasons The Social Network that has the most Buzz amongst my clients as tick-tock. [26:20] Still smaller I would argue still has less buying intent than Instagram but it's growing much faster and it it gets brought up in a lot more board meeting so I have a lot more panicked. Chief digital officer is calling asking me for advice about Commerce pilots on Tik-Tok than I do Commerce pilots on Instagram at this. Scot: [26:43] Nursery and then do you respond with some of your clever to Funk videos. Jason: [26:48] I do I do I send them all to my Instagram Channel where I talk about Tick-Tock on Instagram. Scot: [26:55] And you do the Renegade. Jason: [26:57] Yeah yeah I've, I was for a while but now the problem is I've like 23 ACLS on my skateboard trying to drink that stupid Ocean Spray so I. I probably need to stop that yeah I tend to be about three or four social networks behind so I've kind of just leaned into YouTube now that it's not cool anymore. Scot: [27:18] Just wrapping up the Friendster account. Jason: [27:21] Oh no I'm hang on at that bad boy. Scot: [27:23] It's coming back I promise. Jason: [27:25] Exactly you guys will all be sorry you abandoned me on MySpace. Scot: [27:30] Another industry news item is Shopify held their kind of virtual unite 2021 conference they announced a bunch of platform enhancements I didn't see anything earth-shattering where they get the most Buzz is they basically said hey if you have an app on our app store we're going to give you the first million dollars free and that was kind of part of there roguish rubbish you know app stores have obviously been in the news a lot with both Apple and Google coming out under Apple versus epic and then Google just got an antitrust filing on this topic so you know date they kind of very cleverly took a kind of a counter PR strategy here which got a lot of Buzz which I thought was pretty clever you know um They never said how much that's going to cost them in revenue and the stock didn't really kind of move around and I thought someone should have asked that question I didn't even ask that question so it must be someone in material or or, people don't care I don't know but I thought that was clever PR but I really didn't get anything much more media out of out of the announcements there. Jason: [28:38] Well so there are few things a I would I would say that one got a lot of Buzz but I would say if that was actually an easy thing for Shopify to offer and it's largely misunderstood, the app store for Google or even way more so the app store for apple is the primary moneymaker it's their primary economic model. [28:59] When we talk about App Store in the context of Shopify it's a B2B app store right so what this is is your, you want to sell your goods on a Shopify store and you need some amenity that isn't built into the native Shopify platform, you need ratings and reviews so you go into the App Store and you buy ratings and reviews from one of the, the 50 vendors that offer a ratings and reviews solution and Shopify used to take a little piece of that initial Revenue. For for that app store right and so now they're saying hey we're not going to take a piece of your first million dollars in Revenue. The so so that's a thing and it makes it a little a little cheaper for small companies to be on that that App Store, the reality is the big companies it's super annoying because they already had access to those customers without the App Store. The App Store is not the only path to get your your product instrumented on Shopify so you kind of it's closer to. Like Google where you can kind of sideload apps and not go through the App Store but the bigger thing is. As a general rule Shopify would tell you not to use the app store and most of the other, initiatives from Shopify were about minimizing the app store because it turns out when you install 50 unvented plugins from small unknown third parties. [30:28] Destroys your stability and performance of your web store and so like. Shopify some of the other things they announced was like a better vetting process of that app store but like in general it's not like sellers are using dozens and dozens of apps and that there's that's a big Revenue stream for Shopify. [30:50] So it the fact that they have a robust app echo system is a competitive Advantage for Shopify against other platforms. So maybe there's more apps available on the Shopify App Store than there are on the Bigcommerce App Store and that might make you pick Shopify and by not charging, rev share on your first million dollars in sales and their App Store that encourages more people to stay on the app store which helps them keep that that little note they have against other platforms so. Maybe more information than anyone wanted on that point but, to me the more interesting thing is I shopify's another one of these amazing companies that I still like to criticize right there doing a bunch of things right, but I still like to highlight that they've got a ton of technical debt and a particular pet peeve of mine has been the the inflexibility of their platform that you kind of like every seller gets kind of homogenized to the same experience because it's kind of hard to get out of the Shopify box, and that that box is not very a very good performer and from a web page load speed thing which is super important to e-commerce success. The Shopify store starts out as mediocre and then if you make some bad decisions mediocre becomes horrific and so I would say that. [32:10] They probably didn't do enough they didn't announce enough in this to make me super excited that they're fixing all those problems but I would say they they owned all of those problems at in their unite 2021 conference and, announced some significant progress in each of those so I think for sure. [32:27] They're they're doing more to allow individual shop owners to change the look and feel and optimize their customer experience in more ways. That are codeless which is you know what most Shopify sites want so I think they made a lot of progress in their in their flexibility on their user experience. They're evolving their product management system in some ways to make it more competitive with Standalone pims and to make it a more useful sort of. Hub for marketplaces so I imagine there's some interested followers it Channel advisor and your competitors in that space that are looking at some of the things they announced it. And then they did make some improvements in their page performance they made a lot of improvements in letting people know what their page performance is they really improve their tools there. Um but they still aren't embracing things that I would say are probably things you want to be embracing in 2021 like Progressive web apps for mobile and things like that so. So I would say they're addressing their technical debt but they did not you know come out and say it's we've wiped it all away. Scot: [33:36] Brickell one of the last things I want to talk about is I saw this and thought of you, United presented several times about different Trends in one of your favorites is the talk about Brands going direct one of my also favorite Trends and you frequently reference Nike as a company that's really focused on this and they had some some interesting news there. Jason: [33:56] Yeah yeah so they had that I want to say in the mid June end of June. They did their their quarterly earnings it's slightly confusing because they're not a calendar fiscal year so. So their Q4 ended May 31st so their quarterly earnings were Q4 whereas a lot of companies on counter years in the same season or doing their kind of what they would call their q1 earnings. I'm sorry Q2 earnings so a they had a really good earnings report. Which is kind of impressive because in general you would have said man shoes and apparel didn't do very well during the pandemic. And you know again comping. [34:42] Kind of what would that be April major March April May of this year versus last year like the basis was really sucky last year so you would expect. Q4 to be up but their fiscal year was way up right so there, so they're they're 2020 fiscal year was up nineteen percent from the previous year which is pretty impressive in the pandemic and what's even more interesting is you look like North America and Nike sales, last quarter we're up 29% versus two years ago so if you're wondering if they've fully recovered from the pandemic and people not wearing shoes yes like they did really well and then digital. You know like a lot of other companies again in the pandemic more of your sales shifted to digital so you expect kind of digital to be up last year which should make the comps this year tough, but they were still up 54% and they're up a hundred and seventy-seven percent from two years ago so so. Like stupendous digital growth. [35:49] And you know you as you alluded to the thing we talked a lot about Nike is in the 1990s Nike was a hundred percent wholesale company and they they so choose to Foot Locker and Footlocker sold them to Consumers, and you know over time they were really one of the first Brands to launch their own retail store Nike Town and it was super controversial at the time. People have obviously gotten used to those initiatives and if you zoom back to like twenty ten fifteen percent of Nikes sales were direct-to-consumer well, in 2017 Nike said hey we're going to get really serious about this direct-to-consumer we think that's the future we're going to fire all of our wholesalers and mainly become a direct-to-consumer company and in fact the numbers were startling, they said they had 40,000 companies that sold Nike shoes and they were looking to diminish that to about 80 companies, and every year we've seen them fire wholesalers this year we saw them say to DSW that you're not going to be selling Nike shoes anymore, so Nikes really practicing what they preach and in 2020. Thirty-five percent of their sales were direct-to-consumer so they are you know making a lot of progress there you know in that that strategy is basically working for them so it's been super interesting to watch and I, I talked with a lot of brands in other categories about the Nike example and it's. [37:12] They have their own platform and echo system with Nike Plus, um that they're they're a leader in social commerce they're doing a bunch of things really well so it's interesting that not shocking that they had a great quarterly earnings and I think their stock had a nice bump as well. [37:31] Speaking of stock there's an IPO that I am eager to get my hands on but I won't be able to right away and I thought maybe you could explain that to our listeners Scott Warby Parker has announced that they have confidentially filed for an IPO and you've already taught me what that means but maybe you could explain it to our listeners. Scot: [37:52] Yes there's back in the Obama Administration there was this jobs act thing that allowed you to file confidentially to do an IPO and the benefit of that is it's when you the old school way you would file for an IPO and then all of your conversations with SEC were public and inside of there there's a little bit of dirty laundry thing that goes on there also. [38:19] It almost fully commits you to the IP o– path at that point so it doesn't give the company the ability to kind of, test and kind of say all right we want to kind of show this you see what's going on here and maybe we decide based on their feedback we don't want to do this process or maybe we do some exploratory conversations with potential shareholders and valuations off and we don't like it we want to pull the IP o– it doesn't give you that opportunity so that's what the confidential filing thing gives you now, when companies so then why would a company announced it so the reason companies now announced that they're doing it is too, if they they don't have to do it the day they file so what they probably did this filed they got good feedback and round one from the SEC and then, they committed to the path and then it's smart at that point kind of prime the pump and tell people you're coming down the path a little bit. [39:14] It still hides your SEC things you still have that small window where they filed before they announced they were doing this to test the waters get feedback from SEC maybe they were a lot of times you're also having what's called a dual path kind of a a program where you're selling the company you're looking at possibly selling the company and an IPO is kind of an alternative so that's that's why it would then be time to to announce it is you're fully committed to the IPO path and it's kind of like when you list a house now a lot of people do it coming soon so it puts a little bit of a coming soon out there to build excitement for the IPO but then also does keep the communications with the SE comp SEC confidential and it does allow you to run a little bit of a decision-making process before you announce the confidential file. Jason: [40:02] Gotcha and so but it is true that at some point that s one becomes public right. Scot: [40:07] Yeah yeah what'll happen is the SEC will say okay this SEC is out of draft mode and it's going to you know once you update it with these things you're good to go and then they'll they'll update it and then it will be kind of a hot live S1 and then that will start the whole thing where they that starts the calendar of after X days you start your road show and then you need to price and then do the type you. Jason: [40:36] Yeah and so I and many others are super eager to get our hands on that as a lot of listeners will know where be Parker was one of the, the first kind of poster child for these like modern digital direct to Consumer Brands and so for the longest time, you know every brand in America was like the sky is falling all these d2c companies are showing up in there doing much better than us and they're getting all the buzz and the two biggest examples were Dollar Shave Club and Warby Parker. And we've never gotten a chance to see the real economics behind our shift Club because they were part of a private acquisition at Unilever and Unilever doesn't have to disclose a lot of there. They're their individual financials because it's not material to Unilever. [41:23] We're all eager to see how big Warby Parker really is and you know I have a hypothesis that that while they seem like a good company and. I'm sure they're going to meaningful sales that they these DDC companies are slightly overhyped and so I think people might be surprised at like what the annual sales run rate is. At where we Parker when when the stuff gets disclosed so I'm. Excited for that and then you know past guest of the show Dan McCarthy like he's having a field day with these s ones because increasingly they're putting. Customer retention data and cohort data in these things and that lets him do why you know the real big brain math. To figure out the the long-term value of these companies and inward to be partners case. They're one of the oldest digital di disease out there so they're going to have a lot of robust cohort so they choose to share some data that will be super interesting. Scot: [42:23] Yeah I don't I don't know how often people change their glasses this that'll be factored. Jason: [42:28] Well part of the Moss so like a lot is annual or at least prescriptions and things like that and part of the word we parked our model is that. It was they would say that like we're so inexpensive that we become more of a fashion accessory and people that would have only owned one pair of glasses will own for pair of glasses and people that would have only bought glasses every three years or buying glasses every year and stuff like that so, it'll be interesting to see how much of that is true. Scot: [42:55] Cope and then kind of a tease for a future trip report you are spreading your wings and find a New York to do some retail business for us what's what what are you going to check out when you're there. Jason: [43:07] Yeah old time listeners will know you know I was on the road every week and we talked about visiting stores every time I got a chance to visit them I haven't gotten to do that in a while. I have done a couple business trips but I do have one for the end of this month in New York and New Jersey and I have reserved a day because there's two significant new store openings that have happened this month. There is a Wizarding World of Harry Potter store, that opened in the Flatiron District in New York I've read a lot about that I got to visit it while it was under construction but this will be my first time seeing it open. And some people will know that I often use Ali Anders Wand Shop at Universal Studios as my example of the best retail experience out there so so Harry Potter has some creds, the Harry Potter team has some creds and Retail it'll be interesting to see what they do in this this Flagship retail space. And then the other company that opened a retail store. [44:12] Arguably for the first time is Google so they've opened a permanent store in New York City and they had a big new cycle where they're like we're opening our first store it's a huge deal, and I would put an Asterix on that because they have done a lot of significant pop-up retail where they like open to store for six months. And I'm not sure that the the permanent store is necessarily going to be wildly different than those pop-ups but I'm eager to see how their their retail shops have evolved and I'll be fun to visit that store. Scot: [44:44] Yeah I think I double dog dare you to walk in the Google Store the megaphone and just say two words OK Google and then run out. Let's see what happens and then at the Harry Potter store I'm excited to hear in a future show you don't have to reveal now if you're not comfortable this a very personal question but what do you put at the core of your wand are you a phoenix feather guy or a unicorn hair or Dragon spit or yeah so it's going to be exciting to get a report on that as well. Jason: [45:17] Yeah well Scott as you well know you don't get to pick that because you do not choose the wand the wand chooses you. Scot: [45:23] Ah man going deep on the HP nods. Jason: [45:26] Yeah but adding a layer of complexity this New York store has some scarcity so there are there is a 1 for example that's only available at the store that's not available through any of the other properties so do you. You pick the one that's the best fit for your innate magic or do you you know pick the one-of-a-kind one that you can only get by visiting the store it's. It's a lot of a lot of. Scot: [45:49] Solid on door for the scarcity and sell it on eBay. Jason: [45:52] Yeah Scott Scott I know exactly what you would do I am selling some stuff on eBay for the first time for so side note for a future show. It turns out it's a normal consumer it's a huge pain in the ass to sell stuff on eBay now which is pretty disappointing. Scot: [46:07] Yeah wait till you ship it in the people some kind of quack Ado has. Jason: [46:10] Don't get paid yeah oh I'm terrified I feel like I've gotten like all this these communications from scammers it's like I would never advise a not sophisticated so or to try to do this like this used to be their primary model. Scot: [46:25] Yeah it's hard. Jason: [46:27] It is a mess. Anyway Scott we did allocate a shorter period of time for the show and I feel like I want to honor that commitment I know it's summer everyone's taking vacation so, we don't want to condemn our listeners to our usual our so I think this is a good place to cut it, if you appreciate shorter shows you can thank us by leaving a review and saying hey we always love the show but we love the shorter one even more. Scot: [46:53] Thanks everybody and until next time… Jason: [46:57] Happy Commercing!

    EP268 - Amazon Prime Day Recap with ChannelAdvisor CEO David Spitz

    Play Episode Listen Later Jun 25, 2021 57:54

    EP268 - Amazon Prime Day Recap with ChannelAdvisor CEO David Spitz David Spitz (@davidspitz) is the CEO of ChannelAdvisor. He joins us this week to share ChannelAdvisor data from Amazon Prime Day 2021. Amazon Prime day was launched in 2015 to celebrate Amazon's 20th anniversary, and has become a world-wide summer shopping event. The length of the event has been slowly expanding since 2015, so it is now two days long. Traditionally Prime Day has been a summer event taking place in July, for example July 15-16, 2019. In 2020 due to the pandemic, Prime Day was held in October 13-14, 2020. This year Prime Day is earlier than usual on June 22-23, 2021. Topics Covered: ChannelAdvisor view of prime day: Prime Day 2021 Wrap-up | ChannelAdvisor Morgan Stanley (Brian Nowak) Prime Day Recap Robert Baird (Colin Sebastian) Prime Day Recap Salesforce Prime Day Recap Amazon's Prime Day 2021 sales total $11.19 billion | Digital Commerce 360 Amazon Prime Day 2021 Insights & Real-Time Tracker | Numerator Episode 268 of the Jason & Scot show was recorded on Thursday June 24, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 268 being recorded on Thursday June 24th 2021, I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot: [0:41] Thanks Jason and welcome back Jason Scott show listeners if you enjoy listening to this show as much as we do creating it for you this would be a great time to pause go into your favorite. Podcast listening device technology and leave us that five-star review right Jason. Jason: [0:59] That sounds like a great idea Scott I'm glad you thought of it. Scot: [1:03] Jason's mom they throttled her she can leave one review every week or so so we need we need more help out there from the other other folks that listen. Coupe so this week we are talking about one of my favorite topics Prime day so Amazon introduced Prime Day in 2015 as kind of a summer holiday the first Prime date was July and 15 2015 and if that's a lot of 15s it may sound familiar to 1111 which was the holiday that Alibaba created called signals day Jason I don't know about you but it feels like we just had a prime day so it's kind of a groundhog Prime day for me this year but then as I delegated to one of our many interns they did the math and it's actually been eight months so not exactly your but also not two months to feel like we just had a prime day to you. Jason: [1:55] It kind of did I was going to say that Prime days my like favorite season of the year but then I realized well wait it's a different season every year. So yeah yeah it no I agree I have barely recovered and then as you know I work with a lot of retailers so I've been doing a ton of holiday promotion so I get internally getting ready so to me it kind of feels like December just ended, and now we're having prime day I'm like all backwards upside-down and topsy-turvy. Scot: [2:23] Did you buy anything on Prime day. Jason: [2:25] Boiler over no I totally assumed I would find some stuff to buy and I found nothing there was nothing that I got excited about this year what about you. Scot: [2:36] I always use prime day to load up on my my little cables that I have three kids that love to rob my specifically my iPhone cables so I did find a set of anchor cables that I liked, no but they were half off so I bought a bunch of those so I'm good for what probably is going to be another 12 months of cables hopefully we'll see. Jason: [2:57] My wife has placed a restraining order prohibiting me from buying more more charging cables so. Scot: [3:02] Yes no more dongles are cables or power juicers or anything. Jason: [3:06] One of my favorite charging accessory companies has been like banned from Amazon so that like there was less for me to choose from this year. Scot: [3:14] Bummer what because Aki got what do they do. Jason: [3:20] I like the anchor stuff I get a lot of anchor stuff but there were some holes in anchors line that Aki filled really well. Scot: [3:25] Interesting well in this episode we are going to go really deep on Prime day because it is what we known for and to help us out with an analysis of this we thought we would bring on an expert that has a front row seat and some fresh real-time data on the topic so we are excited to have for the first time on the show David spits CEO channeladvisor's. David: [3:48] Hey guys appreciate you having me on long time listener first-time caller so it's good to be here. Jason: [3:54] Dave we are thrilled to have you and obviously we're eager to jump into all the prime day goodness but tradition we have on the show is always to give listeners a little bit of background about our guests so can you tell us, how you came to your current role at channeladvisor's. David: [4:11] Yeah absolutely so I've been a techie my whole life studied computer science and I was. An entrepreneur a couple times started and sold a couple companies and after my second company I was trying to. Figure out what I was going to do next and I had coffee in 2006 with this fellow named Scott Wingo Jason who I think you may know and. Jason: [4:34] It almost never goes well to have Scott coffee with Scott but yeah. David: [4:36] Yeah it's hard to keep up but since I wasn't you know doing anything really productive at the time he said you know he asked if I'd be willing to help out on some projects at channeladvisor's and I quickly fell in love with the industry and the customers and the people at channeladvisor's and it quickly morphed into kind of a full-time role and end up running day-to-day for the company and then we took it public in 2013 I think it was and I became CEO in 2015 when Scott became chairman and so you know it's been one of those funny careers where I never expected a little bit of side work to turn into a 15 plus your career but you know sometimes you get Serendipity it's been a lot of fun. Jason: [5:17] Yeah and I by all accounts those have been the best 15 years in the history of channeladvisor's by. Scot: [5:23] No doubt about it absolutely. David: [5:25] Scot Scot reminded me actually earlier today that would this is actually our 20th anniversary on July 1st and so it's a it's a pretty big ear you know it's a lot of tech companies don't necessarily last for you know two-plus decades and so it's kind of kind of cool milestone for us. Jason: [5:41] I know for sure you guys have definitely surpassed the traditional mortality rate that's. Um not even for startups just like like twenty percent of the fortune 40 rolls over every every 20 or so. In 20 years is great and by the way fun Serendipity their Prime day was started as the 20th anniversary of Amazon right wasn't that the. [6:09] Official stated reason for This brilliant invented holiday so. I do want to get a little background in to why it is that you have such a front row seat to Prime day but just to kind of set the table Scott and I joked about it a little bit but just to be super explicit. Prime day just ended it was June 22nd and 23rd of 2021. Last year because of the pandemic Prime day was in October so it was October 13th and 14th. And traditionally every Prime day before this has been actually in July. So like inside baseball analysts like normally Prime days Q3. Last year it was Q4 and now it's Q2 which is interesting so that being said I know a lot of our listeners are super familiar with channeladvisor's. Pitch on what channeladvisor's does and why you guys have so much insight into what happens on marketplaces. David: [7:16] Yeah sure so our mission is to connect and optimize the world's Commerce and so we have a software platform that helps thousands of Brands and retailers market sell and fulfill on a variety of e-commerce channels and fundamentally what we do is we consolidate and simplify and automate a whole lot of that work so that our customers can focus on what they do best instead of spending time on the nitty-gritty of integration details and things like that so our goal is to just make it all work and we're best known for marketplaces we started off helping eBay sellers 20 years ago and today we support well over a hundred fifty Market places around the world and by this time next year we expect it to be over 200 so we're doing a major major Marketplace expansion over the course of this year and into next so we're best known for that and of course we drive a lot of volume on Amazon eBay Walmart but but also you know pretty wide variety of others. [8:10] And maybe a little bit lesser known as it were a pretty pretty major player in digital marketing retail media social and shoppable media shelf analytics oh and even fulfillment so we have a pretty broad platform and we work with many of the largest Brands and retailers and channel Partners all around the world and really what I think sets us apart is, obviously the breadth of our platform and the pace of our Innovation but also the breadth of, sewing channels we support and the fact that we have a global footprint so so yeah so we've been in business 20 years helping to make e-commerce easier for for everybody in the industry. Scot: [8:46] So that's a good pitch I'm I'm glad I hinted that over teeth. David: [8:50] Took me 15 years Scott but I got it. Scot: [8:53] Nailed it okay so you have all this data and all these customers and what were some of the themes of this this year's Prime day compared to maybe other years. David: [9:06] Yeah so I would say we characterize it as fairly robust gmv volumes across the two days of prime day writes a prime days really two days as you mentioned Jason and you know we I actually see this as a pretty significant positive indicator for e-commerce because last year as you guys mentioned Prime day was in October it was you know right in advance of the holidays we were still you know effectively in lockdown mode across the world and of course now it's in June which is typically seasonally a little bit slower the restrictions are easing so you think that would be sort of a tougher compote seasonally and you know just with the with the covid situation but we still saw growth and still Saul volume v volumes increasing so to me that shows that that the e-commerce games that we've seen over the last year are pretty are pretty durable and we would expect that they're going to continue to. [9:57] Continue to continue to grow and as I kind of peel the onion I think a couple of interesting things we saw faster growth on day one Prime compared to Day 2 and so weird just to be clear we're comparing the two days of Prime in June this year to the two days in October last year so day one growth was was higher and day two was a little bit a little bit lower than the growth rate but having said that day two was also the highest level of GMB we've actually seen all year so far in 2021 and I was a pretty big milestone because the last high water mark was mid-march with the stimulus that went out and what we've seen during covid is when there's a stimulus you know check that goes out to to consumers in the US we tend to see a pretty meaningful bump in beat in GMB so we saw that in March but like I said day two of prime day actually exceeded that and was our biggest so far in 2021 and what's interesting about that is in the u.s. starting I think it's July 15th we're going to start to have advanced child tax credits get deposited in taxpayer accounts I'm not sure if it's for every month for the rest of the year but it starts in July I think it's the middle of each month for at least the next few months and if the past is any guide will probably see that continue to fool the fuel some some e-commerce gain gains and then the one thing I would I would comment on will probably die of an Amazon little bit is that. [11:23] At least in our data and I should be clear that you know we're talking about when I say our data so all of the sales data that comes through channeladvisor's you know all of the different channels we support around the world so that it may not line up exactly to you know what Amazon or another Channel sees right I mean we have we have a lot of data but it you know because of our customers skew or whatever it may not may not necessarily indicate how a particular channel did but we saw in our data at least is that Prime day really seem to induce a pop in gmv internationally so we saw. About three times the growth rate both in Europe and in Asia Pacific than we saw in the US and we also saw. [12:04] A pretty substantial growth rate and what we call other marketplaces so the big three and our world are Amazon eBay and Walmart and then we have like I said earlier a long list of additional Market places whether its Target Plus or is Orlando or Allegro or Auto you know there are lots of different Market Place all around the world we saw we saw that that long tail really benefit from from from Prime day. Now we did see growth on Amazon I've seen some reports out there that Amazon was flat, or even I saw one report that said it was it was down for Prime day but we didn't see that we saw we saw growth. [12:38] Although I would characterize it as modest and but I don't really see that as a negative frame is on I mean you know again this is a comparison to last October when there was a lot more lockdown activity it was right before the holidays and you know the fact that the fact that it's up at all frankly in this kind of as we emerge from covid especially in the US in a seasonally slower period I think it's actually a pretty positive positive Mark for for Amazon now we've had we've had some customers I've seen some reports that ft F ba fulfillment by Amazon is actually still is a little bit of a bottleneck just in terms of maybe Staffing or capacity constraints so maybe there's a contributing factor there was a lot of our customers are seller fulfilled not necessarily purely FBA and it wouldn't surprise me right I mean there's a ton of people around industry that are that are facing Staffing challenges everywhere and our data tends to skew a little bit more third party instead of first party so. You know maybe that may be a contributing factors to why we saw a little bit more growth than than what we've seen reported out there. Jason: [13:43] Yeah so interesting. First of all I feel like there's so many things we talk about in this business that are versus last year and obviously. Last year was such a anomalous year for so many things in Prime day just being another example it's really hard to talk about this stuff because you're you're comping against a weird outlier. Do you have a in So when you say like man we were we were up versus last Prime day but modest growth. But you know that that's really comparing October which really kicked off holiday spending last year versus. Middle of summer in a time where we've never had this big sale before because even our two-year-old data is July versus June which is closer to you know at least start catching some of the back-to-school stuff. So I don't know like would you have a. When you're thinking about the the comps are you trying to normalize for those the different seasonality Zoar just. David: [14:49] Yeah I think we don't try to do that normalization I would leave that remember the episode you guys did with the the folks that publish the you know the e-commerce data and they are really good at sort of normalizing for that kind of stuff and that's that that math is maybe a little too advanced for for me you know so we don't we don't do that but you know it is it is kind of interesting I mean if I look at like. [15:14] Like for example the one category that was Far and Away the fastest grower this year versus last Prime year or last October Prime day was musical instruments right so is that like is that because you know something about our customer base may be excused more in that direction I don't know maybe covid inspired. [15:32] A lot of people to say that I'm tired of being locked up like I need a new hobby I'm going to, the banjo or the flute or whatever you know so like and we've published a lot of data over the last year about these category trends like you know you guys all remember early on it was like, you know the great toilet paper shortage of 2020 right and we had like a 25,000 percent increase in toilet paper sales in our data of albeit from a from a smaller numbers it's not typically a product our customers sell a lot of and then it was like you know all these like different categories like things you would sort of a you know aren't surprising in retrospect like you know sweatpants or like you know home office desks and stuff like that but then there were some head scratchers like I think it was like April or May last year like bouncy castles you know those inflatable bouncy houses like it was like a top set like it should like popped up and like the top 10 of our categories on our radar and I'm like what the hell like why are you know why are people doing bouncy house and they kind of like Donald me like my there's a lot of people stuck at home with like young kids and they're trying to get their work done and they need like semi secure safe place for the kids to burn off energy where you know they're not going to like wander onto the highway like what's what a better solution than like a bouncy castle. Scot: [16:44] Jason actually put one on the roof of his building is 30-story building there. Jason: [16:48] Yeah but then Scott wouldn't come over and play with me. Scot: [16:49] Very safe but I mean. David: [16:51] Yeah well so there's all sorts of category trends like that and you know some musical instruments the cycle mobile phones Health and Beauty Home and Garden was another strong one. You know and it's just hard to it's hard to say like you know how much of that is seasonality October versus June you know I'll leave that to smarter people than me to figure out. Jason: [17:12] Side note I like to call those people that took up a musical instrument the pandemic Piccolo cohort. Um so yeah feel free to use that the I do I want to jump into the categories a little bit more but you also mentioned. Big boost internet or a meaningful boost internationally and one of the things personal hypothesis not grounded in any data that I have is prime day starting to be a victim of the. Who are of large numbers here in North America that like you know one of the things we saw every Prime day was a huge growth in the number of Prime members. Um and those you know there are a lot of people that did their first shopping on Amazon every year Prime day as a result of recruiting all these, Prime members and now you know we've more than fifty percent of the population are probably Prime members there's a lot of saturation it's. You know they're selling a huge amount of good so it's just hard to grow as fast. Internationally you know in most markets Amazon's not quite as well penetrated as they are North America So when you say you saw some meaningful growth growth internationally. Why do you feel like that was more on Amazon versus the overall effect here or was it sort of similar International where it kind of lifted all boats. David: [18:33] Well I would I would say both it definitely lifted all boats I mean when I when I look at the list of growth rates of number of our channels that for example are in Europe or in Asia Pacific you know like I look at you know some of the screamers that were growing you know triple digits channel is like zalando which is a german-based fashion site fashion Marketplace Auto is another one you know so there's there's. Jason: [19:00] Get all my black turtlenecks from Zorro and up. David: [19:03] I knew it I knew it but I would say similarly with with Amazon as well you know we saw overall generally strong performance out of various European markets and particularly strong performance in Australia. Where you know the Amazon Marketplace launched a few years ago so it's you know still you know probably a little bit more in the growth phase versus the the maturity phase but I think the notion of the law of large numbers is a fair one right I mean I think, again some of the reports I've read of sort of had a little bit of a. You know a little bit of a negative tone like you know I was just you know is this the beginning of the end or something like that and that just feels a little bit strong to me because. You know Amazon is far away as you guys know the Leader by volume and so there's there's, you know some limits into how rapidly you can grow that large number and I think I think I saw on their release today there are over 200 million Prime subscribers worldwide and I can't remember if they break that down you know domestic versus International or at least I haven't even seen that but I think you're right Jason I mean there's there's there's only so many consumers in the US ultimately that that are going to be prime customers and then they probably mopped up most most of them so I think that's probably. Contributing factors is you know there's probably more room for growth in some of these International markets than then you know the maybe in the domestic Market. Scot: [20:29] Any other saw on the countryside any countries stand out I think you did you say Spain in the in the top there. David: [20:37] Spain was was super strong yeah we saw good growth in Italy UK Netherlands and a few other countries were kind of in that range there were a couple that were a little bit more moderate, they're relatively small data points for us in terms of volume so it could be just you know more affected by One customer maybe changing strategies or something so I don't I don't I think that it looked to me like the overall trend was Europe looked look pretty strong and again a pack which for us is primarily concentrated in Australia was also really strong. Scot: [21:13] What's kind of interesting because for a long time we saw retailers try Thanksgiving specials in Europe and then also Black Friday and it didn't really stick and then just like in the last three years it's kind of picked up a lot of momentum I wonder if I wonder if there's this kind of lag effect where we create these holidays and takes a while for them to to stick in Europe. David: [21:36] Yeah I think there's probably something to that you know just in terms of conditioning and often you know, Amazon doesn't necessarily roll out an initiative globally all at once right they'll start in a country and then they'll kind of you know as they see success they'll roll it out and we've seen that with various programs over the years so, so even even prime day I think probably you know didn't start off as a global event and it's become one and you know arguably at this point it's become an even bigger stimulus for non Amazon properties than for Amazon but again that probably more law of large numbers and than anything. Scot: [22:09] Do you know if Market places in Europe have started off for the you know here in the US are one offers their own kind of counter programming if you will to Prime days is that kind of trickled over maybe that's what's driving. David: [22:21] I'm not aware of any that specifically like try to overlap with prime prime day I know here in the US you know Walmart and Target you know both had. [22:31] You know some some compelling deal days that we're going on I'm not aware of any that specifically targeted Prime day in Europe I wouldn't be surprised to see that going forward but so far like they haven't had to do that because Prime day I would say arguably has been an even bigger stimulus for some of these non. Marker 03 [22:47] Amazon properties in for Amazon particular in this kind of longer tail of marketplaces and I don't I don't mean that as you know inherently negative frame is on there just so much bigger than everyone that naturally you know the law, our summer is kind of comes into play and even with the fast growth that smaller marketplaces are seeing they have a long way to go to be you know more than a kind of rounding error in the space but I think what's important is it shows that there's still room to create value for consumers like we're seeing this proliferation of marketplaces and where they're winning is the create really compelling category experiences Orlando being a good example in fashion, for they have a regional focus with regional kind of flavor and expertise or maybe they're focused on curation and storytelling so you know if you just listen to the news you think like oh you know kind of big Tech is taking over everything and there's no room for anybody but we're actually seeing the opposite we're seeing some really Innovation real innovation in e-commerce channels and it's creating more diversity and kind of a more vibrant ecosystem and you know I think that's that's probably a story that that ought to be told more because I think it's really it's exciting not just for for consumers right because they have more interesting ways to shop and find products and have different experiences and it's it's great for Brands and retailers who are, looking to connect with those consumers right they've got multiple they've got more Avenues now than they ever have in so I think that's that's a story that maybe is a little bit under report. Jason: [24:06] Very cool I do want to Pivot and ask you a related question you mentioned upfront that, one of the lesser-known things about channeladvisor's you really are sort of an operating system for Commerce overall and that you have a lot of digital marketing services for for all this hours that you work with did you see any interesting Trends there is there anything. Changing as far as how people are marketing Prime day are they investing off of the primary Market places they're selling at to drive traffic to those marketplaces is all the as far as you can see. David: [24:38] Well I think in the in the sort of narrower view I think you know it's all about like Amazon advertising and how do you kind of Leverage these Marketplace advertising programs that are proliferating you know now called retail media right um and I think that's a really important Trend right there's a lot of kind of turbulence in the overall market around like. [24:58] Just today Google announced they were delaying the removal of cookies from chrome for two years right and there's a lot of the shift from sort of, third-party cookie data the first party data and Who's got what and who's going to win and so the whole digital marketing landscape is actually kind of undergoing one of those kind of periodic shufflings where you know winners and losers will emerge from that and so you know there's there's because of that I think it's kind of cracking open new opportunities again like you know whether it's retail media you know Shopify has been reported to you know be working with I think it was BuzzFeed you know in Striking some deals too you know, maybe create like an affiliate Network you've got you know obviously social advertising continues to be of interest things like shoppable media so I actually think that it's probably a more interesting time right now in digital marketing and it's been in years just because you know whether it's Apple or Google like all these policy and Tech changes and the political pressure and privacy it's kind of it's kind of turning the whole you know the whole industry on its head and forcing people to figure out you know how do they where do they really get value and how do they How do they how do they engage consumers effectively so but when it comes to Prime day I'd say you know hey. [26:09] You know Amazon advertising how do I leverage you know Walmart media properties how do I you know because all these marketplaces are coming up with advertising strategies following in the footsteps of Amazon for good reason it right it's a hugely profitable endeavor and that's creating a lot of opportunities even you know even some less traditional you know we don't necessarily think of them as e-commerce you look at, like insta card or – you know these other these other players and brands have a real interest in like okay you know there's there's obviously a lot of eyeballs on these delivery companies like how do I as a brand get in front of that. And you know and start to you know connect with and influence consumers and maybe nose and towards towards my product so so I think the whole digital marketing world is a really different place than it was even just a few years ago and it's probably going to be choppy for a while as people figure out what is the strategy they need to embrace. Jason: [26:55] No a hundred percent I think we're very early in that disruption so like I don't know what it's going to end up looking at but it is interesting in. The more uncertainty there is in the market it feels like the more advertisers in general want to move. Further down the funnel closer to these conversion events in so that's that that you know is kind of creating scarcity of all of these media products that that talk to customers that are close to purchase decisions. David: [27:22] Yeah absolutely and ultimately that's that's why we exist right we just we try to try to be a little bit of a shock absorber for our customers so that we can we can help we can help manage all that changing complexity. Jason: [27:34] Nice little David I know you're you are in high demand and that is all the time we allocated so I'm super grateful you were able to take some time out and chat with us and thanks again for getting us all up to speed on Prime day. David: [27:49] Hey it was my pleasure I appreciate you guys having me on and look forward to hearing more of what you guys have to say on the topic. Scot: [27:55] Awesome Dave we really appreciate you joining us and you took time off vacation so you get extra brownie points we met Jason will send you some of our coveted show swag for that if folks want to follow your thoughts in the channeladvisor's data that's put out where is the best place for them to go. David: [28:13] Yeah so you can go to channeladvisor' blog for our blog and obviously you can follow us on Twitter and Linkedin we tend to you know push a lot of our content out there as well but I would start on the blog that's a that's a good starting point with for all sorts of resources including a lot of our interesting data around around covid and Prime day and stuff like that. Scot: [28:31] Thanks again and have a great rest of your vacation. David: [28:34] Great thank you guys. Jason: [28:35] And don't forget to wear sunscreen David. David: [28:37] Duly noted. Scot: [28:39] Okay so that is one set of data and now our job here at the Jason and Scot show is to give you a wide spectrum of data and then we're going to summarize it for you Jason one of the were more popular sources of data on Prime day is Amazon itself they always put out a pretty meaty press report and I have it on good knowledge that you dug into that and they're going to share with us what you saw there. Jason: [29:04] I did and I. For better or worse I think we're also going to share our opinions about each of these data sources because they're probably not all created equal and increasingly I would say you know we always have to. Take the Amazon's press releases with a grain of salt like as any company would do they're going to position things, in the best possible light for themselves and specifically in the case of Amazon you know they like to be in the information collecting business not the information sharing business so unless there's a, compelling reason they tend to not reveal a lot of secrets in their press releases and these days I would say there's this extra layer that the press releases are mostly written by antitrust lawyers that are. Trying to bolster their their defense against you know potential antitrust action so so take it with a grain of salt what Amazon tells us about prime day is, that there was a dominant focus on third-party Sellers and they really leaned into all of the. Quote unquote small businesses that sell on the platform they threw out some numbers that are kind of you know. [30:11] Big numbers that are hard to put in context like more than 250 million items were purchased by prime numbers that these were the two biggest selling days for SMB in history of Amazon and that the SMB. [30:26] Segment Drew more than one piece sales from Amazon which you know is probably the antitrust language that happened in there. [30:35] They talked about Prime members say more than any previous Prime day so that the discount for Prime members were either larger or they bought more, doesn't say which and so then always like kind of fun facts to me and something that will dive a little bit more into they talked about what some of their top selling products were now this is global and Amazon is in a lot of markets, Marker 06 [30:58] in addition to North America so they said that worldwide some of the top-selling products and they're not necessarily putting these in any particular order as the iRobot Roomba, a particular model of the robotic vacuum Keurig coffee maker, apple cider vinegar gummy vitamins and Crest 3D tooth whitening strips so an Eclectic mix of stuff, in the u.s. in particular they said top selling items were a waterpik electric water flosser a organic plant-based protein powder the 23andMe DNA test the Roomba robotic vacuum as always the way this flavor of the insta pot which I think now is the instant pot Duo plus 6 quart, nine in one for those of you that are looking for a new instant pot, so those were some of the key things from their press release got anything jump out at you from their press release or did you have any immediate thoughts after reading it. Scot: [31:56] When I read that thing I thought okay someone's gonna have coffee in the morning and then an apple cider gummy and then they're obviously going to need teeth whitening and then they're going to take the little things off the strips and throw them on the floor and then the Roomba will pick them up that was kind of the use case that popped into my head, that's why you did all that in your one car but anyway. Jason: [32:16] That's a perfect customer Journey you nailed it. Scot: [32:17] Boom it's exactly how it goes and then I thought it was interesting they definitely kind of punched in the press release on back to school so they talked about a million laptops and million headphones 240,000 notebooks and that would be paper notebooks and then 220,000 Crayola products if all of those were the big pack of crayons I can't do the math but that is a lot of crayons I bet we could line those crayons up to the moon and back what do you. Jason: [32:42] I'm game for that I know my son Steven would be a big fan of helping to do it yeah I noticed that too it's funny they call that a lot of the b2c b-2s products and if you and when we talk about some of the other data sources, there are other variations of that I think a very clear Trend that got repeated across a bunch of different data sources is activities for kids. Was one of the fastest-growing Sellers and so and I can imagine a couple different hypothesis has hypothesized why that is. Um but yeah that that was interesting what other data sources were you looking at for Prime day data Scott. Scot: [33:24] The last thing on the press release is the first time I've seen him say this they said every day is made better by Prime and I thought that was kind of interesting and in a very you know good little marketing phrase that I hadn't seen before have you seen that. Jason: [33:38] No no I haven't I didn't even notice in the press release good call. Scot: [33:42] Yeah yeah it kind of felt like they're trying it on and I liked it I thought it had a kind of a good little jingle to it so I go to Wall Street for a lot of my data and. Morgan Stanley the analyst Brian Nowak he he does a lot of proprietary models and. Followed everybody and I really like his prime reporting so I kind of need them to that one he his model showed that Prime was about six point nine billion this year up nine percent compared to last year's Prime and when I say that not not June but the October primed it so he did feel felt like I was about 4 billion incremental add to this year now it's interesting is if you kind of do the Wall Street map because they care about quarters and your of your quarters and things so this movement between quarters is a big deal and Wall Street because it's kind of a pull forward in a way of of what last year was in Q4 now it's pulled two quarters forward so so it's going to make it very easy for Amazon produce you're over your growth I think, which is interesting because that's counterintuitive. [34:47] Because we're comping over we've talked a lot about people are gaps kind of to your comp because it's going to be so hard in e-commerce to copy your because we're at you know things were surging because we're all locked up so so Amazon the nether that is Amazon could be one of the few kind of heavy. [35:05] E-commerce people that that shows pretty decent Q2 your overgrowth so it's gonna be fun to watch that as we report on the show what's going on he had a good he also has a chart and maybe we'll tweet this I'll tweak this in reply to when we put the show out there so everyone can see the visual but I like that he lays out kind of the year-to-year trends so the unit volume so I'll start at 2017 and kind of follow this progression so Amazon consistently releases some data points in the press release even though it's not super super helpful but one of the ones they do is how many units were sold so it's interesting in 2017 I think this was the first year they started. [35:43] Giving more information in the press releases they had 88 million units and then it went 110 and 2018 175 and 2019 231 a big jump into 2020 and then 250 and 2021 so 8% on units but then comparable on the revenue side so interesting interesting data there and then the other Wall Street person I watch is Con Sebastian and he does a good job for us well kind of count him on the research team are the Jason is gotcha I think he would wear that as a badge of honor he kind of rounded up a lot of data and the most interesting data point I saw was the Salesforce e-commerce folks who we know really well and we've had on the show and they gather data from a variety of sources including the old-school demandware platform it has a fancy new name it's a Commerce Cloud seller if they renamed it. Jason: [36:39] E-commerce cloud. Scot: [36:40] Still Still Commerce club okay good and they basically said that when you line it up against last year that it was down 1% and so that was the most if we kind of booked into this I think Dave's comments are kind of the most positive out there so the channeladvisor's in the blog post we're kind of the most positive book in and then the Salesforce data seems to be the most negative book in and then you know they did see a bump so they kind of said June was running 8% up your ear and then those two days kind of blipped twelve percent, but then they said Amazon was down 1% which didn't a hundred percent fit together for me because if Amazon was down 1% this off were they almost implied that. Jason: [37:26] I read that as the they were up 12% this Joon vs. last June and that they were down 1% these two days versus the October day. Scot: [37:38] Okay that makes more sense yeah and then in their data they said the winning categories were Handbags and luggage luggage makes a lot of sense to me I don't know if you've traveled it but actually have started traveling again and it is busy out there you know it's kind of like know so so it feels pre-pandemic e and but then there's not nearly as many things open planes flying and people working so it makes it feel that much more more kind of crazy so I could see we're going to we're going to have a lot of people buying luggage to kind of get back into the travel Bud one that surprised me this furniture I feel like we should be at the tail end of this nesting thing going on Earth so I thought that was interesting and then the busy the biggest losing category that they surfaced was apparel and I just feel really bad for apparel I just feel like when are they going to have their moment in the sun it's been like. A terrible 18 months at some point people are going to have to wear clothes right. Jason: [38:39] Yeah yeah and I'll be honest outside of this Prime day data and they were the only ones I saw that called out Apparel in a positive or negative way but outside of this Prime day data I would say. There's a fair amount of data that apparel is probably recovering a little faster than frankly I would have expect it right because. As with all of these Trends there's an argument. Is this the new normal or will people revert right and pretty clear we're not going to live in the one pair of sweatpants that we were for the last 18 months forever, um so you know some new clothes would would sell but I would say more work attire and formal attire and things like that have been selling then, I would have necessarily expected so quickly so you know I can't I don't really have a hypothesis why it would be. Prime day loser maybe apparel was like maybe they're talking about October versus June and there was a you know starting to be there was an economic stimulus and partial recovery. For apparel already happening in October I don't know. Scot: [39:44] And then you had called out some data what do you what did you say. Jason: [39:49] So I do I tend to think that the. The Wall Street analysts are really thoughtful and one of the things I like is in general they showed their work they usually give us a model so we can kind of see how they're thinking from some of these other sources we don't necessarily get a model. So I guess I would be a little more skeptical of the data but just you know it's another data point out there so people should be aware of it, digital Commerce 360 which is kind of the. The online version of what used to be the internet retailer magazine they were pretty bullish on Prime day so they do do an estimate every year they said, in this is going to show you how much variation we have in these numbers they said that they estimated 11-point 19 billion in sales over the two prime days, which would be up, almost eight percent so and they do do an estimate every year so that that. [40:47] 8% growth is decelerating growth which I think is a universal. Conclusion but they're they are estimating significantly higher sales than some of the Wall Street guys and again we don't know exactly. What their math is one other just fun fact that I have no way to validate confirm or deny from their data is they also have an estimate of three p versus one piece sales. Every year since Prime day started and on the first Primary in 2015 they estimated that like 52 percent of all all. Sales were were. 3p which kind of fits with how fast the marketplace was already growing at that point the marketplace has continued to outgrow first party since then overall but they say over Prime day that like. Six I want to say like 61 percent of all sales were one piece o their data set says that Prime day disproportionately benefited one p vs 3 p which kind of. Scot: [41:58] That number seems really high just so just kind of give folks the data so there at eleven point two billion and I assume that's gmv and then Wall Street was I saw not a lot of variable at somewhere between six and a half and seven so it's almost like double sets that's interesting. Someone. Jason: [42:19] I'll be honest and nobody did this to my knowledge but a. A fallacy in all of these numbers are that like people only bought stuff over the last two days because it was Prime day right like like what you really want to do there's a significant basis right if there was no Prime day Amazon still would have sold a lot of stuff yesterday. And so what you really want to do is put together a model that had like predicted the basis and then predicted what was incremental because of. Prime day and that would have given you a better way because the October basis is going to be very different from the June basis is different than the July basis and we've got all these complicated factors affecting consumer spending right now. I don't know I'm not sure it's worth putting together a complicated enough model to really try to try to figure all this stuff out. Scot: [43:12] Yeah how about there was a lot of Buzz around live streaming in the Amazon live thing and you I got heads down and I didn't get a chance to go check it and do watch that. Jason: [43:24] I did I was super interested in this because in general I would say two things that were just kind of Commerce Trends running into this year that I wanted to see if Amazon moved the needle on is. People are really interested in piloting live-streaming Commerce. Walmart has done a bunch of really visible test of course like it's it's really taking off in China and so we're seeing a lot of brands do invest in test here and Amazon has had live streaming Commerce on Prime day for. For a while now so that it's not a new idea to them so I was curious to see what they would do differently and I would say it was a mixed bag so. On the one hand they I would say they D emphasized it like visually the lot the Amazon alive which is their program, the pixels were less prevalent than they used to be like Amazon live used to get above the fold top of the page. Visibility during Prime day and I felt like in most iterations, the live streaming video was lower on the page so just literally less visual attention than it would ordinarily get. What they did this year that they haven't done in your past as far as I remember is the video is autoplay so when you go to these Pages the video is automatically running it's muted and you can turn on your sound it felt like they had a lot more. [44:52] Um vendors that were doing Amazon alive spots and they seemed a little more polished this year and I don't remember they did this in the past but this year they showed you viewership. And side note. Viewership is going to be somewhat artificial because it auto plays right so it doesn't necessarily mean they're they're all those were active eyeballs but every time I picked it was fluctuating between like 30 thousand and seventy thousand people viewing it live and I I don't have anything to compare that to because again if Amazon had that feature in the past I don't remember it and didn't write it down, but that that is interesting I note that they didn't make any hey about it in there in the press release as far as I saw. So I would say it Amazon live felt kind of incremental to me they clearly made some tweaks but they didn't like it didn't feel like they. We need way more into it than they have years past or did anything wildly different the other. [45:55] Big trend is social commerce and Tick-Tock right and so one of the things I was super interested in was. Are they going to do anything interesting or novel off of Amazon to drive people to Amazon historically Amazon spends a fortune on Google ads to drive people to Amazon but you know for example have not seen any Amazon elad ever on Facebook. And for whatever reason The Social Network that has. Brands interested in Commerce most whipped into a lather as Tick-Tock and so and you know a ton of Amazon Prime day is about affiliates and so I thought hey we're not going to see Amazon do anything on Tick Tock but I wonder what brands will do some things and there were some Tick-Tock specific products that seem like they outperform Don on Amazon so like I think one of the, top 10 sellers overall was this string of LED strip lights these like multicolored lights that you can control with your phone kind of like. [46:53] The cheaper better version of Philips Hue strip lights and this was a product that was heavily promoted by some popular tick talkers and kind of jump from obscurity on Amazon to be a top 10 product so that was a little interesting. There are these Tick-Tock leggings that were very popular in Amazon earlier in the year and I noticed they were a prime lightning deal so I saw some inklings of. Some some enhance social media activity mostly by Third parties that we're trying to drive people to their deals on Amazon but I wouldn't say I saw anything like revolutionary or game-changing you know it was mostly. Executing that kind of traditional tactics that we've seen before in the US. Scot: [47:41] Pickle anything else before we jump into the summary. Jason: [47:44] A couple things I'll hide really quick Amazon Prime is our Amazon day is always primarily about Amazon products regardless of what they want to say. Things like fire devices and Echoes are always on the top sellers list and I you know there were a bunch of data that like three of the top five products again this year we're Amazon devices and interesting thing. Amazon had two tabs on this on the deal they had an Amazon devices tab where they were selling. Fire and Echoes and then they had an Amazon Brands tab where they were selling all of the. The Amazon Brands product a data source that I do use for, individual product sales on Amazon is numerator they have a big panel and they said that like in home and kitchen five of the top 25 sellers were from Amazon Basics and. During the first day of Amazon that three of the top five. Pet products where Amazon wag product so it it does seem like. Like the Amazon devices have kind of saturated themselves at the top of prime day but these other Amazon brands are starting to move up the. [48:56] The prime list and then I guess one more thing I would point out I'm super interested in what other retailers counter program against Prime day. Um and so I would say an interesting Trend this year is there were a lot of deals as David sort of alluded to I think this has become a. [49:13] A significant spending holiday in the United States and it drive sales everywhere whether you have deals or not frankly I just think there's more intrinsic spending around Prime day thanks to all the the, the work that Amazon does but I noticed less retailers overtly calling their their sales. Prime I saw them using the word Prime less so for example Target was super aggressively competing against Amazon they called it Target deal days and fun inside baseball fact it seemed like Target was doing some really clever things to office skate the pricing spiders and not let Amazon see their prices so ordinarily you'd see a lot of targets deal prices on the PDP. Prime during Prime day you had to add them to cart to see them they were doing a bunch of deals at the at the sort of category level instead of at the individual product level which makes it harder to. It's a match, Walmart had their event was called deals for days and they seem like they more so than I remember in years past we're leaning into exclusive products that you could only get from Walmart so that was kind of their answer to the. The price matching and then Best Buy I felt like just went right for it and Best Buy was like Best Buy Prime Day deals and they were seemingly getting like really aggressive on price and just trying them to meet or beat the the Amazon Prime price on their featured item so it's interesting just to see that all play out. Scot: [50:42] Pickle so if you store all that together what were your three takeaways from this year's Prime day. Jason: [50:50] So I would sort of call out three things to me. That because they do try to let all these third parties participate in Prime day, the signal-to-noise ratio on these deals is getting pretty overwhelming I mentioned I didn't buy anything it was because I didn't find anything that was an amazing deal and part of that problem is because there probably were some products that were an amazing deal but they were buried. Amongst tens of thousands of. Many deals right and I think I even posted I got a like a feature deal sent to me that was like a hundred and thirty dollars standing desk there was on sale for $125. And I'm like that's three percent which I don't know that that. You know is necessary feature deal so I do think the signal and the noise is starting to work against primed a little bit I do think secretly. It's still all about Amazon you know primarily selling their own stuff my second big takeaway is. It's a summer holiday like you know props to Amazon for starting it and creating it but like you know it's definitely kind of a plan spending event for consumers, I think it's still a little early to decide exactly what the impact of June versus July is I don't know if we mentioned up front but Amazon claims they moved it earlier. To accommodate challenges in the supply chain this year and especially supply chain challenges that would impact their vendors but they. [52:20] They didn't necessarily explain why that was and then again I do think it was interesting to see The Accelerated affiliate activity and particularly some of these these. Products and campaigns on Tick Tock and micro influencers driving traffic to Prime day so I those were kind of my three big takeaways what about you Scott. Scot: [52:44] Well I was agree with with yours which is actually pretty rare and then I thought the international growth thing was interesting at all I haven't seen anyone on Wall Street really kind of think about that and that could be kind of a little bit of a Q2 surprised that that Amazon shows here so I'll be watching for that when we do our Q2 summary so that'll be fun to watch for then another one is you know. I don't know about you you guys are probably still in school right but you know here we are in June we're just out of school we don't really start thinking about back to school until late July definitely early August and I feel like the fact that kind of, punched up in the pressure release some of those back to school items maybe they maybe they. Kind of sucked some of the oxygen out of the room there and it'll be interesting to see if maybe you know a Best Buy specifically talked a lot about the electronics and things I wonder if they've taken a little bit of the you know the kind of led the pack on pulling that forward which could, have a light back to school for everyone else normally I'd say they're not big enough to do that but actually kind of are now right when you think about these billions of dollars that were talking about they could put a pretty material done in the back to school sir especially certain categories and then the third one I would say is this kind of knock on effect is really fascinating to me because if I kind of think back to 2015, you know. [54:13] It was definitely an Amazon only thing and it's pretty interesting that it's having this this kind of pin action into other retailers and marketplaces and things of that nature so so I think that's kind of continues to be surprised. I would say kind of a bonus fourth one is I'm disappointed that we're not seeing more innovation the livestream stuff I've seen is pretty lame outside of startups that are doing cool things around you know like opening Collectibles boxes and kind of Niche you know Niche compared to overall e-commerce their big niches I just haven't seen anyone kind of crack the livestream thing in the u.s. that yet and you know if anyone could do it I thought maybe Amazon would but I'm not sure we're going to see it there. Jason: [54:57] Yeah I was I was waiting to see some cool twitch play on live streaming where they bring Twitch in the prime day and some Innovative way that we haven't. I thought of before and didn't really get that or maybe even another hypothesis I had that never showed up was they should be live streaming from Whole Foods like they should be. Having chefs and stuff doing doing deals in Whole Foods and and they actually went the other way I think Prime day was less of a big deal in Whole Foods than it was last year. Scot: [55:27] Yeah yeah clearly I need to hire you and I to solve this live stream thing. Jason: [55:32] Yeah I'm not available I don't know about you it's too much fun trying to help everyone else unsuccessfully compete with Amazon it would feel like cheating to would be like going to the Patriots like what's the fun in that. Scot: [55:41] Yeah absolutely. Jason: [55:43] Yeah I do want to I feel like we're way over time but I do think the back to school thing is interesting you I I haven't thought about it but you're exactly right like you know they did Prime day in October last year which kind of preempted the normal. Holiday sales and that you know they tried to get that first dollar of holiday spending and so you know maybe in a way they moved to June to get the first dollar and back-to-school spending. And there's a way in which this might have been an extra smart year to do it because I you know you have much older kids I you know have a, just graduated kindergarten about to start first grader and in our family and in many families we talked to last year felt a little bit like a lost year like we felt like our kids probably didn't make as much. Academic progress is they would have if the pandemic didn't hit and so I think. There are a lot of parents that are trying to catch up a little bit over the summer and so I think like potentially a lot of the purchases I saw I mean. Best-selling things we're still like. Homeschooling tools like like educational posters to put up in your in your house you know Teaching Alphabet and geography and things like that so I wonder if. Amazon kind of tapped into this you know parents spending more on helping their kids. Have a little more education over the summer and and that you know tied in nicely to kind of pulling back to school into the beginning of summer instead of the end. Scot: [57:10] Yes these folks in Amazon are pretty clever with how they think through this stuff. Jason: [57:14] Damned annoying really if you think about it. But Scott that's going to be a great place to either because we have exceeded our allotted time as you mentioned up front this would be an awesome time to jump on iTunes and finally we best that five-star review. Scot: [57:32] Thanks for joining us everyone and. Jason: [57:34] Until next time happy commercing!

    EP267 - Deep Dive into Food Commerce with Matt Newberg of HNGRY

    Play Episode Listen Later Jun 16, 2021 68:51

    EP267 - Deep Dive into Food Commerce with Matt Newberg of HNGRY Matt Newberg (@thenewb) is the founder of HNGRY ( In this episode we deep dive into the rapidly changing digital grocery and digital restaurant industries. Topics Covered: Changes in competition between grocery, QSR, and fast casual. Digital restaurant marketplaces (Door Dash, Uber Eats) Digital grocery marketplaces (Instacart) Ghost Kitchens (food industry version of private label) Delivery vs Pickup On Prem vs Off Prem Consumption Emerging digital grocery top-off market (GoPuff, Instacart, DoorDash) Amazon evolving grocery strategy (Amazon Fresh, Just Walk Out, Delivery) Episode 267 of the Jason & Scot show was recorded on Tuesday June 16, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 267 being recorded on Tuesday June 15 20 21, I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot & Matt: [0:40] Hey Jason and welcome back Jason Scott show listeners Jason one topic we have really wanting to do a deep dive on and is one of your favorites, is the impact from covid on the grocery and restaurant industry so we thought we'd invite a True Food expert Matt Newberg he is the founder of hungry hungry is a new media platform examining the impact of technology on how people eat Matt welcome to the show, thanks so much for having me guys it's awesome to be here. Jason: [1:10] Matt we are thrilled to have you nobody but you will ever get this but Clubhouse comes up all the time and I'm like I was on clubhouse back when it was cool in like. Scot & Matt: [1:23] That was fun I really enjoyed that and it's definitely gone somewhere else but but yeah definitely I've tapered off of that a little bit. Jason: [1:32] I've uninstall that I feel like it's totally jumped the shark but you you invited me to a food chat like early on and so I feel like a rare moment of me being an early adopter. Scot & Matt: [1:45] That was fun. Jason: [1:46] That was fun so we're going to jump into all things food and hungry but before we do our listeners always like to get a little bit of. Behind the scenes color on our guests so I'd love to hear a little bit about your background and how you got interested in the food industry. Scot & Matt: [2:06] Yeah course so my background is kind of really in the technology space I was a product manager most recently a Vimeo and. You know I started getting really kind of curious about the food delivery space I'd say towards the end of 2018 I took a trip to India and I've been reading about ghost kitchens and while I was working in Tech I was making video content around food, and it was really kind of just like Food Tours kind of like Munchies style and I. [2:37] When I saw when I heard what Travis kalanick was doing in Allah with Cloud kitchens I decided I had to kind of merge this. Kind of what I was doing with video content and start examining kind of the technology behind the food industry and when I reached LA and early 2019 to shoot this my I just had one of those moments where you kind of see the, you know like the impact of technology inside of a a like food operation it was it was it wasn't like, walking into a q SI restaurant it was like walking into like you know Ground Zero of this like new I didn't know what to think of it and I was just blown away by how many tablets and people screaming and shouting and they're like, you know 20 or 20 some odd kitchens Under One Roof and. [3:31] You know put out a video in 2019 kind of profiling that kind of for the first time giving people a taste of what ghost kitchens were it got a great response and I kind of dropped everything and decided I was going to start writing about, Food & Tack on a weekly basis so that started really ramping up hungry and late 2019 and then the pandemic it and, I've been covering everything from you know, dark convenience stores to ghost kitchens and virtual Brands all the way down to an alternative protein and a few other little Trends here and there like personalized nutrition which is basically wearables and, the gut microbiome and how that's going to basically play a role and personalizing a lot of the food that we eat over the next few decades in my view, and it's been a wild and crazy Journey especially, with everything that's happened I could have never predicted it and I think the timing of me kind of picking this as my as my beat was, it was a great move so it's been it's been a lot of fun. [4:35] Let I have a million questions just on your intro but let's start let's start it I'm not sure Andrew on the show tell me a little bit about the hungry business model are you doing like a sub stack kind of direct crater direct to an audience thing or is it more of a paid video Channel or ad-supported how does that work. Yes it started out with video which was you know it's all been completely free and then I started adding an October I launched a pay wall paid subscription product, for industry insiders and so that gives them access to premium content every week and also maintain a free Weekly Newsletter so the goal is to kind of build this community, of Industry insiders and also you know create a funnel through the free newsletter so that's kind of been the model to date. [5:24] Are you using this abstract platformer can you say what platform oh no I'm using something called ghost which we basically customized, charge is a pretty high commission so just basically pay for the stripe fees and, and that goes subscription is very cheap so yeah basically rolled my own kind of version of sub stack, and with ghosts you get to control more it's you kind of you know they can't just shut you down someday and less like the internet and show you down or something yeah it's like a modern version of WordPress and I should also say that I have a podcast as well called the feed you can check it out I'm definitely nowhere near the number of episodes as you guys but hopefully one day I'll get there and, we know done a few in-depth videos on you can search for them on YouTube and they're about you know they range in length but they're around 20-30 minutes long kind of deep dives into a particular topic. Well the the super secret of our show is when I have three listeners and one of them is Jason's mom so while we're waiting on episode you may be ahead of us on Muslims. Jason: [6:31] We made an early decision to go quality quantity over quality. [6:38] And I should point out the other fact you can't say you have 30 Minute Podcast and that they're deep Dives because we usually haven't finished our intro in the purse. I've heard that all content needs to be more brief and so Scott and I like the buck we don't like to follow the industry Trends we like to set. For too long yeah so there's a bunch of things we want to jump into but side note before we do are you wearing a glucose monitor right now. Scot & Matt: [7:09] No I did that last summer for about a month I tried. Two different programs one was called clear and based in the Netherlands and other ones called levels and since that since I was going into that. Yeah there's been a number of other startups that have popped up that are they're all using the same freestyle Libre technology Hardware sensor which is made by Abbott, and they're just kind of innovating on the software layer layer above like you know, daily logging of your meals and tracking your levels so and then you know obviously making recommendations about what you should or should not eat but it was definitely fun it was definitely like a really good learning experience and I highly recommend anyone do it, you don't have to be a pre-diabetic or diabetic it's really powerful information. Jason: [7:59] Yeah if nothing else I super admire Abbott Labs because you think you figure about. Only about you know forty percent of the American population has diabetes so your Tam is just not big enough if you can only sell to be with diabetes so they figured out a way to sell the glucose monitor to the whole world. But yeah. Scot & Matt: [8:19] Yeah I wish I wish it was for the entire world I mean it's pretty hard because you have to get a doctor's note. Jason: [8:25] Yeah and it's still kind of expensive for not for Off Script use right like yeah and so for listeners that probably don't know what we're talking about like this is this, kind of trend I would call it an extension of the kind of self measurement thing where people are using these real-time glucose monitors that you wear, to get like really detailed insight into how the food you eat in the timing of that impacts your. Your blood glucose throughout the day and they can you know prescribed changes to your diet and lifestyle based on on your body chemistry. So did you find it useful or was it a gimmick for you. Scot & Matt: [9:08] No definitely useful like I have some tips now like in tricks and little hacks like if I'm going to eat something that I know is in a spike my blood sugar I'll take a little bit of apple cider vinegar, to kind of flatten this bike if I do happen to eat something that makes me feel a little sluggish I definitely like walking for about 10 or 15 minutes is a good, Goodwin and then like the order in which you eat foods like always eat your fiber before your carbs so if I'm going to eat pizza I always gotta order a salad, or even better but the salad on the pizza if you're into that sort of thing so, and levels makes it really fun they give you all these little mini hacks that you can do and you can kind of see whether they work for you or not and that's kind of the whole idea it's highly personalized so what my what might work for me, isn't necessarily going to work for you because we you know you and I we might share you know something like 98 to 99 percent of the same DNA but we, we only share a very small percentage of the same gut microbes so that's kind of where the the Magics secret sauce I guess lies. Jason: [10:14] Yeah yeah I think I've talked to several people who did some variation of that program in most say that they were like somewhat surprised that they had like a preconceived notion, that there were certain foods that would like really Spike their blood sugar or wouldn't. That right sometimes the test were validating but often they learned that their body responded a little differently than they expect. Scot & Matt: [10:38] Yeah like I went to town you know I started eating everything under the sun and the first week. Jason: [10:43] Well in the name of science. Scot & Matt: [10:44] Yeah exactly and like honestly eating the cheeseburger wasn't bad it was the it was like the Coca-Cola I had with it or. You know having it's all about the ratio of like fats to carbs and if that's if that ever gets to be you know certain that gets out of whack then you're going to have a spike. Jason: [11:05] That's why I just go pure carbs. Scot & Matt: [11:07] Did you try a venti Starbucks vanilla latte boy Jason you know you can guess what that would have done. Jason: [11:16] Oh my God like yeah I'd be yeah we don't need to go there so let's pivot to be to be food. And that one of the things that I admire about you is you you take your journalism seriously, so if I'm remembering right one of the first conversations I had with you you casually mention that you posed as a Amazon Fresh delivery driver so that you could sneak, Amazon Fresh store that that was at the time a dark store in LA. Scot & Matt: [11:49] Thank you that yes that is correct. Jason: [11:55] So the so that's kind of how I discovered you I am a paid subscriber to the newsletter I've been following you ever since in Scotland I've been wanting to talk about a bunch of these kind of macro food trends, and so I thought you would just be a great person to have a perspective on those so if you'll indulge me for like a 30-second setup. The biggest thing I talked about with clients in terms of this macro trend is, what I call the the breaking down on the swim lanes and by that what I mean is in the pre-pandemic world. There were certain occasions where the American family was going to buy their calories at a grocery store and make their own meal for at-home consumption, and there would be other occasions when they were going to stop at a q Sr like McDonald's and very likely consume those calories in the car on the way home, and there would be other occasions when they were gonna stop at a fast casual restaurant and have a Applebee's sit-down dinner and. Applebee's competed with the other fast-casual restaurants McDonald's competed with the other cure SARS and hi v– or Albertsons competed with the other grocery stores. [13:09] They really didn't they each had a share of the American stomach and they didn't really necessarily compete hard with each other and in my mind one of the things that happened, either coincidentally or because of the pandemic is, they have all moved in each other space and by that what I mean is you can now have you know ready to eat meals delivered from Whole Foods and then an hour, um you can't you know obviously you can get all those those meals delivered for at-home consumption which is mostly how a restaurant meals got consumed in the last year, but you can also use your Mobile Order ahead Applebee's have your meal waiting for you, walk into the restaurant have the food already served pay at a touchscreen and walk out and kind of have it faster turnaround and Applebee's as you would have in a McDonald's. And oh by the way McDonald's we'll do it our groceries with your. Right so so I kind of feel like all those those swim lanes are off and everyone is competing for every calorie now does like am I seeing that right is that. Scot & Matt: [14:14] Absolutely I think it's you know Grocers becoming rest you know they the term grocer Aunt became a thing and then you had restaurants becoming Grocers like your local, you know, Neighborhood Restaurant was using their you know us foods are what are you know their supplier to basically instead of like trying that into prepared food they would just sell those raw ingredients at the onset of the pandemic. Yeah so much so much happening but the job to be done remained the same you know feed me a certain level of quality and nutrition and convenience. Jason: [14:52] I loved restaurant by the way I hadn't heard that so I'll be using that now although your Porter every time I. Scot & Matt: [14:58] I've stolen the calorie swimlane so we're even now. Jason: [15:02] Okay awesome so one thing that just super timely it's Scott. Knows all too well US Department of Commerce publish all this retail sales data every month and I geek out on it and it published this morning, and one of the things I always like to look at that I think has been fascinating is, one of the categories in the US Department of Commerce data is food and beverage retailers and another category is restaurants like the US Department of Commerce. Definition of retail includes restaurant, and so I went back in history and looked at like what's oh cool what's the breakdown in dollars people spent it restaurants versus food and beverage stores and for most of the last decade it was kind of. [15:53] The pandemic hits and it went 70/30 which by the way surprises people people expected like oh restaurants lost even more. Because of home delivery of restaurants rest you know and of course the Qs are staying with drive-through, it was like 7030 and and then it kind of leveled off to maybe like 60/40 5545 and I've been curious to see if it's gonna. Ball all the way back to 50/50 if there's if there's going to be a flip and in this month data so it's middle of June so the Mets data just came out, and the the restaurant Trade Organization is publishing a version of the data this morning that shows that like restaurants surpassed. Grocery stores for the first time and you know since people are the pandemic. And side note they kind of. Jigger the data they're not comparing restaurants to grocery stores they're comparing restaurants and bars too. Scot & Matt: [17:00] Yeah right there. Jason: [17:01] Grocery stores and grocery stores are a subset of the. Food and beverage retail so like I would argue it ought to be food and beverage retail against restaurant and Grocery and in that case the Gap has narrowed but restaurants are still losing but the restaurant industry of course wants to take the most positive spin so he, you followed that at all and you have a hypothesis or a prediction about like with the with the post pandemic ratio looks like. Scot & Matt: [17:29] Totally yeah so it's D I was looking at that data today and I saw Jonathan maze from restaurant, from that restaurant publication published this and I Dig Dug in and I saw that five billion dollar Gap and I was like you're adding in the bars and like subtracting the liquor stores, so that's a five billion dollar Gap. You know in the grand scheme of things yeah you could basically say it's 50/50 now and I would expect that kind of as you know vaccinations are increase and you know the weather gets warmer and that sort of thing, you know historically food at home I think you know pretty much. Eclipse food away from home up until you know it started getting really neck-and-neck I think around like. You know 2019 as the economy was really booming you know I think it's generally a sign of wealth and developed countries is you know a strong strong restaurant, consumption and our consumption so longer-term you know what where does this where does this all go I. [18:37] I think it goes to grocery to be honest with you I I think these things are the same blips that we saw in covid or kind of going to happen in a you know as re-openings happened this summer and so. [18:51] I think longer term you know like the seismic shift of these things like yeah they can they can change on a dime but like the longer term sustainable Trend I think is food at home, and what that looks like it's just going to change it's not going to be it's going to be more meal solution driven things as we as you mentioned. You know where you're getting you know maybe a famous chef has created a frozen type of product or, fresh prepared product or maybe there's even a ghost kitchen inside of a Walmart you know and so then how do these things get counted but clearly anything get sold through these retail channels is going to get counted as food at home and like technically if I'm consuming if I'm consuming restaurant delivery today that's being counted as food away from home right even though I'm consuming it at home, right and deliveries you know something like close to 10% of of the that entire and you know sector so. You know I do think over time as these like quick Commerce players and we'll talk about those you know enter the market they're going to be doing more and more restaurant style meals, and and that will because it works because the unit economics are better in that scenario I think it's just gonna. Still some share away from the unsustainable Marketplace restaurant delivery model. [20:10] When you when you entered the what got you into hungry you talked about Travis's new start up maybe and I'm kind of the the new but I feel like you guys are at a 400 level and I'm still at 101, but you know so maybe explain what it is he's the Uber founder explain what it is he's building and kind of what you know about it and then you know how prevalent are these ghosts and I always get confused because some people say ghost and darkest that the same thing or is there some difference yeah it's all the same ones just slightly friendlier I don't know which ones from your honesty but. Jason: [20:45] Dark Knight versus Casper. Scot & Matt: [20:46] Ghost makes me think the Snapchat so yeah goes kitchen so you know, I think this you know you're seeing these Trends play out in both Grocery and restaurants which is like startups that are basically owning more and more of the value chain so. Cloud kitchens is really at its core real estate company there's a real estate side to it where they're actually going into you know they're buying up distressed properties that are located in these zip codes where there's High, yeah demand for delivery food and you know they do a lot of research into what those demographics are in advance they buy that building at that they basically lease it to you know called 20 or 30. Restaurants you know or food entrepreneurs that want to do delivery they set them up with a tablet that lists them on every single major, delivery Marketplace they also you know can license some of their own in-house Brands to them, and so they own those Brands they own the software tablets and now you're kind of like. [22:00] You know this food entrepreneur trying to make it work for delivery with all these you know twenty to thirty percent commissions and you need to do about like I'd say seven are 50k and, and top-line sales to break even in one of those kitchens they can cost you know six or seven thousand maybe even more and it's about 200 square feet so you can fit like maybe two people in there. And you work for kitchens I guess is kind of about it yeah a lot of people have compared them to we work but the you know they actually we work with leasing spaces and they're buying spaces and the reason they're buying their buying these properties is too. You know really improve the value of that real estate over time and use technology to figure out, what brands should be put into these kitchens who should we go after what virtual brands should we sell what other kind of, non-food kind of convenience items should be sell along side that and I think over time you know it's going to be a full-on. Vertical play where they started with the real estate and they're just going to move into the last mile component because right now with all these drivers coming in you don't gain the efficiencies of true batching because, everything is fragmented across you know we're whoever owns the customer whether it's door – ubereats Postmates and so, what I believe will happen over time is that. [23:21] Kitchens becomes it's kind of like a Smile hyperlocal Amazon that's in your neighborhood and they've just co-located a bunch of restaurants and and they're that, who do enough delivery volume where it doesn't make sense for them to be doing another brick and mortar right so obviously in covid every restaurant became. Effectively a de-facto ghost kitchen because they weren't able to see customers now as dining rooms you know Roar. You know you're not going to be able to do as much delivery volume so the brands that want to do that we'll have a kind of, experience Center that's augmented by this dark infrastructure and the in the goal is to make that infrastructure kind of plug in play and you could light up a bunch of different markets you know pretty quickly and launch new Concepts so, that's a that's kind of a medium winded answer but I can dive into any of those aspects more a couple quick ones so is this like into neighborhoods in Allah and or because he's like a gazillionaire off of uber going public or as this I can you know I'd be shocked that it's in 80 cities and doubling rapidly what's the scale. It's I have I'm tracking close to 60 right now in the US with some good keys and percentage of them are coming online right now. So larger than I would have guessed here 1 and tier 2 markets. [24:47] And then Mark Lori just left Walmart and his doing something kind of like this with his brother are they the same thing or does he have a different concept, I wrote about that one last year that I believe there is something close to 300 million on a 1.3 1.5 billion dollar valuation. It's. Different model because they're actually leveraging instead of ghost kitchens where you have multiple Brands each day are basically retrofitting like Sprint Sprinter vans electric Sprinter vans into kitchens that can basically cook the meal, Watson route to you within this small neighborhood in New Jersey Westfield New Jersey I think and. [25:30] The idea is that they can do more deliveries per per hour and also unlock higher average order value is because there's selling it to families where you know there's four people or maybe more ordering from, this concept so they basically license. Well-known restaurants in New York City and some other cities and then bring them to the suburbs and the ideas that like that brand recognition, you know that there's demand for that brand outside of that core geography and they basically license that concept, on behalf of from the restaurant tour and then they train those chefs in their commissary that's just like one big commissaries not subdivided into ghost kitchens to basically like create these sous vide packs of meals, and then it's just kind of sitting in the back of the van where like the the final prep State the final, work gets done to heat that meal while it's in route to the customer so you could get your food and like. 10 15 minutes depending on where the nearest van is if you put in your address into this app you can kind of see what you got. [26:37] So it's it's a kind of a crazy idea there's no some people when I put that out there they're calling it the quality of food delivery I think was kind of harsh but you know. I've been tracking that one for a while it was called it was going under a stealth name called food truck ink and finally it's called so, be very careful to see how that fits in with Mark Lori's bigger umbrella which he's calling his like new futuristic city. Jason: [27:05] Yeah yeah people are going to want to eat in the city of the future. Scot & Matt: [27:09] I hope so yeah but I hope that they socialized from time to time. Jason: [27:12] Me too one of the things that's interesting about the whole ghost kitchen model is its West capex intensive and coincidence. And an sorry Trend at the moment is because of work from home and remote work like populations are shifting around right now so review. If you had the perfect restaurant location before the pandemic in your spending a fortune on rent. It likely isn't the perfect location anymore because a bunch of your your target audience moved from San Francisco to Austin or whatever. Feels like the ghost kitchens may be able to be a little more agile. Scot & Matt: [27:55] Totally yeah the idea is you. I guess you can sign a yeah you basically signed a 12-month commitment and it depends on. You know the city but they were doing different types of arrangements to get people in there, definitely more flexibility and less yeah you spend 50k to a hundred K on kitchen equipment, I think they're located in markets where you know they expect that demand to continually grow but it when compared to a brick-and-mortar like absolutely like. There was a period where you know even certain ghost kitchens in Manhattan weren't operating because they were in. You know like business districts like by dye and Tribeca and a lot of people had left the city so. You know you were in the clubhouse I think with Corey from zul and and that was that was the example there, but generally speaking I think you know the bed is that you know delivery will continue to grow wherever the cloud kitchen is located because they've kind of. Pick that market on purpose. Jason: [29:03] So let's let's zoom up to Mack returns again for a moment so. Like you know how much of the stomach restaurants will win back like I think the jury's out like you know I'm like at the moment I'm expecting there'll be some Revenge dining if you will and. You know because there's so much pent-up demand that we're definitely going to see a spike in restaurant usage whether that. Persist or not remains to be seen but it feels like one of the things that it's much more likely to be permanent is. Regardless of where you get them a greater percentage of calories are likely consumed at home than before the pandemic I just feel like you know a lot of the restaurant meals are forever going to be delivered now or consumed at home. Scot & Matt: [29:50] Yeah I yeah I think between grocer be between grocery delivery or between Grocery and food delivery at home the yeah home becomes bigger than it was before for yeah I definitely agree. Jason: [30:04] So then one of the the trends that comes up is okay so you know digital grocery wasn't a huge thing before the pandemic it instantly overnight became a huge thing and it's got and I have talked about in a bunch of context on their show. When something is a brand new trend, the smart thing to do in the thing everyone does is outsourced right so when e-commerce for apparel was a brand new thing there were a bunch of you know e-commerce companies you Outsource it to Target and Toys R Us Outsource their e-commerce to a, Bookseller in Seattle called Amazon right and over time as as a business becomes more real and more legit. [30:44] Increasingly as a mistake to Outsource it because it. You know your core customer experience and So lately we've been talking about that a lot with. Digital grocery space and you know so many people Outsource to instacart and is that really in the that made sense in the short run is that a good long-term solution for grocery stores. Obviously restaurants. Very rarely stood up their own digital infrastructure it seems like the overwhelming majority relied on these marketplaces which I guess door – and ubereats are the two. Two biggest and my understanding is that the unit economics or the restaurant totally totally suck through those marketplaces. Is is that going to be the way that customers always discover their delivery restaurant meals or like we've seen in other categories of e-commerce do you think. More restaurants will try to have their own digital ordering experiences or how could that play out. Scot & Matt: [31:44] Yeah I think that the direct channel is going to definitely become you know it's become a must-have you know you have to have your own direct channel so the question is how do you manage these two things right and and this goes for groceries as well as restaurants right, all these apps are kind of disintermediating the relationship between your customer and your business, you know and so the goal is to figure out how to make those sales incremental on the marketplace and then drive you no longer term retention through. Do your own channels and so you know it's the card has its own white-label tack you know they've. They've been able to create a suite of products that you know Grocers can kind of pick and choose from if they don't want the marketplace you know Wegmans is a good example of this they've you know Leverage The White Label, they're also on the marketplace you know as far as the restaurants you know obviously doordash has storefront, I'm pretty skeptical of but you know there's also door – drive on top of all these white label platforms whether it's cow now or, yeah it's square has an integration I think with a door – now so all these POS ordering systems are going to have Integrations with last-mile fulfillment so. [32:59] I think it's just going to be about balancing it out and being smart about how you kind of load balance those two all these different channels and the number of channels is going to continually increase I. And so you know it's a must that you have a you know it's become a mustard every grocer and every restaurant have their own direct ordering and you know, we can get into the microfilm and all that stuff but. Jason: [33:26] I do want to get there it is it's funny, I you know I spent a lot of time with clients in the restaurant space and I talked a lot about needing to own, the customer experience which is increasingly digital I mean I think Panera came out like last month and said that over 50% of all their orders are now from the website so there are digital first restaurant. And every time I bring this up with clients that are like yeah but Jason you don't understand the magnitude of the problem like we could never own our own delivery like you know how much delivery capacity that would require it's impossible to build. And I'm like have you heard of Pizza Hut. Like it seems like there are all these restaurants that just it's endemic in their model that they'll have delivery like every independent Chinese food restaurant in America has always delivered it seems it seems odd that. Restaurants are so reticent to own their own own capacity. Scot & Matt: [34:23] Well it is true that like if you if they were actually going to go and hire all those drivers you know whether they be contractors are full-time employees that, it does require a lot of demand and it does involve a lot of know-how that they don't necessarily have so it does make sense of why this was the Easy Choice in the pandemic for them to like steal so much Airway and, you know because there was no other solution right that's like easy so I think the thing there is to really break down the things that they can do themselves and the things that they should Outsource and I think when it comes to. Yeah delivery that's clear like no no restaurant unless you're you know Domino's or, you know you have a ton of local delivery demand is going to like really operate their own Fleet, a lot of people will just Outsource it to like door – drive or now lift this getting into that space Uber has an API and although has a aggregate kind of API that will allow. Best messages basically paying this real-time Marketplace of these services and just pick whichever is going to be faster and cheaper they can kind of set the parameters of like. You know how fast or how cheap they want it to be and they could pass or subsidize it to the customer so you know that that part I don't expect restaurants to do I absolutely think restaurants need, have their own website whether it's you know some sort of CMS that their licensing from someone else or build it themselves and then integrate it with a door – driver one of these other players. Jason: [35:52] And I guess that is one of the interesting like so if you look at some of the other segments of e-commerce that evolved by a company I talked about often is this company called GSI and in the early days of e-commerce. [36:05] If you know an investor said hey should we get an e-commerce that the CEO ago yeah I'm gonna hire this company GSI to do it TurnKey right because the, in the same way that it was easy and it was an economically meaningful in the same way that you might you know put your menu on door – when it's not economically meaningful, and by far was the easiest thing over time. Every retailer realized hey it's a mistake to Outsource this this business to GSI and we need to own that but Jesus I didn't actually go away or go out of business like a GS I mean a bunch of money in the, the founder of GSI is this guy Mark Ruben who owns the 76ers and Fanatics and a bunch of other good things so he's a success story and Jesus I still exist today, they they operate under different name called radio and they pivoted from, providing all these Services TurnKey and sort of Outsourcing it to providing the Ava cart services that a retailer you know didn't think it made sense right so they weaned in order management. Fulfillment and 3pl services and you know kind of over time so we gradually moved away from the selling everything as a bundle and. Seems to me that like you know you can imagine not all of door – but some part of, instacart and doordash could could follow that same trajectory. Scot & Matt: [37:31] Totally yeah totally see that playing out like that so some of those that you talked about if the restaurant too, as a consumer these things quality of delivery is pretty bad I don't know if there's any good data but mine's probably like 60 to 70% and getting the order right and getting it here kind of within the window and I don't know if that's, I'm in a smaller City so maybe that's just part of the city here but I don't know if you guys in Chicago and La have the same problem. Jason: [38:01] I heard the triangle is going to be the biggest city in America and. Scot & Matt: [38:03] We do we do it were considered a Goldilocks City because we've got this interesting we're kind of like we match the u.s. demographic or something in a certain way anyway City search was launched here because the. So if I'm a restaurant one of the things that makes Amazon Amazon is the control that customer experience so it seems like even if I'm going to use one of these Network things it's not are never going to be a good as doing it myself you just think the economics are not there to do it yourself. [38:32] As far as I know I think Rick yeah it depends what you're saying would you define by doing it yourself if it's owning the customer relationship that's just the front end right so let's Domino's never made. [38:46] Delivering the pizza they make my all the money on the actual, you know Pizza itself on the margin of the products right so do what you do best on that Customer Loyalty right to whatever loyalty system you're going to use with your own front end but outsourced, you know that last mile component where the driver picks it up and you know delivers it to your customer that last component you know and so why should why should anyone have to go and build that. Because if Pizza you've spent all this time the whole thing breaks down when the pizza gets their cold because right. You know they delivered 60 other things and the pizza was last yeah I mean there's there's also you could also you know hire your own Fleet and then leverage these other software players there's one called get Swift there's another one, called on flea basically allow you to manage your own drivers and yeah I think you know part of it is like product Innovation right like obviously Dominos engineer's it's Pizza to be like, yeah keep retain the heat very well and that kind of impacts this comes full circle with the cut the glucose monitor right it's like makes you feel like crap after but you know. But so I think it's kind of a combo of like designing things that work for delivery like literally like testing. You know there are restaurants that would like literally go and. [40:13] Test order their products and see that okay we need to like cook it at this temperature so that by the you know the time it hits this guy's house 30 minutes later it's like at the perfect. You know crunch or whatever and like that's you know that's a little extreme but like you kind of have to factor that in, and then as far as like the drivers you know screwing up and doing other things like I don't know you guys I guess like. I think it's just asking a lot for the long tail of restaurants like forget the major Q Sr s write this you know the long tail of restaurants you know, to to do this kind of thing and you have to remember a lot of the reasons why these guys even got on delivering the first place was because Uber and Postmates and all these guys and door – Offered Logistics when GrubHub just started as a pure market place that was sitting on top of the existing kind of Chinese restaurants and pizzerias that were already set up to do this through the phone right so, they've kind of unlock that for it for a long tale of restaurants I would have never done delivery had they had they not have access to this on-demand Fleet so. I think it's good that Fleet is here to stay but I think the way in which I just think. [41:26] You know the vertically and it's clear that the vertically integrated model is much better and you can see this with like chains like cluster truck. Which is you know just a vertically integrated goes kitchen that works with a shot of Kroger yeah good brand yeah and as Lori didn't come. Jason: [41:44] Cluster truck is what was left. Scot & Matt: [41:46] What a cluster truck. So I think you'll see a mix of this kind of white label with the door – drive and then like the vertically integrated kind of first-party player that you know, is basically delivering and maybe leasing the space or owning more and more Upstream to get better data online, okay when should you fire this item and you know on on your stove top and you know just to make sure that the timing is the food is not just sitting out there waiting for a driver like a lot of these POS connections have not even, been linked up right is like no kind of connection between like what's in my inventory or what. [42:25] Yeah and and and what's being listed on the marketplace right so that's why you get all these like out of stocks and refunds and and, you know restaurants are not updating customers on like what the ETA is are because there's no transparency into those operations because they're operating in completely offline, yep the worst here is our local Moe's where they have six iPads and they forget to check them and yeah exactly I have to go in because you can never get them delivered Within an hour of placement and when you go in there's like all the frustrated ubereats people sitting there waiting and they haven't even pulled the little tab off of the eight iPad that is the growth of what the one that's super frustrating is Panera because they did their own delivery here locally and then they just started Outsourcing it to GrubHub I think in the quality like literally went down, like 80% but they also you know they seem to be ahead and I think Jason one time mentioned over half of their orders are digital now and that that's kind of more like the Starbucks mobile kind of thing we're more and more people are ordering digitally from the restaurant either be in or out you have any interesting data on that or they are they kind of, are they ahead of the Packer they are most restaurants that have mobile ordering getting to that 50% mark. [43:46] No I think I think there's only gonna be so many brands that can own that with the customer I mean Jason probably knows better but you know. There you know the the golden standards are like the sweet greens the Starbucks is and there's payments actually has a great ranking Pym NTS shout-out to the no vowel Club, um they they have a great ranking of. Food delivery apps or restaurant apps by you know how well they they do loyalty and all these other things, Casey's General Store is a very interesting use case that I would say like somewhere in the 60% range of transactions flow through their mobile app whether it's loyalty or delivery or pickup. Which is pretty fascinating. One thing to remember and this goes back to Olo is that the majority of these transactions are going to be pick up or curbside pickup, deliveries still pretty small and, so it's you know as much as everyone talks about delivery delivery delivery I think pick up deserves. [44:56] Yeah Fair mentioned because. That's a lot of people are doing that to just save time when they when they get to the store and I think you're going to see more of this Q are ordering and other types of channels where, you can kind of use the menu and maybe even order before you sit down now is that going to be a romantic night out with your spouse you know when, you're dining out for a nice you know a nice dinner like no but there are certain occasions where it's going to make sense to. Like you shouldn't be waiting right and so that's kind of what this is all about just you no more free time to do more fun stuff. Jason: [45:36] Yeah no I do think that's interesting I think there are going to be use cases where people are going to like consider foregoing the wader to be Advantage right like it's. In some cases it's annoying when the waiters not writing down your order in your you know they're going to get something wrong versus being able to like beam your order exactly how you want it directly to kitchen and there are other times when that ordering is an important part of the. The Ambiance and the experience right. Scot & Matt: [46:05] Totally yeah yep and that's the rise of the Q R that I think we saw the covid-19. Jason: [46:11] Yeah yeah yeah but you're the mighty QR code is back I think that's a article on you're on the homepage right now isn't it. [46:24] Let's come back to them and then I do want to Pivot because in classic Jason Scott Peck fashion were using were burning Through Time, to grocery a little bit because you did you did kind of talk a lot about the, prevalence of pickup versus delivery and I think that that is also very prominent in how it seems like digital grocery is playing out. Um [46:49] The bike in the same way that a you know as a fast TurnKey solution a lot of people Outsource their restaurant business to Door – a lot of Independent Grocers were pretty quick to Outsource their, some quite large Grocers Outsource their gross their digital grocery to instacart and one of the things that's interesting to me about these marketplaces getting a bunch of the business is, they then have opportunities to kind of cherry pick pieces of the business that they want to steal from their Marketplace Partners right and we. Racine Amazon do that with private labels the you know arguably like the door – is our are doing that with ghost kitchens, and there are some rumors about instacart you know having their own warehouses to fulfill, um like top up orders and I'm curious if you have seen any of that or if you. Hypothesis about how that might play out not shockingly instacart totally denies. Scot & Matt: [47:55] So yeah I mean this has been a narrative that's been a been there for a while and it makes sense that people fear those because the constant story with technology and these you know kind of, offline businesses has generally been like David versus Goliath and. I can say so I put out a story about instacart getting into microfilament with Publix, I'm not sure where this is going to be deployed but they're basically, building an MSC with Publix and they may be doing it with more Grocers but this is the info I received. [48:31] And I think it's the cart it's going to be a it would be a very poor decision for them to become a first party retailer and compete against, it's there Grocers and unlike door – where there's I don't know how many. Hundreds of thousands of businesses on there there's only a few hundred Retail Partners on the instacart platform. And each of those partners are very meaningful I mean like the head of the tail are you got Albertsons you got Kroger you know these are big big big partners, and so if they were to ever take that data what those customers aren't they basically have, aggregated and basically wanting competed against those partners that would just be all out Warfare and I don't I'm I've spoken to people there and I've done some homework into this and I really don't think that that's, in the cards for them despite the fact that there's so many other guys coming up who are vertically integrating and and there's obviously lots of Pros to that. When I see in the car doing as a response to that kind of thread is just basically, creating more virtual storefronts on top of like d2c companies or getting into other non-food categories that can be sold from kind of any kind of Warehouse that may not be a two hour. [49:51] Fulfillment time it might be a two-day fulfillment on them that will eventually work its way to same day, that's kind of the high level there it's a lot of other Grocers you know so-and-so cards I think offering MFC micro fulfillment centers are automated, and usually attached to a retail store because you kind of automate the bulk of items you know picking through this system and then you're picking the rest of the store and that has its own set of challenges we can speak that's a very long debate, but you know. Yeah they're not going to centralize that process it's going to be done on a per grocer basis in they're going to offer that in the same kind of fashion I think is they're going to offer that Enterprise white label solution because once you hit, I don't call it three four thousand orders is when you have to start looking at okay I need to move to a dark store I need to do a manual pick in a dark store that's. Attached to my store because you don't want, no customer wants to go in and see all these Shoppers coming in and ruining the experience rights and the Grocer's know that every order that gets fulfilled from like inside the stores. When you're doing this is just going to be lost Revenue so. They definitely want to to not Outsource it but like move it outside of the store because when you start messing with the store your cannibalizing those sales so. Jason: [51:14] That's the equivalent of Scott's experience of standing in line behind the 12 Uber delivery driver. Scot & Matt: [51:19] Exactly and that's that's just like that's kind of the moment where like going back to like why I got into the space when you have those moments where you see like the majority of people here are not actually consuming this food right it's like, then you're like holy crap we've entered in some other weird phase of the future. Jason: [51:36] Yeah I remember I distinctly remember going to pick up a fast food order during a pandemic and I like popped into this restaurant and they have reconfigured the whole dining area to be pick up tables for the eight different food delivery companies. Scot & Matt: [51:50] Yes that's every every restaurant out here is done that and put like little printed signs like this is the door – table this is the GrubHub table. Jason: [51:59] Part of me was like you know what I really want to do is stand outside this window and just like see who's winning cuz you could you could physically watch it. Scot & Matt: [52:07] I should steal that from you yeah I actually walk in with a. Jason: [52:10] What you'll actually do the work I won't so feel free to Steve. Scot & Matt: [52:12] I put on a door – masked because like it just happens to be handy and I was and I got one for free and everyone thinks that like I'm waiting for a door – or so I get to like cut in line it's kind of fun. Jason: [52:25] I like it you mentioned mfcs a couple time in a lot of our listeners will be super familiar with that but just. To take half a step backwards and then I promise to ask a question so grocery delivery is awesome, Walmart and Kroger love selling selling digital grocery better than they love losing the order to Amazon, but the one Inconvenient Truth is that most of those digital grocery orders right now are wildly unprofitable right because. And that old grocery model the customer pays all the way over to pick the product and they pay the labor to drive at home and in the Digital model of customer expects Walmart to pay to pick the product and drive it home. Which is not very favorable so, the the working hypothesis is man you know customers are pretty happy picking up the groceries outside our curb and that saves us the delivery cost, and if we can eventually get robots to pick the order instead of humans which is a micro fulfillment center or a MFC we can cut 90% of the picking cost, so it does seem like that's a big Trend right now are grocery stores by expanding their pilots of these mfcs and investing a lot more in there, their curbside pickup experience. [53:49] Is that the model that you see winning and and to be honest like I'm optimistic that that could potentially be profitable there's other smart people my friends who charita. Is pretty adamant that even with those two Evolutions that digital grocery still doesn't have have workable unit economics. Scot & Matt: [54:09] I think her skepticism is definitely warranted and you know I actually you know was biased in favor of mfcs and I started digging in the last few weeks, into the shuttle MFC technology and as well as the CFC technology that okada's used and. You know I can say that a lot of these early entrance into the market who are doing the shuttle technology and that's like the takeoffs and. Alert innovation. [54:39] You know I think that was like the 1.0 test and I you know Albertsons did say they're going to do like nine of those they'll have nine up and running this year so they are doubling down, but what I did see was like damn attic which has a shuttle product product and is also seen it being used at Amazon Fresh. They're actually recommending autostore for most of their Grocers and auto store, you know the best deployment I think that we can see in the US as a philly Philly deployment It's actually an e-commerce fulfillment center. It's going to sit outside of the city that will do next day and same-day delivery, I think we'll be pretty profitable and I think some of these shuttle ones are the jury's out on whether or not they can actually fulfill the demand fast enough and that they can actually be. You know they can actually have those payback's I think auto stores targeting about a four year payback for Grocers so there's obviously so many variables and so many different things you have real estate costs labor costs you have, Geographic density you know it doesn't make sense to. [55:50] You know plop a huge monolithic C FC which has you know very low per unit picking costs and in a neighborhood like in a town like Cincinnati where there's only three hundred thousand people. Or you know and if you're if you had six million people you know then that kind of works and that's why ocado kind of really works well in the UK, I'm skeptical what that's going to look like with Kroger in the US and so. [56:21] Yeah the short answer is like there's no I think one-size-fits-all deployment because every situation is different, but the hope is that over time you know you can get more and more stuff in the Automation and out of the store and what's happening with some of these early 1.0 players from what I'm hearing is that they thought that they would put. You know 80% of the most popular ordered most popular ordered skus in the Automation and the other 20% wouldn't you know the deli meats and the dairy and all the stuff that is more it's maybe fast-moving or perishable. They keep it in the store it's actually proving out to be more something like 50/50 and at that point it's kind of a mess and you might not be paying that off for a long time so. I think we're going to see autostore emerge as the as the dominant provider here and, and yes it's an NFC technology but it can also be done kind of as an EFC kind of detached it's not as big and monolithic as a 300,000 square foot Kroger facility with a kado it's about a hundred twenty thousand square feet. And it's all about you know can you do same-day pickup same day some same day delivery if you get it in quick enough in the morning or at the night before do next day so. That's what I'm saying. [57:46] Recall were running up against time so you know it wouldn't be a Jason Scott show if we got to sneak a little bit of Amazon talking here so what do you think about all Amazon's good, a bunch of initiatives going on you know we've heard go puff is I think Jason calls him a top off kind of the thing you know they're evidently spinning up to compete with them they obviously on Whole Foods and are doing a tons of things there what do you think about the the sphere of things Amazon is doing and what has the most is most interesting to you or is most likely to be successful. [58:22] So the one thing that I have on Earth over the last month or so was the, kind of center aisle kind of goods your non-perishables being delivered same day from Amazon they actually announced this I think right we're literally like a week before the pandemic hit. That they were starting this in a few cities. And you know then covid happened demand goes through the roof and then they got to kind of just like put that aside but what I'm saying is they have this new kind of fulfillment center that's. Call it 45 miles outside the customer and. [59:01] They are stocking that with about a hundred thousand of the most of the fastest moving skus that are not fresh, and they're building about 2 million square feet square feet per major Metro to do this so I'm actually trying to go down to San Diego and. Do an Amazon order for that and I'll report back you should check it out why just ordered we need you to sneak in there. Well yeah I'm gonna do a delivery that's what I'm saying like I'm Sino Flex driver so get a little lost looking for the bathroom but they they co-locate they're starting to co-locate these next to their larger Suffocation centers, so they're kind of piggybacking on their existing infrastructure. At the same time they're you know they're going to do they're dipping their toe into grocery into fresh I think we're tracking about 36 some odd. Fresh stores open sometime this year. And then obviously they have 500 Whole Food stores that they could take some of those learnings and and apply their I'm not sure how that's going to be leveraged in the entire ecosystem you know there's. Obviously there's so much there's so many products with Amazon whether it's like they had prime now they just finally announced that they were like going to merge that into. [1:00:21] Poor Amazon or fresh I'm not sure and then, you know with Whole Foods they had 365 Whole Foods and now that is getting Consolidated into just Whole Foods so I think you're going to see them move around these different chest pieces and figure out what to do with all their assets, I think like at a higher level what you what this is all leaning towards is this on the grocery front it's you know. Free one-hour delivery from one of these Whole Foods or fresh stores or maybe even a dark fulfillment center. For Prime members and then like for cpg buyers going back to this whole disintermediation thing like a Consolidated by where some brand is able to purchase shelf space and digital. [1:01:05] Placement on the website and building that flywheel between online and offline and then on the go pop stuff that's like maybe. Less perishable they're going to just they're going to they realize that they you know I think. Kind of gave some of that to Walmart and Target to those stores that really want on the kind of same day so now this new infrastructure that they're building out. Yeah I like I mentioned two million square feet is crazy / Metro is going to kind of I think attack that pretty hard. So that's what I'm saying it's two million square feet in Amazon's a small test. One other thing I should mention is that they're also becoming their own distributor so once once these stores become get a certain volume it doesn't make sense to use like Spartan ashore. Unify so they're gonna they've also confirmed in three markets LOL Orlando Maryland that they've also become their own distributor to those stores unlocks more margin. [1:02:08] Allows you know and obviously with all this there their delivery costs are the lowest in the business is estimate there about 50 cents per bag. Call it may be four bucks in order average order values on these things are typically a hundred a hundred thirty bucks. You know a lot of these you know it's the card charges 10% these micro fulfillment guys net like not even including. [1:02:34] Not including the last mile delivery it's still like north of ten percent so instacart is still a really good bet for a lot of retailers because the a lot of this technology that, it was really hot and that they sold that narrative you know isn't panning out to be as cost effective. You know like your friend at Forest or mentioned so that's that's where we are right now. Can't wait to see what happens towards the end of the year as things kind of normalize and more of these these mfcs get deployed and Amazon start to kind of unveil more of these things because I'm seeing San Diego coming up. So we should see more markets get that same day of the hundred thousand skis. Jason: [1:03:18] Side note Scott will be super excited when they when Amazon starts Outsourcing its distribution its grocery distribution capability to its competitors to write. You could you could tell imagine that, we're past out of time but I want to leave you with one lightning question of course in addition to Whole Foods and all this delivery Amazon has obviously watched their own more mainstream grocery format Amazon Fresh, I think you and I have known about this for a while but like it's there's a new cycle right now where everyone is reporting that the next Amazon Fresh store in Seattle, has just walk out technology instead of the – cart do you have a guest 2 years from now like has does Amazon Fresh scale are there two thousand of them are there, none of them are there 10,000 of them one of them what do you. Scot & Matt: [1:04:08] That's a good question I think yeah we're just at the tip of the spear here and I think it's going to be a mix of dark and you know experiential infrastructure. And you know right now that's kind of one in the same I'm going to be curious to see where all these you know we're all this demand gets fulfilled from, but I think you know Amazon's super efficient with their inventory and, you know compared to a lot of other grocers that don't know what's in their store I'm pretty confident that Amazon knows exactly what's inside it at least it's fresh stores you know and maybe they're getting the fill Whole Foods on to that Tech. So you know I think you can unlock a lot with just pure manual picks you know software from the inside the store that gets you to a certain amount of capacity and so the question is how do you keep, going that you Fortress with more retail stores do you build dark infrastructure, I think they're just kind of moving forging like Full Speed Ahead and and I think. It may not be a ton of retail but there's going to be some kind of warehousing that's going to have to be built to support this demand. [1:05:17] And you know I think it's dipping now I think a lot of Grocers are reporting like dipping their online sales as we've seen this massive surgery or talking about with restaurants and this pent-up demand that's down you know maybe. You know somewhere between five to ten percent of its highs so. Well we get to twenty percent penetration over the next you know five three four five years. Maybe I don't know like you know it's hard to say exactly but I think Amazon is is very well positioned and they're and they're doing in a. As close to profitably as anyone could possibly do it so. Jason: [1:05:59] Yeah that it's actually a great Point there's a huge amount of loss in traditional grocery in just out of stock so you know, total five product benefit of rolling out that the just walk out technology to grocery is to have a much better more accurate handle on it. Scot & Matt: [1:06:17] I would just and even think about that but yeah they're doing a lot of that would like see stores and other kind of non-food retail retail as well that could be. Jason: [1:06:25] You know the bane of instant cards you know existence is they don't have accurate inventory from there. My Sellers and obviously that's you know we suddenly have all this right crappy for substitution if you know exactly how many bananas you have you know things things that customer experience can be very different. Scot & Matt: [1:06:45] Yeah I yeah totally I think well it's a guard has to use a I beat to make basically make up for that, waste is a huge thing and if you can solve that problem you boost the margins significantly and then you know you could make you could maybe break even on delivery, so that's going to be that's another huge salute you know challenge for these Grocers and some of these automation players are selling Solutions in that in that kind of category as well. Jason: [1:07:14] Yeah it's definitely going to be an interesting year in the food space and meant we could we could dive into this for another hour but, it is happen again we use more than our allotted time so for sure if listeners have questions or comments about the show feel free to hit us up on Twitter or Facebook page, as always if this is the show that's going to help you jump to that next ring in your career maybe you could do us a favor of jumping on iTunes and finally giving us that five-star review You've been teasing us with. Scot & Matt: [1:07:43] Matt really appreciate you coming on the show if folks want to find you online where where's the best place to find you yeah thanks so much for having us it's always great chatting with you guys, it's hungry dot TV hngry that's hungry with no u dot TV, and as a free Weekly Newsletter as well as you know paid subscription so thank you Jason for your support but yet definitely get on the dot the weekly digest and you can see kind of what's going on, every weekend hungry lands. Jason: [1:08:15] That is awesome the the newsletter is well worth the subscription although I'm pretty sure Matt lost money on mine because the mighty publicist, accounting department trying to sign up for

    EP266 - Minoan CEO Marc Hostovsky on Native Retail

    Play Episode Listen Later Jun 11, 2021 55:15

    EP266 - Minoan CEO Marc Hostovsky on Native Retail  Marc Hostovsky, CEO of Monoan an innovative “Native Retail” concept. Monoan makes it easy for consumers to natively purchase products that they have tried and loved during hospitality experiences. Such as buying the bedding used in a boutique hotel room you are staying at. Marc founded Monoan after previous commerce experiences at and Walmart. Marc can be reached at Episode 266 of the Jason & Scot show was recorded on Thursday June 11, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 266 being recorded on Thursday June 10th 2021 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 Scot show listeners here at the Jason and Scot show headquarters we are always on the lookout for exciting new startups that are innovating around some of our favorite topics of e-commerce payments. Drones AV are all that good stuff one of our favorite Trends is Brands going Direct one startup with a very Innovative approach on this trend is called minoan and we are very excited to have the founder and CEO mark hostovsky on the show Marc welcome to the show. Marc: [1:17] Thanks great to be here it's nice to hear I've heard the intro many times as a listener so cool to hear it as a guest now. Jason: [1:25] We are honored to have you as a guest and Mark this is not your first rodeo in Commerce so do you want to tell our guests are our listeners a little bit about your e-commerce background and how you. You came to start at the company. Marc: [1:44] Yeah sure so I was an early employee at Yeah I met basically Scott Hilton and some of the early team at an at a lip Uncle tedium I never know how to say it but the sandwich shop in New York City when I was working actually at a. Research firm yeah and got sold on sort of the mission of. Fixing the economics of e-commerce you know specifically like. Looking at how Amazon had built this entire infrastructure Optimizer I'm getting you one package as quickly as possible which is very consumer friendly but economically challenging, and so creating this new e-commerce model where you can incentivize. [2:38] Yeah customers basically to take actions that improve the economics of the order like bundling more items together different for slower shipping and basically after listening to Scott and team talk about jet for like. 30 40 minutes I went back to my old job at the time and was like how could I possibly you know keep selling keep this job of selling research I know there's this awesome company, really shaking things up and yeah join the company pre-launch was there. For the growth from zero to a billion dollar annualized run rate, ten months got to work really closely with Mark lies on greater leading there and then yeah through the Walmart acquisition took over a pretty large p&l in hard lines which is sort of where. My interest in this concept of native retail came about. Scot: [3:34] Brickell and then. I'm always excited to you know when folks go from kind of having a job to starting a business was this something you always want to do to take the entrepreneurial plunge or did you just kind of say I've got this killer idea and I can't not do it or what led you to entrepreneurship. Marc: [3:54] Yeah I've always wanted to start something I'm a big student of Entrepreneurship and I love reading Memoirs of entrepreneurs I did. Before my now and I did start a company called tail your which was, pretty much a virtual tailoring which is my first run-in with the entrepreneurial Buzz I think in this case, like it was always on saying she was like one day I will start a company I didn't necessarily plan on doing it on a certain timeline but. It was sort of combination of just being I was just consumed by this idea of like I was really frustrated. In trying to create really strong product experiences for our customers and so I'd say it was sort of a combination of like I've always been interested always wanted to be an entrepreneur but also had one of these problems that was like. You know as I would think about it for I go to bed and then. Like an hour or two later I'm still thinking about it and putting those in my phone and so I was like you know what I'm just gonna like go after this and do some research and see if this this you know what eventually became a known could be a real business. Scot: [5:03] Yeah and what's the good let's take one step back on jet tell us a little bit more about what you did there where you on marketplaces have a couple sides there's kind of working with suppliers or Brands to bring kind of product into the marketplace and then there's the demand inside which which which pieces did you work on while you were there. Marc: [5:24] That's funny because I did probably three different things in a very short amount of time just because we were growing. The pace of growth was just it was unlike anything I had seen and probably will ever, see you again so when we started I was in more sales role so I was pitching retailers to, come on to the platform like the Vitamin Shoppe Sports Authorities tncs towards the russes of the world then. Beige. Jason: [5:59] Side note every company you just mentioned is no longer in business. Marc: [6:02] Yeah I almost said a little alrighty for work for they're either not in business or no longer business or not doing well which is good because you always want to sell the someone who's doing really really well or really really poorly it's the people in the middle we don't really have like an impetus to take action, basically we were pitching them on like a new model of e-commerce where. You know it on Amazon your competitiveness is solely dictated by the prices you said and so. [6:32] That's tough for these larger you know it's tougher for these larger companies to compete with, like smaller sellers who could drop price we're getting stuff that's Overstock Etc and so we were sort of pitching this, model where it's like hey it on jet yeah of course price is important but also how your inventory is commingled to reduce Le chipping gives you an advantage or infrastructure how many distribution centers you have if you're closer to more customers and it's, less costly to ship to them that gives you an advantage if you're not competing on price alone which is really compelling for these retailers who are getting crushed on you know they weren't able to being priced competitively, in anyway so we pitched we brought on a lot of retailers and then Scott Hilton. [7:21] The chief Revenue officer also has like okay now that we have all these retailers on board we actually need people to manage, manage them and manage categories and so the category development team which was going on to this Biz development. Most of that team then transition to category management sand so I took over the pnl basically for sporting goods. Arts crafts and music which is why I went near him Jason Retreat talked about anything, all right before the podcast and I was also managing our third-party integration Partnerships and so Channel advisor Commerce of that's that's sort of how I actually got to know you Scott and going to a catalyst and seeing you speak. [8:03] And then after the jet acquisition took over. A much larger PL at Walmart hardlines category is about a 400 million-dollar business which was huge for me for Walmart that's peanuts surprisingly I mean the scale of Walmart is something that I think. A lot of you in retail people understand that people who are less familiar with retail just like a market caps don't understand like quite how much money flows through. Jason: [8:30] It's crazy that 400 million a year is like a starter merchants. Marc: [8:34] Yeah I mean it was like it was peanuts to them they did you over 500 billion a year so yeah so that that was sort of my journey from jet into Walmart. Scot: [8:46] Cool can you tell us a fun Market Lori story that's appropriate for a family listeners. Marc: [8:52] Yeah yeah yeah I can't I mean he is. Relentlessly I think he has a couple superpowers one of them is just Relentless optimism. It was crazy how fast we were moving how quickly we were changing things and. He's just like rock-solid all the time he's constantly problem solving and so and the other that super power he has I think is just obsessive thought like he really, sits and thinks about and stews on ideas for a long long long long long long long long time and so the things that he's doing incredibly well, thought out and that was sort of My overall impression of him was impressive I think there I don't know if there are any like fun. Stories specifically like they're certainly crazy moments at jet-like on launch tonight, where we had some technical issues and we had like we like 60 70 person team staying in the office till 4:00 in the morning to manually, route orders just so you could get all the customer all the orders out and keeping customers happy. I'm trying to think yeah I don't know if there are any specific like crazy Mark lawyers towards that. Scot: [10:17] Well I'll say a couple of new can verify if they're true or not so I heard that he's like one of his slogans was the company would either be billions or body bags at. Marc: [10:25] Billions are body bags yeah yeah that was our sort of rallying. Scot: [10:26] Yeah okay all right. Marc: [10:29] Cry. Scot: [10:30] Yeah I told some people in there like horrified by that they were like that's terrible it was like well it's kind of kind of true. Marc: [10:36] Yeah it's just it's real he's like this model only we are in a scale game e-commerce is a scale game and and there's big rewards these the billions. You figure it out and if you can't get the scale usually use very clear about that like if we can't get the scale the economics don't work and so you know those are the body bags maybe a little bit more of it but it got the point across in a way it was exciting for us yeah it's like a good way to get the team. Excited and motivated to make sure that it was the billions and up body bags. Scot: [11:06] Yeah it's a been reading a lot about persuasion and anything that can have a visual whenever I hear that I kind of have the visual of a fork in the road and like a rainbow and a pot of gold on one side and a body bag on the it's like it's like a it's like really it's like for some reason that phrase has like a very visual kind of thing that kind of comes to me when people said and then let's see what was another one oh there was like this kind of extreme transparency in the company where everyone could see whatever was making and it was kind of a huge distraction for a while and I guess they either got through that or they turned it off is that were you there for that part. Marc: [11:40] Yeah yeah so that was yeah I mean that so I actually really appreciated that and something I'm bringing some Minoans so there's and this isn't you know Ray dalio thoughts about this a lot as well and principles but trust transparency and fairness were the three values and so, there are a few ways that they put in that in the practice one is that comp was fully transparent even down to like equity, Grant like dollar Equity Grant so you could understand if you understood someone's level you knew exactly how much they made and the dollar value. Of the equity that they received when they joined and so that that started a little bit after I got there like that complete transparency but when I but even when I joined you know the. Salaries were fixed and there's like no negotiation I was like listen this is the price this is the salary for this level you get promoted at this level there's no bands. And the other thing that's great is he would go and have his. Board meetings or investor presentations and then he would come right back and present you know the entire board meeting maybe there's some things that. Were removed but you'd present that entire board meeting deck to the entire team which is cool because, um you really felt like you had ownership of the business like it's like okay I understand like how he's presenting this to and for an aspiring entrepreneur like myself I mean I loved it this was like. [13:05] It was like getting paid to get an MBA you know seeing how he thought about the business how he pitched investors how we thought about strategy and and so it worked I mean yeah I think there were probably circumstances where. [13:19] The transparency might have irked some you know like people. Who didn't want people knowing how much they made stuff like that for the most part we were all on board with it now and we now and when it became Walmart that was you know then it's a little bit of a different story so that. Dissipate a little bit. Scot: [13:40] Walmart make you put up the signs they have and all their meeting rooms where it's like you know return all the pencils to the do the office supply room and only sharpen it if you're down to the nub. Marc: [13:53] Yeah pretty much there is like. Scot: [13:55] About a culture Clash. Marc: [13:57] Yeah that was interesting I mean there were as some did the biggest change for me was around samples just because when you're a jet it's like. [14:06] It's really easy to be an e-commerce Merchant and never actually touch or use the products that you're selling, and not really know like how the customer is experiencing them and so one thing that's important to us was like well let's get a sample that see like okay this is our best in trouble like how is it because it is it good like you know it's best-selling but, how does it hold up and it at Walmart. And then the samples we would just like you know people would like take them home basically and Walmart there's a very strict like no samples policy or or getting samples but you had to you know people can like take them home because there's really more tight like a bribery. Policy which made sense because if you look at the history of. I mean Walmart was in like the 80s and 90s and these are all like I don't know if this is folklore true but there are stories of right buyers being offered, Ferraris to work with specific suppliers or vendors and for that supplier or vendor it is very much worth the money to give them fire a Ferrari if it gets you into stores do they're just moving so much volume and so they started cracking down on like bribery and and not even just bribery Billy gift so when we would go and meet with vendors. If you like we would meet with some of our larger Fitness vendors and they would have a spread or like a bottle of water. [15:28] And you'd have to if you took a bottle of water you're supposed to leave some cash behind which we would do but that was like so surprising to me was like but it makes sense like it's you know it that was the big difference between a small, company and a big company with. It's been around for a longer time and even more rules and I weigh more so it's not necessarily that like I I understood why these rules are in place but for me it was yeah I was definitely a bit of a culture Clash that's for sure. Jason: [16:02] Yeah and In fairness to some of the big companies most of those rules are in place because of bad prior incident. Marc: [16:10] Right yeah. Jason: [16:10] And in the case of Walmart there there were execs like in jail in Brazil around corruption right and so. Marc: [16:17] Okay. Jason: [16:18] So they were you know somewhat / you know there's a lot of protecting people from themselves and those rules. Marc: [16:25] Yeah yeah yeah makes sense I mean when you there in a powerful position and it's easy to be tempted so just like put the rules in place that. Jason: [16:33] It's funny that I've been calling on Walmart for probably 30 years and I distinctly remember like the first time going to a meeting in Bentonville, sitting down and and the merchants like hey can I offer you a bottle of water and I'm like oh sure that be great and he pops it down he's like that'll be 35 cents. Because there's no there's no gratuities going in either direction. Marc: [16:56] Yeah yeah it's strictly business and those rooms are clearly strictly business. Jason: [17:01] Oh my God yeah back in the it's updated a little bit but back in those days they were literally like saw horses and plywood tables and like the walls were grid wall. So that you know people could come in and hang their products. And it was super annoying because I would come in I would always have to rent a screen like a and I don't mean like a video screen in those days I mean like a like a projector screen. And swept it in because Walmart didn't have one and I'm like they're they're trying to send the message that they're cheap but they're actually causing me to spend $200 every single time I got. Marc: [17:40] Oh yeah we had we had one of our large Fitness vendors went while I was there and in Bentonville. We didn't have room they wanted to come and bring a bunch of products and demo them and you're like there's not room like we don't have room for all this and so they rented a. Like an RV basically you're like a huge trailer and put a bunch of them in the back and we went outside and they had this like. Thing that they had toad over that at all there. Products in them it was like wow you guys that was the exact response that sort of the head of hard lines that was like you spent all this money just to show us these products when you know we were pushing for lower cost so. That's interesting like the yeah you gotta do it you gotta do it again. Jason: [18:31] For sure but listen enough about Walmart let's pivot to minoan what is the elevator pitch. Marker 02 Marc: [18:37] Minoan is essentially a platform for Native retail. And Native retail is about using products in the way that they were designed to be used, and so for a hairdryer you know in Native retail you're using that hair dryer when your. When your hair is wet you know you're coming as shower when your hair is wet you're using that hair dryer to dry and style your hair which is what the, you know the product managers and engineers and designers who are creating that product they were designing it to be really really good at exactly that, as opposed to e-commerce where when you're interacting with a product it is, you know abstractly represented on the screen and actually I'm currently sitting in a warehouse somewhere and then when you're interacting with those products and stores. Oftentimes they're deconstructed placed in display cases crammed on shelves that are optimized on dollar per square foot you know not necessarily on, creating really strong product consumer interactions. Yeah and so native retails about like getting people to actually use the products and the way they were designed to be used and then if they really really like them making it easy for them to buy through like a frictionless add to cart and checkout process. Jason: [19:58] Nice so I love the concept and I do want to drill down a bit more but maybe just to make it really concrete for listeners let's talk about like typical customer experience so the one I've read about is in hotel rooms. Marc: [20:12] Yes or foothold right now is related to Teague hospitality and so, we work with a lot of boutique hotels to make their experience or like short-term rentals to make their experiences shoppable to guess so, example would be like you know if your staying at an Airbnb, and you're sleeping on the mattress and hands the best night's sleep ever gotten what is this thing instead of ripping off the sheets and trying to find the tag you know in Manoa and you can understand what what the mattress is or what the hair dryer is that you're using or the speaker system, but they have offered or the fitness equipment or the appliances the artwork you know the soaps shampoos like any of the products that you're going to be interacting with during your stay. That already yours you know for the weekend we tell you a little bit more about them through this digital narrative which is basically like a. Tailored e-commerce site specifically for the guests and tailored to their environment, we're if they really like something they can buy it and it'll be waiting for them at the time they get home. Jason: [21:17] That's awesome I'm a big fan of that customer experience. On a small scale I spent a big chunk of the early part of my career at Best Buy and Target and for for a while my whole role was, what I called taking products out of product jail like we had all these products that like we literally locked in a, like a display case like a glass case or in Best Buy's case of steel cage and this is not going to be shocking it's painfully obvious in hindsight but like you take the digital camera out of the steel cage and you let customers touch it in the store and you sell dramatically more of them. Marc: [21:57] Yeah I mean that's like it when some one of our investors in advisor Joy. [22:01] She's one of the world's foremost experts in like haptics and proprioception and consumer retail just basically like touch, I'm and so she's proven over and over again that first of all individuals have sort of like a need for touch, like scale and so there are a lot of consumers that have a very high they call it n f t so this is for n FTS meant none fungible tokens and ft men need for touch, and there's a ton of research that she's done that shows that yeah when you get products in people's hands like willingness to pay goes up and version goes up recall those up like it just memory of that brand and of that product, increases dramatically. [22:41] And then there's also stories of like even in Toys R Us I spoke to someone who's a merchant Toys R Us years ago in the earlier days I mean if we're still in the early days but really in like the ideation phase of the knowing. And she would say that a lot of Toys R Us stores had this sort of like playbox or like sandbox area where people could use toys and whatever products they put in that environment we're like their best sellers. And there's a lot there's a lot of like anecdotal pieces of see people saying the same thing like John Foley the founder Peloton I went to go see his how I built this which was done live in New York City. And Gyros is asking him you know why do you keep investing in stores like why you keep opening more and more stores it seems like you could do pretty well without the stores in that you know most companies going in the opposite direction they're messing my stores. [23:34] And he said because I'm telling you when I could get someone on this bike handling listening to the music in the moment it was 50/50. 50/50 on whether or not they're going to spend 2,800 bucks right then and there and bring this thing home and so this you know what the idea of. [23:55] Native retail or I mean car rental like renting a car and using it is native we're not necessarily inventing, category I think what we're trying to do is build a platform to make it a little more frictionless and bring it to life in more use cases like. I really just believe that the best. Product experiences don't happen on shelves and they don't happen on screens they happen in the wild and so creating a platform where spaces that are creating these, meaningful product experiences can more easily integrate retail and monetize it, I'm and then making it easier for Brands to access these spaces at scale create meaningful customer moments create a little bit of one on time one-on-one time with between you know gas in these properties and their products or there's no salesperson over your shoulder there's no. Yeah just you and the product and so that's what we're very passionate about. Jason: [24:52] No I love it and I get the risk of getting slightly psychology geeky there's this psychological principle called the endowment effect in. Marc: [25:01] Oh yeah we can geek out if you want I've done a ton of and. We can go there because that's a huge that's actually a huge tenant of how we design our experiences with with guests and so would you do we do we go down that. Rabbit hole. Jason: [25:17] Work at a super high level that the principal is I hand you. Like the the actual psychology experiment started out with like coffee mugs but I got hands you any object that that digital camera I'm trying to sell you in Target or that that bespoke coffee maker in the the boutique hotel that you're selling and merely by the fact that you receive that product or even if I can just make you imagine I handed it to you by the way as soon as you imagine owning it. It's more valuable to you and the decision you now have to make is am I going to give this back or am I going to keep it right and giving something back as loss and so then this like powerful psychological trigger of Wasa version kicks in, and so it's there so much of selling is about getting someone to physically viscerally imagine that they own that product and then you've kind of. You've gotten them over the hump. Marc: [26:21] Yeah exactly it's really like a tenant of basically psychological ownership which is. Feeling of ants possessiveness the feeling that something is yours which you know psychological ownership proceeded legal ownership like the reason we have legal ownership is because humans naturally are possessive and. [26:43] I'm also an evolution geek or anything about just like looking at like humans over time but we were naturally possessive and so we had it we had to create rules so that people wouldn't like, you know hurt each other over land or over these things and, and psychological ownership can be really powerful mean there's a lot of research that shows its psychological ownership is more powerful than legal ownership and that comes to their done a ton of research around that in like Equity at startups and it's like, the feeling that someone owns or is a big part of a company, typically this correlated with like higher performance or higher success then just legal ownership you know just giving someone, ownership in the company and you can use legal ownership as a tool to accelerate psychological ownership like you give someone legal ownership then you can more easily get them to feel like a psychological owner but ya know in our context like hospitality is actually a perfect environment for sales to occur because psychological ownership, has three antecedents so in order for psychological ownership to occur they're sort of three things that. [27:55] If you can do those things you can do one of the three even like you're more likely to create this you know feeling of the endowment effect and people really wanting to hold on to something, one is the ability to control they use the term Target so when is the ability to control a Target and so. [28:14] That would be like if you do like a desk chair example, being able to like move it around or set it to your settings you know get it in the right lean the right height like controlling it manipulating it to your liking, the second one is intimate knowledge of a product so, really understanding like it's particular settings being comfortable using it understanding its features and then the third one is investment of the self and so spending either money or time on something, is a third one so if you can do those three things if you can have someone sort of manipulate or control a Target if you can have someone gain intimate knowledge about a Target you can get someone to invest here time or money into a Target, you have this really powerful effective psychological ownership and then willingness to pay goes up recall goes up conversion goes up and this is the stuff that you learn pack has really studied in retail and so in our environments, and we see this incoming we have some spaces that in the first quarter we can bring it 25% like one every four people going to one property in particular in my mind I'm thinking of we're buying something. [29:28] And so when it's done well it can be really really, powerful and interesting and the psychology part of it is something that that's what I'm most excited about incorporating sort of into these guest experiences, I'm and we're still in the very very early did you know we have a lot more optimization to do on that. Jason: [29:50] That's 25 percent conversion that's like getting up into the like get spiffy territory that's crazy talk. The the other half of your model that's I think is also super interesting as I talk a lot these days about the unbundling of the shopping experience and and by that what I mean is. In the olden days like all the phases of buying something out of necessity and convenience had to be bundled together so you you'd go to a store, and that's where you discovered products that you then you did your consideration in the aisle then you did your purchase and the store fulfilled those goods for you, but one of the things that digital and Technology have enabled is kind of the unbundling of that right and so today, you're you're way more likely to discover a product you you have to have on Tik Tok then you are in a shelf right and, you're likely to do your consideration like you know while reading Rings or reviews on Amazon and then you do your fulfillment for curbside pickup or whatever the case is and so to me. The you know it feels like you're you're leaning into that that. Um endowment effect but you're also kind of leaning into the unbundling that you're you're creating awareness and consideration like at the point of views instead of like forcing someone to go to a shopping destination to do it. Marc: [31:13] Yeah not exactly I mean it's. E-commerce has its I mean I'm on an e-commerce podcast it's like I. [31:23] There's so many things that I love about e-commerce but the more time I spent in it I just got really frustrated and, it's impossible the reality is there's just a lot of wiring that goes into how we perceive our world around us and e-commerce can only ever really tap into, visual stimulus in visual representation of a product which to be honest like you can that can take you far and I buy, like you know 60 70 ton of stuff I buy I buy online, but they're also a lot of like gaps there there are lots of sort of gotchas and there's anyone who has shopped online has experienced this sort of mismatch of like you receive something that wasn't necessarily what, you thought it was or was as advertised and the reality is like it's just a hypothesis you know like it the if we're thinking about shopping and like sort of the rational linear way of like, identifying a problem doing your research making a purchase decision and experiencing it. [32:24] You know like when you identify the problem you see you then start to like Forge a hypothesis so it's like okay I need a new mattress that's a problem, my hypothesis is that Casper is going to be a really good mattress for me and I'm gonna sleep well on it that's the problem I'm trying to solve and then you do things to strengthen that high, hypothesis you can read reviews you can watch videos you can read about their hybrid technology but ultimately you don't really prove, that hypothesis is not concluded or proven conclusive. [32:58] It's in your house and you are sleeping on it you've slept on it for a couple nights in a row and they're just lots of times where the hypothesis can be. Incorrect despite the amount of information that you can get about products online and I think you have for me it's that the. It's like foolproof you know like you're using it the way that you would use it in your home so if you like it buy it, if you don't like it yeah no problem this one of our back like go on and and go discover other cool products that you might like. I don't even know if I I kind of think I took your answer and went on to my own like random tangent which I can do sometimes because I'm from Boston but hopefully hopefully it you get what I'm saying. Scot: [33:46] The founder thing you're passionate. Marc: [33:48] Yeah the founder thing or just an eccentric thing. Scot: [33:52] Let's talk to the customer experience so I go to an errand I'm a go to Airbnb or maybe a you know a resort or something and I walk in and you know is there a wall of QR codes is there a locked box, that I slide my credit card into how how does this work what's the what's the user experience. Marc: [34:16] Yeah so any space that we work with contractually agrees to come marketing and so we think about that in digital touch points and physical touch points and so the guest experience are basically. In most cases, when you get your booking confirmation email or in your email that is like leading up to your stay and maybe a day or two before your stay. [34:40] There will be a little you know notice in that email that says Haley put a tremendous amount of thought into curating each and every product amenity space, if you want a sneak peek of what's waiting for you click here and so that'll take you to this digital basically hentai shop will experience that we built for that property with images of the property, each room in the property has its own like page basically with the product each brand has its own brand page, so there's this this yeah it's experience that is meant to harmonize with the physical experience of being in that space, then when you arrive at the property yes they're usually or always is a physical touch point which is right now we're doing QR codes are also looking at there's some there's some other Technologies you can use to do, like physical to digital and sometimes that's like a notecard sometimes it's booklets, we're exploring like this is what's fun is sort of thinking about any Commerce you think about driving visits and you think about it, and you know from like channels primarily or different areas for us we think about visits is like okay what are like the moments during this guest experience we're someone could feel compelled to learn a little bit more about, the product and so. Yeah we're still thinking about where these physical touch points could occur but there will be QR codes on the property and then usually there's also inclusion in the posting you know where the language is a little more like, you know. [36:09] Yep found something you like or missing any element of the experience like you can you know bring it home with you and so that's how we're sort of integrating the shop ability into the guest experience. Scot: [36:21] So then I go in there and do you you know so you mentioned hair dryer Casper is there going to be like is revision that. You learn about Jason and then you set up a little podcast thing and he gets super excited because he's a microphone there or you learn about me and there's kind of a drone and a cool Star Wars thing or or is it mostly like in context stuff there's nothing kind of. That's been injected into the experience. Marc: [36:49] Yeah it's in context of so I do have this larger, vision and there are some hospitality companies that share this around actually being able to tailor specific products to the guests, before their stay so even like replacing the mattress to a mattress pad they want to try your bringing in things that you know they were like now that's very labor-intensive and so we're not even, I mean we don't do we're not doing anything like that now we're not focused on it right now it's just contextual Congress really so it's like you know, you need to go to sleep here are things that will help you sleep here's one more information about the Linens the pillows the wedding whatever it may be but certainly in the future I mean we're thinking about. We're thinking about ways you can tailor it to the specific user as well and then just figuring out operationally how you can do that in a way that's either in line with like with hotels, they are are already are doing things between yesterday's and like flipping rooms and cleaning rooms and so like you do things in a way they're just integrated into that and easy or finding, you know finding a way to just solve for sort of that operational challenge of changing. Scot: [37:59] Got it and then over so in my mind everything is a Marketplace that's my role here on the Jason Scott show so you've got the that's the by side and then the sell side you know I think one of the things you guys do that I teased at the top is your working directly with the Brand's to get them in there not not like a retailer right so it's not like there's a but Bath and Beyond is sitting in the middle of these things or Home Goods or a retailer your kind of the they've got retailer here the market maker the marketplace that's bringing these together it kind of reminds me we had on the show Zola which really kind of turned upside down the wedding registry bye-bye kind of bringing unique Brands Direct in there and it kind of you know. I think it's interesting because Brands seemed to really really be leaning into any direct experience so what have you what a do I have that right and then be are you finding brands or like super receptive to this or you have to like really convince them to do it. Marc: [38:56] I know you do definitely right now I have spent a lot of time learning from Folks at Zola and asking people their questions about Sir you know there's a lot of similarities and sort of how we. We are operating and its really we're just trying to help Brands increase their own audience like and that's what makes us different than. You know that's what we have in common with Zola and not in common with like an Amazon do I know you guys talked a lot about how guys like Amazon's goal is to increase, lifetime value with the customer and not have the brand increase lifetime value like they want you coming back to Amazon to buy things they don't want you buying something from. [39:39] Casper on Amazon and then going and replenishing your buying stuff and our model is different our models about Discovery and helping that brand acquire a customer and then build that lifetime value directly, with the customer and that's something that yes super attractive to Brands I mean it is tough it is, there's a book called some subprime attention crisis which I think is such a great term because it is it is tough, to get attention and out are right now if your direct consumer brand and there's more Brands and there than there have ever been you know the barriers to entry and creating a brand drop, precipitously it's like easier than ever to Source a manufacturer of season ever to build the website it's easier than ever to launch to do fulfillment and completely Outsource it and have it be reliable it's easier than ever to Target consumers and be very targeted, and so you have a ton of Brands and obviously a ton of money that's going to Facebook and Google but the attention. [40:44] It is challenging and so yeah brands are very interested in the idea of having someone in a space over the course of three or four days using their product specifically, for the job to be done you know using their mattress to sleep on using their cookware to actually prepare a meal using their speaker system to create a mood with music. And so our hit rate with Brands like our conversion rate Brands is very very high in terms of like sales it's like. High very high percentage of the brands that we talked to about the platform do end up joining. Jason: [41:21] Nice and what is the model are you buying goods from them and wholesaling them or are you an actual Marketplace that's kind of taking a take rate on on helping them sell their own Goods what what. Marc: [41:34] Yeah it's set up on a commission basis so basically we'll take a commission on any items sold and then a portion of that commission goes back to the property partner or space partner almost like an affiliate for, for creating the environment and driving the cell and then there's also you know there's marketing, these for like sharing the data around clicks conversion customer pathing collecting reviews stuff like that. Jason: [42:01] Got to monetize that first party data these days. Marc: [42:04] Yeah yeah. Scot: [42:07] And then, on the startup side you know the extent you're comfortable sharing any any metrics on how big you guys are and then that kind of ties into you know are you going to go to the Venture Capital route or you guys going to bootstrap this and where are you on that always exciting Journey. Marc: [42:25] Yeah yeah we I can't share any Revenue. Numbers because we are likely going to be kicking off I guess essentially goes we're probably going to be doing our we've raised an initial round of funding or Boolean arrays, another round in Q3 because basically we're. Waiting to hit a specific threshold to gets before we go out and raise with a number with a number in mind we are doing so the way that I've approached it is originally I was. Bootstrapping the business and I was like you know what I'm just going to like build Shopify stores for like all these properties and, have a centralized backend and like you know it's a pretty asset late model actually don't think I need to raise money and then the more I got into it the more we were building these things I realized that, Shopify is great and it's an it's a fantastic platform. [43:26] But there were some rigidity in like how that we couldn't really work around like I basically wanted like a thousand different front ends and one centralized, back ends to manage everything and Shopify is very very much built around like one front end, going back end and so we realized that we were going to need some technology built and so we went out and raised a precede which a no institutional money it was only angels and I mean really almost all entrepreneurs, as who we wanted to raise from, and so we did that we close that in January we've used that to invest in the technology and schedule a bit more and now we're at the point where, we're sort of seeing the true scale. And potential with the idea of native retail and like we've signed up over a hundred 20 brands in a very short amount of time you spend 30 property groups sometimes Property Group should huge you know like large hotels was like 35 hotels. In the Northeast we work with of on stay they have like 500 600 homes in the US the reading 50 homes every month they just raise a ton of money we work with mint house which is sort of. This new brand of apartment hotels where. [44:44] The hotel rooms basically have let you know that the living room full kitchen full bathroom to give the space of an apartment but, they manage it like a hotel yeah we just seen a ton of interest in the market so now now we're going to be sea route because like I don't you know we don't want to under capitalized the idea it's a really big vision, we basically want to be the everywhere store like we want to be powering shoppable experiences anywhere where someone's natively, using a product and when you take that really far out there like that does mean car rentals you know and, when you can like a natively use a card doesn't mean things like going to ski resorts when you're using, boots or gloves or skis fishing charters when you're using, rigging gear rods reels staged homes we've signed co-working spaces that were starting to launch with Ethan restaurants where we're making like the olive oil shoppable on the Ceramics and even getting into, selling wine we're starting to like test, which is you have to be really tricky with the sale of alcohol so some technical things were working through luckily one of the co-founders of drizzle he's actually investor vanilla and so we have some good, we have some good experience and people we can learn from but like we really want to be everywhere and just be the platform, that makes it easy to make a physical space shoppable easy to set up products easy to bring those products into your space and easy to facilitate Commerce. [46:13] And so that's like a really big vision and so in our next round that we're going to be going after like we are going to go to the Venture route. [46:23] Because we want to really get after I mean there's a big network of that here I like the more spaces you work with the more purchasing power you have more guests are getting in front of. Yeah and so. But you know I think it's got you of a lot more entrepreneurial experience than I do so that's sort of just the perspective that that we formed as we've been going through this, we can talk again in and a couple of years and I'll tell you whether or not that was the right decision. Scot: [46:52] Yeah the it's interesting I Mentor a lot of first-time entrepreneur Zu and I've had a lot of sessions and everyone always goes through this kind of similar Journey where I you know could never take more than five people to build this idea and then suddenly you're like we're I think everyone misses it is the go-to market you know so if we kind of think of your Tam just in the hospitality space, yeah I could see you could put a hundred sales people against this and not even make a huge dent in it um yeah so you know the go-to-market always is like where I think a lot of first-time folks have a bit of a blind spot unless they've been in a B2B sales company where it just is a big lift to go you know you have this funnel where your every day someone is going to talk to. 20 to 50 people and then they got a conversion rate and then you got a long Pipeline and you know. Marc: [47:43] For us it's more on the account management and customer success the hide like there's just so many prop and we want to manage this store as well like these stores need optimization like. It can really change the economics of the property right like so talking about that property we have this comparing it 25% it's like, again one of every guests and one every four guess is buying something there any Commission on that like that changes that totally changes the economics of operating their space, like you get the point where the commission's outweigh the are larger than the initial cost you invested in like furnishing. The environment so we spend a lot of time with property sort of thinking through their amenities thinking through brand Integrations what they should bring in and so it's really on that like sort of those are things that we don't want. To like make self-service or automated because we're learning a lot so it's really about eating of that team. On the business development side we've been very fortunate where we just get a lot of referrals like a lot of Our Brands aren't just in one hotel you know so if you work with like, ratio coffee make these beautiful coffee machines or work with them in one property and then they're like wait a minute can you think me shoppable and like these five other properties like we're also there, and so then we'll get a Shirley can you introduce us and so of course we need to staff up. The the PD side because it's a calm you know it's a solution it's it's not a commodity so you need like sales people sort of explain that but. [49:12] For us it's really kind of like getting I think account like customer success and people can manage all the properties in the retail it's occurring. Scot: [49:22] It's another common theme is the go-to-market surprises people and then you kind of get your head around the funnel then you realize it's not a funnel it's an hourglass in it's kind of like all right we did all this work to get all these properties on and then now know how do we get them from pilot to. And every room every room optimize around one every room Optimizer so there's like this there's always way more work than these things than any kind of anticipate when you you're just kind of thing. Marc: [49:49] Yeah you need both you need biddy to go out and service opportunities and then it's exactly like you're saying that you can close all these deals but if you know the infrastructure or the right processes to get people actually on board and, and set up and manage well then yeah that's good I wish maybe she'll shamelessly steal that hourglass analogy. Jason: [50:09] Yeah I imagine it's key to keep that hourglass like somewhat balanced to is the thing you don't want too much sand pouring in there until you have to the right size vessel to catch it. Marc: [50:22] Right yeah and that's what we've been doing and we're barely even doing we have a video person but she's like not reaching out to any new properties because we have her doing. Basically you like more the customer success, work right now and so it's like we're like yeah and we're growing we're going within the Network's of our existing you know we're launching more of on stay homes more mint as property stuff. Jason: [50:45] Sounds like you have some opportunity to expand through word-of-mouth from your existing partners. Marc: [50:51] Yeah and that's part of what I think in that transition going back to how this started like thinking you're going to bootstrap its anchor I don't think some money but only Angels you know one institutional money is nothing like okay now I understand why, institutional money exists it's like. Good to pour a little gasoline on something that's that's you know working where you understand how it scales and to just get like the people in the right roles to make sure that you can get there. Quickly. Jason: [51:18] Yeah it's nice though when you can raise the money when you've proven enough value that they know they're there they are just paying the poured gasoline on and not like. Prove the model app the so, kind of thinking forward it seems like you have a lot of runway in Hospitality it seems like obviously there's the, all the sort of in-room experiences but you know / the other examples like you're also renting a car and that on that vacation and you're doing some like fun activities and it seems like you can expand in all those areas is, your vision right now to kind of stay in Hospitality or like does this have a play in like. Wildly different use cases that were not even thinking about yet. Marc: [52:05] It has plays in a variety of use cases but it's it's can be very tempting. And to get distracted yeah like it be very tempting to like get into a bunch of new vertical so we were actually we were approached by like a sports complex that is huge sports complex and like Atlanta, that has a bunch of like basketball courts and like baseball fields and it's like a training complex. Where they wanted to put together programmer it's like we want people to be able to buy like basketballs they're using or try different baseball bats and then the one that baseball bat they like they can just order and so on, and then it I mean every category almost has a different application of native retail like Amazon. Just opened a salon which is. Jason: [52:57] I are actually booked to fly over to London and get our dues. Marc: [53:00] Oh I would love to I will have to tell have to check in with you after you do that but like that's native retail in a beauty environment right and so. Jason: [53:08] And I think that's why they did it like I I think it's an opportunity to get into that like professional beauty product line more so than they're trying to monetize the service of cutting hair. Marc: [53:20] Yeah yeah and so there's a ton of different, every category has its own of its own native retail use case we're focused on Hospitality I just believe on. I just believe in I think focusing is incredibly important and so it's like let's conquer one Hill and then move to the next cell and then get onto a bigger Hill and then get to the bigger mountain and then you know go from there and so the short-term is certainly, Hospitality but there's there's there's lots of applications. Jason: [53:52] Yeah I've read about that Focus I've never tried it myself but I've heard it's been successful for others. Marc: [53:58] Yeah me too that's fine. Jason: [54:01] Awesome Mark we could talk about this all night but it has happened again we have used up all of our listeners allotted time, as always if there's any questions or comments that folks have their listening this podcast feel free to hit us up on Twitter or Facebook page, and as always if you enjoyed the show it's a great time to jump over to iTunes and leave us that five-star review You've been meaning to do. Scot: [54:28] Marc we really appreciate you taking time to be on the show and if folks want to find you online what's a good place for them to look yet. Marc: [54:36] Has been great to be here you could find us at minoan are you can e-mail if you're interested in learning a little bit more. Jason: [54:51] Awesome we will put both of those in the show notes and until next time happy commercing!

    EP265 - News and Listener Questions

    Play Episode Listen Later May 28, 2021 66:05

    EP265 - News and Listener Questions Amazon News Amazon acquisition of MGM DC attorney general sues Amazon on antitrust grounds Amazon limited FBA access Amazon addressing review fraud Amazon Prime Day likely June 21 and 22 Other News Perch (from Episode 252) raises $775M Walmart testing a new livestream format Fedex struggling with late deliveries and adding higher surchages Retail Q1 Earnings Ulta – US Comps up 65.9% (up 7% from 2YA) Costco – US Comps up 18.2%, e-commerce up 41.2% Dollar General – US Comps down 4.6%; (up 17.1% from 2YA) Best Buy – US Comps up 37.9%, e-commerce up 7.6% (online revenue was 33.2% versus 42.2% last year) Burlington – Comps up 20% (shutdown e-commerce Q1 2020) Gap – Comps up 28% (up 13% vs 2YA). Digital up 82% vs 2 YA.  Digital now 40% of total sales. Episode 265 of the Jason & Scot show was recorded on Thursday May 27, 2021. 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: [0:24] Welcome to the Jason and Scot show this is episode 265 being recorded on Thursday May 27th 2021 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo. Scot: [0:41] Hey Jason and welcome back Jason Scott show listeners, Jason before we jump into some juicy news and we got a couple listener questions I wanted to send a big congrats to Chris Bell if that name is familiar to listeners he is the CEO of perch one of those quote unquote F be a Amazon Seller roll up companies and he was here on a pisode 252. Jason: [1:07] Yeah I heard him he did a small raise this week did you you get the details of that at all. Scot: [1:15] I did and you know in the The Venture Capital World which I am. I guess involved in to some degree you have your seed round and you’re a around and your B and your C so they just did there are around and what’s kind of special about it is usually you’ll do something like you know maybe couple hundred thousand to a cup small millions in a seed round and Silicon Valley they the seeds are pretty large the you’ll do an AR around maybe five to ten million and a be around 20 to 30 or 40 Etc they are around they did 775 million so so it’s they proclaimed their the fastest company to achieve profitable unicorn status unicorn says means you have a billion-dollar valuation and then they said they have been profitable since Inception which is interesting because, if you. [2:14] Keep it so that then what that means is they’re probably just going out and using all this Capital to acquire profitable companies and therefore as an entity from an ebitda perspective there there there’s an accounting trick where they’re profitable but the the the Goodwill of those Acquisitions is kind of below the line then it’s the largest series a Ever Raised by a consumer goods company by a factor of over four so I think the previous record was something like a hundred hundred and twenty-five so yeah that is a crazy rays and you know I think we’ve previously talked about I think it’s 3 billion in the US and five globally raised for these types of companies and and this obviously text about another billion on there and then I think a song article that this cause other people to reload their War chest as well so it’s it’s a very active segment and it’s exciting to see / qu as a friend of the show really really start to scale up. Jason: [3:13] Yeah yeah I had two immediate thoughts number one clearly it’s an advantage to get on the Jason and Scot show before doing your raised because it seems like there’s about a four x multiple you get just for being on the show. And no. Scot: [3:28] Yeah that was in the footnotes of the press release. Jason: [3:30] Yeah and number two it’s going to be ugly when they show up on Shark Tank and try to do an up round because mr. wonderful is going to cream them on this valuation. Scot: [3:40] Mr. wonderful is going to just like tap out in the first five seconds he’s the bottom feeder he’s not going to like like this one. Jason: [3:49] Yeah they’re only going to get a royalty deal from him. Scot: [3:52] Small loan that they pay back in 5 minutes. With thirty percent interest compounded every every 3 seconds, okay so this week we have some listener questions as I mentioned before we get to that there was some pretty big. Jason: [4:17] News your margin is there opportunity. Scot: [4:24] Yeah I like to say it wouldn’t be a Jason Scott show if we didn’t talk a little bit about Amazon and they made a really big play this week they announced that they are going they’ve entered a negotiation or a see an agreement to by MGM for 8.45 billion I have a theory here that Jeff wants to own the James Bond franchise so he can put himself in there I think he fancies himself in his current situation of a single Bachelor that’s gotten pretty buff as maybe the next James Bond but maybe that’s off a little bit what did you think about this when Jason. Jason: [5:06] Yeah well a couple of That’s So a whether Jeff realize it is it or not he could only is the bond villain in this scenario. Scot: [5:14] It’s got a Lex Luthor vibes. Jason: [5:17] Yeah the crazy bald super buff guy that owns his own rocket ship and then buys the company James Bond works for like I think that’s the theme for like a James Bond movies. Scot: [5:29] Yeah and finally had a cat that he maybe he does who knows maybe has a cat that he sits there and pets while he’s planning his next moose. Jason: [5:37] Yeah I don’t know you know people have been asking me about this in the. To me the acquisition makes perfect sense it’s not even very surprising and pretty consistent with a lot of other tactics we’ve seen. Amazon follow I like the open question is whether that’s a good valuation for him GM or not but. [5:59] Yo big picture Amazon is this platform and and we’re all familiar with the flywheel but in essence. The more reasons Amazon has for people that join Prime the more money they make on this whole ecosystem of services around Prime and it’s. It’s one of their biggest competitive advantages versus other. Content Publishers that are contents indicators that might have been interested in him GM is. Amazon can sell James Bond merchandise on Amazon they can make Amazon TV shows for Amazon Prime those Amazon, those people that join Amazon Prime in order to see the new James Bond movie will spend more money on the third-party Marketplace and will be open to more ads from, the Amazon ad Network and all all of these Services sort of. Lean into each other and so it means a Matata Amazon’s better able to monetize an eyeball than almost anyone else so then buying em Jim for. P point for doesn’t even seem that surprising I think they’ve they’re spending over a billion to make the Lord of the Rings. Series alone so like it. Scot: [7:17] Just a license it I think I think there’s just a license. Jason: [7:20] Oh my god well yeah so. Scot: [7:22] Yeah there’s hundreds of millions of dollars in the licensing of the Tolkien estate. Jason: [7:26] Yeah so and I mean the NFL was a billion dollars a year for 15 years or something so so this seems I get totally fits there are people that are saying that in gym that this is too high evaluation and that Amazon may have like had to reach. But I guess time will tell on that. Scot: [7:50] A couple fun facts so this is their second biggest acquisition, the only one bigger than this one was Whole Foods 13.7 billion in this one’s about 8.45 and it’s important to note that in today’s environment what you do is you you kind of you get everything all your eyes dotted and your t’s crossed you you filed to do that position and then you have to go through this process where you work with the government to see if they’re going to let it happen or not there’s what’s its I know it’s called H hart-scott-rodino hurts Scott Regina something like that H RH s g human do better idea, but there’s this one approval that you get there but then also increasingly you know Amazon’s under the antitrust microscope and there is a lot of senators tweeting their dislike of this deal, and I’ll turn to you for that before we do it is interesting in the media segment you’ve got Netflix as kind of the king disruptor and they’re causing a lot of a lot of different things to happen one of the big ones was AT&T who thought it would be clever to buy a bunch of content to put through their pipes in the form of Time Warner they are shedding Time Warner and what’s called Warner media and that’s going to be married with Discovery to create a try to have a mass of. [9:14] New and Library content to kind of go up against peacock Disney plus the 80 different new streaming services were all thinking about you know should we subscribe to those or not so it’s definitely kind of a little bit of a musical chairs thing and it makes a ton of sense for Amazon to really build a war chest and I think they’re buying it mostly for the catalog and then when you get that IP you could come out with you know all kinds of. James Bond merch there’s a lot of really good IP inside of that catalog so I think that’s what’s driving driving a lot of it. Jason: [9:50] Yeah no for sure there is a fun or more silly theory about the acquisition, MGM owns a bunch of movies that are in this catalog but they have even more rights to TV series and one of the TV series in that portfolio is a show you may be familiar with called The Apprentice. And so there are people that are like did Jeff Bezos just by MGM so that he could like release all the the unaired you know behind the scene footage from The Apprentice to embarrass anyone that might have been on that show. Scot: [10:29] Yeah could be. Jason: [10:30] I doubt it but yeah. Scot: [10:31] We’ll see I doubt it that’s a big that’s a big price to pay to bearson ex-president. Jason: [10:36] I mean yeah it is funny to think about but yeah. Yeah so yeah it’s going to be interesting. Famous Last Words I’ll probably be dead wrong I doubt so anytime you do a merger or an acquisition of this size like you do have to get regulatory approval, I kind of don’t think this is gonna be that tough because Amazon doesn’t have a lot of. [11:09] Like meaningful Network content versus HBO or Disney or Netflix at the moment like which is how this would have to be looked at so we’ll have to see but I think the, the claws you referring to is the hart-scott-rodino which is a law yeah so so. Like remember most antitrust law in the United States is like a hundred years old so it’s super relevant to today’s business circumstances and I say that entirely sarcastically, um but this. [11:42] In 1960 76 we passed this like minor update to The Clayton Act which is one of the big antitrust laws and it was this hart-scott-rodino improved antitrust improvements Act, in one of the things that it did is it used to be that if, even acquisition was going to trigger some antitrust concerns the government had to notice it and had to sue you and they made it. From sort of a opt-in to an opt-out kind of situation where if you do an acquisition over a certain size. You have to proactively get the government’s approval before the merger can go through and so now all these big Acquisitions have to be proactively. Approved and and this one will have to go through that process as well a minor fun fact there. All companies have to comply with antitrust law whether the deal is big enough to trigger the the HSR or not it just did your, over that size you have to do it proactively, and so there’s been one antitrust action against a company that was too small for this act and it was in the e-commerce space it was bizarre Voice versus the Department of Justice when. Bizarre voice pot power abuse. Scot: [13:00] Yeah they didn’t file for it and then the government flipped out and said you didn’t do it and then they said we didn’t have to and then the government said you did undo undo that. Jason: [13:08] Was so I don’t even yeah I don’t even think they said you you you had to proactively file but they said it’s still an antitrust violation and we’re going to prove it in the government won in court and broke them up. Scot: [13:22] Yep boom and you are an expert witness. Jason: [13:25] I was an expert witness in the case and then and I lost because I represent a bizarre voice and then fun fact, so power reviews got split backup and power views later hired my wife to run their marketing so losing that case got my wife a job. Scot: [13:42] Boom there you go what goes around Good Karma you put dark Good Karma into the road. Jason: [13:46] It’s a small world and I wouldn’t want to paint it exactly. Scot: [13:51] Cool also in the category of antitrust the the DC attorney general is going after Amazon and what’s interesting is you know the. Can’t put a quote here he’s alleging that not only are the fees they Amazon charges sellers responsible for higher prices across the web then we can talk about that that kind of ties to price parity which Jason Del Rey spent a lot of time on and is Amazon podcast series but also Amazon Rewards sellers who use FBA to the detriment of sellers who don’t but have lower prices and you know fact check, true on how the algorithm works I’m not sure you know I think what Amazon would say on that second part we can talk about price parity next is it’s a better customer experience to get your products fast and free and that that ties into it as well as the, consideration not just the price so yeah so it’s gonna be interesting to see how that one comes out because I think Amazon has a good good position there if you can’t think about the overall customer experience but the other one is a little trickier which is the price parity in your kind of a more of an expert on that one if you want to run through that one. Jason: [15:14] Yeah well so and it’s interesting to so that the AG actually filed the suit so there’s a real lawsuit that Amazon is going to have to respond to and that, that triggers Discovery and all kinds of other things that make all this antitrust talk a lot more real and so sort of two things there’s the outcome of this exact lawsuit and whether Amazon. Can defend itself and win whether loses and has to take some some. Remedy or whether they somehow settle right which often happens in these cases so that’s the outcome of this suit which we’ll talk about in just a second but there’s a bigger implication. Um even the process of Defending themselves or settling this suit they. Can like get some stuff on the record that then helps trigger other antitrust actions so there’s a that’s a. Kind of a real risk here so the the specific thing that I think the DC eiji is alleging that somewhat problematic for Amazon is. Amazon has used to have a price parity Clause with a lot of their vendors and so essentially it said you’re not allowed to sell your product. Cheaper somewhere else than you sell it on Amazon. [16:44] And I think Amazon would say that they stop doing that process in like 2019 but the, the Attorney General a can sue them for behavior before 2019 so that that alone doesn’t save you, and then I think that the Attorney General also alleged that while they may have discontinued that process in 2019. They’re still enforcing other Clauses that essentially. Have the same outcome so so that the hypothesis here is if you’re selling and I think this would apply to both first party and third party but and I don’t know I give if the Attorney General had a specific. Um example in in their suit like like the whole text of the suit isn’t available yet but. So we’ll assume it’s third party for a second I’m selling some widget on Amazon I promise Amazon I won’t sell that same widget cheaper on Walmart. And so what the Attorney General is arguing is hey Walmart’s bigger than you like Walmart might have been able to negotiate a lower price which would be good for consumers we’re not for the fact that you artificially. Stop that vendor from offering Walmart a lower price and that that is. [18:07] A violation of the Sherman Act and so like you’re you’re guilty of antitrust for doing that so that’s the. The argument Amazon’s far from the only big player out there with price parity policies not that that defends you from a lawsuit but so that’s going to be. Interesting to see how that all plays out there some really smart antitrust people that have pointed to that as one of Amazon’s biggest vulnerabilities. The I don’t know like. [18:38] The it’s unlikely that that alone caught would if Amazon were to lose that case entirely that it would force Amazon to break up. It would probably force them to pay some fine and promise not to. Do that that business practice anymore and maybe you know they would have to agree to some kind of. You know more careful monitoring than they would otherwise like so. We’ll see how that all plays out but the reason this case is super interesting to me is there’s two things you have to worry about an anti trust you it’s anti doing anti-competitive things is not illegal. Um it’s illegal to be a monopoly and then use that Monopoly to do these anti-competitive things so the Amazon enforcing the price parity thing is only, a problem if Amazon meets the strict antitrust definition of a monopoly and. It sounds like that should be pretty pretty easy to know there are over fifty percent of something you’re a monopoly but the problem is. The of something which is what we call the relevant market right so if you’re the the DC attorney general what what they said in their announcement was that the relevant Market is e-commerce. [20:00] So they’re going to say Amazon’s more is a majority of e-commerce which a is probably not true. Um by most people’s counts there in the like 30 to 40 percent of. Of us e-commerce sales so they’re not even majority of all e-commerce and by the way those numbers wildly undercount certain flavors of e-commerce that like are you know people like to discount but our e-commerce right so. People like to take out ticket sales or events sales. People like to take out restaurant sales and you know over 50 percent of all restaurant sales in the last year were e-commerce thanks to Door – and there’s huge e-commerce categories like. Pornography that nobody puts in their numbers right so so if you’re Amazon you’re going to argue that you’re not a monopoly, um and that you’re not over 50% of e-commerce and then they’re also going to say even if we were over 50 percent of e-commerce eCommerce isn’t a relevant Market because the definition of a relevant Market is. The consumers can’t. Um are stuck in a market and don’t have another alternative and so they actually use this test called the snip test which is means like. [21:16] Could someone make a small but significant price increase, and you know would customers be forced to pay that because they didn’t have some alternative place to go and Amazon’s going to say e-commerce is not a relevant Market doesn’t pass the snip test because if we raised our prices people would just drive to Walmart and buy stuff at the store, and so the market is is retail right so that that’s going to be a huge fight that’s going to you know people are gonna spend millions of dollars on both sides fighting, but the reason that’s going to be interesting is is in the process of litigating this case if a relevant Market gets defined of effective a judge rules that something’s relevant Market. Then suddenly that’s going to open up all kinds of other. Other doors to either Amazon being potentially vulnerable or not being vulnerable to further antitrust actions so. It’s the first step in a long process but it’s going to be fun to watch as a non-financial Observer. Scot: [22:16] Yeah and I’ve been following the Apple epic case and a lot of interesting things come out of the due diligence where you know the CEO of Epic could emailed Tim Cook and Tim Cook’s answer was who is this guy. For service this string itself where the he was kind of his kind of arguing this the the Epic I was arguing with Tim Cook of why they the store is really long intricate email and as if he intended like known each other and they’d met several times Tim’s like it’s those like his internal answer to the whole thing as class, but the guy like six hours and you know five million dollars of lawyer fees to write that email looks like. [23:10] Yeah yes no one wants all their emails out in the public but that’s what’s interesting about these things whoa. Jason: [23:17] Oh my gosh yeah it’ll be a great jobs program for lawyers for the next 10 years. Scot: [23:22] Yeah my favorite Amazon news this week is that the sum of the press has leaked the Amazon Prime day and it’s going to be June 21 and 22 or at least that’s the rumor it hasn’t been been. Officially announced by Amazon but looks like we got a latest June Prime Day this year so that’s exciting I am actually low on some charging cords and some other things so I’m looking forward to stocking up on some, some some accessories. Jason: [23:51] I don’t think my wife will allow a single more additional cord to come into our home so I that could be problematic for me, always excited for Prime day like again Amazon hasn’t confirmed this but it certainly fits everything we know, so what has been interesting this is always a challenge out Amazon always wants to keep it kind of secret and Under Wraps, it’s such a big deal and Amazon wants to encourage everyone to lean into it that like all the third party merchants. I need time to prepare for Prime day so it’s always kind of a this tricky Balancing Act of Amazon not telling us when it is but wanting everyone to be ready for it. [24:34] And what has already happened since since has been pretty obvious that Prime day is going to be in late June some time is that Merchants are starting to panic because. A common phenomenon right now is Merchants are getting their their FBA quotas cut by Amazon and what that means is, last quarter you were selling red widgets on Amazon via FBA and Amazon allowed you to put 35,000 units in the FBA system and and, there now you’re getting a letter saying you’re only allowed to have 20,000 units or 10,000 units or in some cases no more units and so all of these, these Merchants are getting their their allocation in the FBA warehouses cut, and that’s a huge bummer leading up to Prime day because it just means you’re not going to be able to sell as much. Scot: [25:30] Yeah and looking at Prime day over time. Amazon selling more and more of their stuff right so it’s the things that get the biggest discounts are the echo this the Kendall dad and and increasingly as they it’s almost become an Amazon Gadget day for Amazon’s owned Brands as you like to say so ring is in there and now they’ve got zero and so that that seems to be the bulk of what’s going on and I imagine Amazon needs more room for that stuff and that’s kind of why there. Clearing the floor for their own Goods to be sold on Prime day. Jason: [26:09] Yeah I mean it’s I feel like. It’s the flywheel in action like all these good things are happening for Amazon and then of course the pandemic you know dramatically accelerated people’s use of e-commerce which means that everyone wants more inventory and e-commerce warehouses which also means more sellers want to come to Amazon right and now we have all these International sellers coming to Amazon as a good way to access the US market and so if you’re an existing seller, you’re competing for FB a space with way more other sellers than you ever were before and other products than you ever were before and while amazonite is scaling their fulfillment capacity at you know frankly a mind-boggling rate like I feel like demand is even faster and so I think Amazon’s having to make some hard decisions about, how much room they give everyone and it it doesn’t feel good if you’re one of the towers that feel like you could make more money if you had more room. Scot: [27:09] Okay so then the other one that’s been in the news and kind of a lot of chatter on quote Amazon Twitter is Amazon has really been cracking down on a bunch of these Chinese sellers that have had questionable review policies so there’s a lot of folks you’ll see a lot of US based sellers make accusations about Chinese sellers that there either buying reviews or you know doing some this gray hat black hat kind of review stuff and there seemed to be a pretty big cleansing if you will of a lot of this going on I saw the New York Times had an article calling it The Great Purge so a lot of the US base sellers we’re kind of celebrating the CID kind of finally seen the light of day and come home to roost did you dig into that one. Jason: [28:00] A little bit there’s a couple interesting things so Amazon kicked a couple of and we don’t know if it’s permanent or not but like delisted a couple of very significant Sellers from the platform and so one that’s very familiar in my drawers is called aqui a UK ey I think, which is kind of a similar company to Anchor with a lot of like interesting charger Technologies and cables and things. [28:30] And so they’ve been a very popular seller on Amazon for him primarily use the Amazon platform for a while and Amazon took them off right and and whether it’s true or not Amazon’s kind of spinning it as. Hey we’re. We take all of the credibility of the of the ratings and review system super seriously and anyone that violates it no matter how big are significant to us is going in the Penalty Box and so we proactively took this action, and a lot of other people are saying. Yeah don’t really buy it you know the Attorney General of several States like uncovered some of this in the various behavior and only after they like brought it to Amazon’s attention and insisted Amazon take action. Um did Amazon Deal s these guys so there’s some. Dispute over over the sequence of events and then you know there that New York Times article highlighted a lot of kind of. Accusations of. They’re being kind of a to class system that if you’re a really big seller on Amazon with significant volume that you get the benefit of the doubt from all these review things and they only take action if there’s. You know a huge violation versus if you’re a smaller cell or in your just accused of some bad behavior you get put in the Penalty Box and you have to kind of fight your way out. [29:54] Don’t don’t know what the truth is but certainly is interesting and it certainly. Um got a lot of traction in the new cycle last. [30:07] There were a couple of other news items and some earnings from this week that we want to cover really quickly we’re recording this on Thursday night the 27th as I mentioned in the opening, and earlier tonight Walmart launched a surprise event they had what they call Walmart shop along, I’ll call it a live stream Commerce event that they hosted on So we’ve covered in the past a couple of interesting social media things Walmart’s done where they partnered with Tick Tock to do some, some live streaming video Commerce but this time instead of doing it on Tik-Tok they did it on so they launched a new URL, Walmart shop, and this first event featured this woman and Marie Ray Drummond who’s more commonly known as The Pioneer Woman and Scot will be super familiar with Hershey’s, like the number 22 on Forbes list of top influencers and so she’s like kind of a part cook part, you know apparel part home decor, influencer and so she has a bunch of exclusive products that are sold through Walmart and they did a live stream event and sold a bunch of products live off of the video feed tonight. Did you get anything. Scot: [31:34] I actually do hook know who this is I am not a fan, My Heart Belongs only to the Kardashian’s those are the only influencers I pay attention to so I don’t I stop at number one and two on the list and I don’t go down to the 22s, but yeah it is it so having you know I know you’re big on live streaming, how does it compare to what some of the Chinese folks are doing is it is it kind of in that genre where you know you can buy light right from the stream and it’s got like a little bit of a QVC feel but kind of a different energy like. What’s it look like. Jason: [32:11] The so so the most popular live streaming in China is our very bite-size nuggets so a it’s not so much, this the the retail platform is doing a live stream like it’s not Ali Baba’s livestream it’s, it’s thousands of third-party sellers that are each doing their own live streams and each live stream in China you know they tend to be these like two minute long segments about a particular product right so so think of them as kind of commercial sized livestreams. The QVC and HSN historically do these like 30-minute programs where they have one personality, in a particular genre selling a bunch of products over half an hour and so the Walmart livestream felt a lot more like a traditional, Q VC style program I want to say, tonight’s program was like 45 minutes long and it was just Ray and her two daughters. [33:10] Talking about a wide variety of merchandise all from her that was for sale for 45 minutes but the. There was very like seamless Commerce integration with the video so. If you watched it on a browser like there’s a big window that has the video and she’s wearing all these items and demoing them it’s a three column interface on the left hand side was a chat box so there’s a, like why live commentary from from Shoppers and they can interact with her and she very obviously could see all other comments because. She responded to a lot of the comments in real time and then the third column had like product tiles for everything she was talking about so, when she was talking about a dress she’s wearing the dress but there’s a product I’ll for the dress on this right-hand column and you could click on it and immediately add it to your cart and checkout of you wanted. And you could scroll back to see any of the previous tile so it is. It seemed like the Commerce interface and the chat was all pretty well done I don’t know what American consumers are going to want in terms of live streaming but this. This did feel a lot more like the pretty traditional American version of a. [34:26] Of a TV show infomercial than these kind of bite-sized. Um Commerce experiences that are that are really taking off on taobao live for example which is like a platform for all these individual sellers selling stuff. Scot: [34:42] You think they built their own platform for this for others is there like a vendor out there that’s licensing always these retailers this kind of stuff. Jason: [34:50] A little of both so a there was some complaint about some technical problems so it sounded like and I think Walmart even, like a Walmart moderator even said a couple times hey some of you on mobile are having a problem we’re working on it and. It seemed like it wasn’t not everyone had a problem that it seemed like some people did it definitely seemed like. A completely white labeled platform for Walmart a bunch of us kind of dug underneath the. The covers and there’s a popular content management system out there for sort of codeless web development called webflow, and it appears that this site was built on webflow, which is interesting to me for a couple of reasons and sorry there’s a another vendor that specializes in actual video streams, and they’re called be live and there and so it looks like they were using web flow as the. The the rapper for all this and they were streaming the video through be wife. [35:56] Number one these are very popular tools that I’d recommend generally to someone that needed to build something quick and prototype something but they’re not necessarily. The scalable robust Enterprise tools that you would expect. Walmart to be using if they thought they were going to be putting 10 billion dollars of Revenue through it and so. That’s fine to me that says that this is kind of a pilot for them or a minimum viable product and that. They built something to test the experience instead of something that would. Scale to the ultimate size it could it could achieve for Walmart so that was interesting but fun fact web flow is hosted exclusively on Amazon ec2 so, I don’t I don’t know this for a fact maybe Walmart was able to negotiate some special hosting Arrangement but the likelihood is, that this the this thing was actually running on Amazon. Scot: [36:53] You picture someone at Amazon with the cause of mobile problem button ready to go. Jason: [37:00] Yeah yeah exactly don’t ya don’t don’t know about that either but I am pretty confident if this became something that that was going to be a recurring thing at Walmart that it would probably be a not hosted on an on Amazon solution. And they are pretty robust it chops at the show at this point so I don’t know to me I actually take that as a positive sign that maybe there, they’re doing fast agile stuff and not trying to perfectly engineer everything in order to just test whether users are going to like something or not. Scot: [37:33] Yeah I love it I love when big companies do MVPs and kind of do the spirit of the MVP where yeah just put something together pretty quick and put it out there and get some feedback and then iterate so it would be cool to see how that goes. Jason: [37:45] Yeah and that doesn’t that feels like the spirit of Walmart lately they’ve done the these Tick-Tock Pilots now they’re doing a pilot on their own platform so yeah props like and. [37:57] We’ll be interested to hear what results they share with us. Um a couple of other random things the we’re going to jump into some more earnings because there were a bunch of retail earnings calls this week and, spoiler where they’re all across the board like for companies that did, really well in the pandemic like they’re their comps this quarter a little soft because they’re starting to comp against how well they did in the pandemic, and if their company that like you know traditionally wasn’t graded e-commerce then their e-commerce exploded last year which meant their e-commerce comps this year aren’t as good so, so they’re kind of all across the board and as a result of all these earnings you’re starting to see all these articles being written about how. Oh man you know the luster is wearing off of e-commerce and people are going back to stores and we’re starting to see store comps go up and and the rate of e-commerce growth slowed down, and I find those articles a little annoying because they’re mostly written by people that don’t seem to understand like, the difference between a a sales rate and a. Change in sales rate right so they’re you know they’re they’re interpreting like hey retail sales went from up 4% to up 6% and e-commerce slow down from up a hundred percent to up 50%. [39:22] Um therefore, customers are stop stopping e-commerce and going in the stores and there’s like no way more people bought something online for the first time last quarter than ever before right like gets they’re just not under fundamental it’s a fundamental misunderstanding of rates of change and one of the things I still like to remind people and inconvenient. [39:46] Truth about the whole pandemic and Retail as well in United States things are trending in the right direction they feel good, Pete things are opening up with gas masks retailers are rebounding all these good things are happening, , most of the data on store traffic is still that that there are way less people in the store today than we’re in the store two years ago, so Nationwide according to Shopper track we are still have 20% less traffic than we did in 2019, and that’s been kind of consistently true for the last twenty four weeks so and by the way that makes the US, more recovered than most countries like a lot of places in Europe like traffic is still down fifty percent from two years ago so it is still true a lot less people are walking in the stores, and a lot more people are buying stuff online than ever before so, you know interpret all these numbers listen to all these numbers but don’t don’t you know overreact to these these articles that are saying like e-commerce has kind of. Tailing. Scot: [40:57] Yeah and you were you called it you predicted a lot of folks are going to talk about the two year ago metric and it looks like it’s starting to come to fruition. Jason: [41:04] Oh my God yeah the the if I had a dollar for every time someone said Roaring 20s or two years ago in an earnings call I would I would have raised almost as much money as perch. So let’s jump into those those earnings real real quickly a wide variety of retailers so the first one I saw and most of these are from today so like our podcast is nothing if not Timely, Alta which is one of the two big specialty Beauty companies reported, and this is a perfect example so they’re their comps for stores in the United States were up 65.9% from this quarter a year ago. So that’s you know. A year ago the quarter would have been partly impacted by covid but so being up 65% is is a big number that, but what that probably just means is that they took a huge hit a year ago, and have you if you look at Ulta has comps from two years ago their up seven their sales are up 7% from where they were this quarter two years ago so so they’re up. Um they probably you know like give if 7% over two years is like you know. [42:22] Modest growth it’s but it’s not astronomical growth so so that was Ulta then Costco us comp and by the way Ultra does not break out there e-commerce separately, Costco us comps were up 18.2%, so that’s healthy but again Costco problem never had to close for the pandemic and Costco is probably a net winner in the, um pandemic visits and so when they’re up 18% that’s pretty impressive and then their e-commerce was way up which is. Kind of against most of the trends because last a year ago was such a good quarter for e-commerce that most companies aren’t comping that well against, against the last year’s e-commerce numbers but Costco’s was up 41% did that surprise you at all Scott. Scot: [43:13] It does because Costco yeah they’ve definitely super embraced e-commerce it must be it must be I’m gonna guess it’s instacart is it like some delivery thing that. Jason: [43:26] Is partly instacart so it’s complicated so Costco have like shelf-stable products which they do sell via their own e-commerce on have for a while, but for your point they don’t do it enthusiastically and a lot of Costco execs still like have Fame uh as much as recently as a year ago we’re saying why would we ever encourage anyone not to walk in a store. And then the perishables you couldn’t get via e-commerce at all and Costco partnered with instacart so now you can get some of the Frozen and perishables. E-commerce and so you’re exactly right like when someone has a big e-commerce quarter right now what I say is that they left money on the table a year ago and because Costco. [44:10] Is a hugely successful retailer in spite of not leaning into digital they you know we’re not prepared for the spike in demand for e-commerce they didn’t have a good fresh and frozen solution for e-commerce which is a big chunk of their sales, so flip side Dollar General comps are down 4.6 percent in this is a perfect example of a company that like. Did pretty well in the pandemic which is interesting because you know, they both had something going for them and something going against them like people were worried about their finances in the pandemic and so that certainly worked in favor of Dollar General, but they were not considered essential goods and so had to close a lot of stores so being down four percent versus last year, is interesting now I will say. People all have slightly different definitions like most when I’m saying comps that’s comparable store sales and so. We take out of that stores that opened and closed but it is possible that Dollar General is only comping open stores against open stores. [45:27] I don’t know but kind of put this in a an overall perspective their comps versus two years ago are up 17% so generally. Going in a good direction. [45:41] And so then Best Buy which I was most interested in Best Buys in a really interesting category there’s a lot of evidence that. Like some parts of electronics killed it in the pandemic everyone needed a laptop. The that a lot of electronics products didn’t do that well in the pandemic and so it’s kind of like a mixed bag and then the overall Electronics category actually didn’t do phenomenally well and yet Best Buy reported good numbers every quarter, and they did again so their comps were up 38% 37.9% which is very strong the. Then e-commerce like was very modest up only seven percent and that’s reflective of them having a monster e-commerce growth. [46:27] During during the pandemic that they’re now lapping and so that the interesting number to me at Best Buy is, for this last quarter 33 percent of all their sales were online so almost a third of their sales were online and that’s down a little bit at the peak of the pandemic last year when a bunch of stores were forced to close because they were non-essential, forty-two percent of Best Buy sales where online so there was a. The overall consumer electronics category a lot of people are reporting that it’s fifty percent online which is mostly thanks to Amazon, so it’s empty you know best by being at 40 last year you could have imagined that they would just build on that but it does appear that as people are going back to the stores. The next earnings is a cautionary tale for me is that Burlington Coat Factory said they had good comps this quarter of their come swept 20% in general apparel company comps this quarter our monster because. Apparel like nobody bought any apparel a year ago, um and so 20% I would actually argue doesn’t feel that big and then I can’t give you an e-commerce number because Burlington Coat Factory turned off their website a month before the panda. [47:48] Yeah which is at the time I felt like a bad decision but then in hindsight it looks like a really bad decision and then insult to injury, um profitability was down on their 20 percent comp and you go we’ll gosh Jason why we’re was profitability down oh well they had a bunch of expenses related to closing their website. Scot: [48:07] That’s nice. Jason: [48:10] Can’t be fun to mention in the in the shareholder meeting and then the last earnings which. I think was also today is the gap and they’re much more typical of what what I’m seeing in apparel companies their overall comps were up 20%, um and they’re they’re digital was up 82 percent which that is impressive that’s. You know we are seeing the the rate of growth of most e-commerce dip Gap was are really a good e-commerce operator with significant e-commerce sales so for them to be up 82 percent, that to me says that a bunch of people like are are the the e-commerce habit for closes. And to kind of put this in perspective in this quarter when people were welcome to walk into a Gap Store e-commerce still representing 40 percent of Gap sales so so you know they’re they’re almost a digital first retailer this. Scot: [49:09] Sidebar did I see some news out it was kind of a head scratcher and it kind of was watchi