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

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Recorded live from NRF Nexus, Jason and Scot sit down with Josh Krepon, President of U.S. D2C and Global Digital at Steve Madden. Josh shares his path through Ralph Lauren, Victoria's Secret, Tory Burch and Cole Haan, and what it takes to operate inside founder-led companies. At Steve Madden, a $3 billion business with an in-house sample factory and brands including Dolce Vita, Betsey Johnson and Kurt Geiger, his remit covers stores, e-commerce and marketing under one P&L. He makes the case that this alignment moves decisions faster than siloed org charts allow.

The conversation turns to social and TikTok Shop. Josh is candid that its real value is discovery, and digs into the economics of low AOVs, creator commissions and not owning the customer. Brands that can hold full price at higher price points have a structural advantage there. On tariffs, he describes a constant calculus of what to pass through, what margin to absorb and where to cut cost, and how quickly the sourcing math keeps flipping.

The back half goes deep on agentic commerce. Steve Madden is live on Google's Universal Checkout, a partnership Google name-checked on its own earnings call, and recently launched two brands on DoorDash. Josh explains how AI has upended vendor selection, where a long operating history can now signal legacy technology, and why short pilots have replaced long RFPs. He closes on where this lands: discovery, not autonomous checkout, is the real prize for a brand like his.

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EP344 - How Brooklinen Is Preparing for Agentic Commerce

Live from NRF Nexus in Colorado Springs, Jason and Scot sit down with Abbie Weiss, SVP of Digital & E-Commerce at Brooklinen, to talk digital-first retail, changing discovery, customer experience, and preparing for agentic commerce.

Abbie shares how Brooklinen is expanding across retail, B2B, and the design trade while keeping customer experience, and "ease, at the center of its strategy. They also explore the changing role of discovery, influencers and affiliates, the blurring lines between awareness and conversion, and how Brooklinen is preparing for agentic commerce through better content, catalog readiness, and cross-team collaboration.

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Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy.AI and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

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n this episode, Jason and Scot reunite after seeing each other in person, sharing stories from recent conferences and discussing how social media, micro-influencers, and AI-powered shopping agents are reshaping the way consumers discover and book travel.

The main event, though, is Amazon's Q2 earnings. They break down AWS's continued growth, stronger margins, and Wall Street's reaction to Amazon's aggressive AI investments. From retail performance and gains in everyday essentials to robotics, custom AI chips like Trainium and Graviton, and the company's rapidly expanding advertising business, this episode unpacks the biggest takeaways from one of Amazon's most important quarters.

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Recorded live from NRF Nexus in Colorado Springs, Jason and Scot sit down with keynote speaker Mitch Joel. His core thesis is that the attention economy is over and we're entering the intimacy economy, where the winning brands make every customer feel like the experience was built just for them. From there the conversation covers why digital commerce broke serendipity and discovery, how curation becomes a competitive edge once AI can scale it, whether agentic shopping is actually what shoppers want, and how AI is being deployed at companies (often pointed at internal productivity instead of the customer). It closes on trust, and the uncomfortable cases where AI improves the experience but only if you don't disclose it.

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Jason and Scot introduce their first video recording and speak with Travis Hess, CEO of Commerce, about the company and the state of e-commerce. Travis discusses his background in services, the rebrand from BigCommerce to Commerce, and current work on B2B capabilities, AI features, and easier launches. Check out the FIRST video podcast episode:

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We're unapologetic fanboys of Apple and great retail experiences on this show, so for Apple's 50th anniversary — and the 25th anniversary of the first Apple Store — we brought on the person who actually created the modern Apple Store concept: Ron Johnson.

Ron built his career in 10-year cycles, and each one changed retail. At Target, he dreamed up the first designer collaboration in retail history (Michael Graves) and helped turn a Midwest discounter into a place people bragged about shopping. At Apple, he opened the first stores in 2001 — when Gateway was folding, Dell was winning, and everyone thought a 5%-market-share computer company had no business signing mall leases. He named the Genius Bar (Steve Jobs told him nobody would buy it), killed the cash register with a mobile checkout built on an iPod Touch, and left in 2012 with a million people a day walking into Apple Stores. Then he took the hardest job in retail — CEO of JCPenney — and he's refreshingly honest here about what went wrong.

What we get into:

→ The Michael Graves deal, and why "design" beat "fashion" at Target → Why Steve Jobs hated the idea of mall stores — and how Ron changed his mind → Where the Genius Bar name came from, and the meaning behind it → Killing the cash wrap: mobile checkout in 2008, self-checkout in 2010 → Spending the morning of 9/11 with Steve Jobs → JCPenney, situational arrogance, and the change-management lesson he owns → Why omnichannel won — stores didn't, online didn't → What agentic commerce and AI actually do to shopping (and Satya Nadella's "token capital")

Ron's book, Shop Different, comes out September 22nd from HarperCollins. It's built around the Harvard Business School case study of his career — Harvard's most popular first-year case — and it's going to be one of the must-reads of the fall for anyone who loves retail. Links to buy it are in the show notes.

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Episode 340 of the Jason & Scot Show was recorded on Friday, June 19th, 2026

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Greetings Jason and Scot show listeners! We hope you're enjoying the new pods and we have another Jason and Scot show on the way, but until then I wanted to share a new podcast we're launching called RetailPlaybook. Andrew Bell is the top expert in optimizing your product catalog and PDP for maximum sales on Alexa for Shopping (Rufus), Sparky and Target Shopping Assistant.

In his new podcast Andrew will be discussing all the news and best practices. If you are a 1P/3P brand or seller that cares about what Alexa, Sparky or TSA say about YOUR products, this pod is for you. There's also an accompanying substack newsletters at retailplaybook.ai. Subscribe to the pod and newsletter today and be sure to forward it to your team!

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EP339 - The Non-Agentic Episode In this episode, we challenge Scot to talk about all the interesting things happening in the commerce indsutry, without talking about Agentic Commerce. Including USDC Sales Data, Q1 Earnings Reports, upcoming Prime Day, and the latest on Direct to Consumer from China models from Tik Tok Shop, Shein, and Temu. Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy.AI and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

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EP338 - Amazon Q1 2026 Earnings

Chapters 0:32 Welcome to the Jason and Scott Show 1:36 Spring Break Reflections 3:20 Upcoming Events and Workshops 5:47 Healthcare Insights 8:00 Amazon's Prime Day Changes 9:58 Amazon's Q1 Earnings Overview 20:04 Amazon's Retail Performance Analysis 28:28 Fulfillment and Delivery Innovations 30:26 Global Instant Commerce Trends 31:32 Revenue Breakdown Insights 35:01 Whole Foods Performance 42:47 Advertising Business Growth 46:34 The Future of Agentic Commerce 54:05 UCP Developments and Strategy 1:04:41 Closing Thoughts and Reviews In this episode, hosts Jason "Retailgeek" Goldberg and Scot Wingo dive into Amazon's strong Q1 2026 earnings, highlighting a 17% year-over-year revenue increase and its rise as the second-largest grocer in the US. They discuss Amazon's significant investments in AI and AWS, which achieved 28% revenue growth, and the expanding advertising division competing with giants like Google and Meta. Tune in for insights into Amazon's strategies in the evolving landscape of retail and commerce.

Episode 336 of the Jason & Scot Show was recorded on Friday, February 6th, 2026

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

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The Future of Agentic Commerce

In Episode 337 of the Jason & Scot Show, recorded on March 10th, 2026, hosts Jason "Retailgeek" Goldberg and Scot Wingo explore the transformative impact of agentic commerce, as discussed during a panel at Citi's 2026 Global Consumer and Retail Conference. Joined by experts Ron Josey and Paul Lejuez, they examine how AI technologies are reshaping retail, leading to impressive traffic growth for companies like Target and Amazon. The discussion highlights the balance between online and physical retail strategies, the rise of retail media networks, and the potential of AI-driven partnerships. Jason and Scott also analyze emerging market players, particularly in beauty and fashion sectors. Tune in for critical insights on the future of retail technology, and if you enjoyed this episode, please like our Facebook page and leave us a review on iTunes. Thank you for listening to Episode 337 of the Jason & Scot Show!

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EP336 - Amazon Q4 Earnings

Chapters 0:31 Welcome to the Jason and Scott Show 3:28 NRF Highlights and Personal Updates 5:54 Upcoming Conferences and Events 9:15 Anthropic's Super Bowl Ads 16:11 Claude Bot and Agentic Technology 16:42 Amazon Earnings Overview 23:32 Meta's Advertising Strategies 27:32 Google's AI Developments 35:45 Amazon's Earnings Call Insights 44:29 Retail Growth and Essentials 48:20 Marketplace Dynamics 49:42 AWS Performance and Challenges 54:26 Amazon's Advertising Business 1:00:31 Agentic Commerce and Future Predictions 1:13:43 Walmart Leadership Changes and Implication Welcome to a new installment of the Jason and Scot Show! In this special episode recorded on February 6th, 2026, hosts Jason Goldberg and Scot Wingo reconnect for an enlightening discussion following their experiences at the NRF and share key industry insights. This episode is packed with updates on Amazon's recent earnings call, the advertising landscape, and the emerging role of agentic commerce in the retail world.

Join Jason and Scot as they kick off the episode by reflecting on their time at NRF, where Jason delivered an impactful keynote that had listeners buzzing. In a light-hearted banter, they dive into personal stories, including the often-asked question about Jason's son's sunburn during their recent Hawaiian vacation. From there, the conversation takes a deep dive into the evolving nature of retail, where both hosts express their excitement over how businesses are embracing the latest innovations in technology and AI.

The duo then brings their focus to Amazon's latest earnings report, which revealed a robust growth in retail despite an ominous forecast for capital expenditures. While they discuss the implications of Amazon's projected $200 billion in investments—including expansion into AI infrastructure, fulfillment centers, and essential goods—Jason and Scot analyze whether Wall Street's reaction of an 8% drop was justifiable considering Amazon's overall performance in retail and advertising.

Listeners will gain valuable insights on how Amazon's grocery strategies and its dominance in everyday essentials have created a competitive landscape that mirrors historic retail expansions, like Walmart's grocery initiative. The hosts also emphasize the relevance of the Amazon Marketplace, where third-party sellers are taking up 62% of total units sold, highlighting the synergistic effect between advertising and retail performance.

The podcast also delves into the broader context of the e-commerce space, touching on AWS growth dynamics, the challenges posed by capacity constraints, and how they contribute to the narratives surrounding AI integration. With mentions of Anthropic's recent ad campaigns and competitor movements, listeners will appreciate the comprehensive look at the competitive dynamics shaping the industry.

Throughout the episode, Jason and Scot maintain an engaging dialogue on the potential of agentic commerce, discussing the opportunities for businesses to adapt and innovate in a rapidly changing environment. Their analysis of the demand for AI-driven tools and the importance of maintaining consumer experiences culminates in a call to reflect on the value of assortment and the implications of shifting consumer behaviors.

In conclusion, Episode 336 serves as both a detailed recap of Amazon's recent performance and a broader commentary on the evolution within the e-commerce sector. With thought-provoking insights and a playful rapport, Jason and Scot ensure that listeners walk away with both the latest news and a deeper understanding of where the retail industry is headed.

Episode 336 of the Jason & Scot Show was recorded on Friday, February 6th, 2026

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EP335 - Kevin Ertell The Strategy Trap

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In this electrifying episode of the Jason & Scot Show, recorded on Friday, October 10th, 2025, hosts Jason "Retailgeek" Goldberg and Scot\t Wingo welcome a very special guest and longtime friend, Kevin Ertell. With over 30 years of combined history, the duo dives into Kevin's impressive career trajectory, his extensive experiences in retail and strategy execution, and the valuable insights behind his newly released book, "The Strategy Trap: Why Companies Fail at Execution and How to Get It Right."

Kevin's impressive background spans from starting at Tower Records to holding senior positions at iconic companies like Borders, Nike, and Sur La Table. He discusses his evolution in the retail space, the intricacies of establishing the first TowerRecords.com site, and his current role advising various businesses, including helping the Minnesota Timberwolves with their ticketing operations. As he unveils his book, listeners learn about the core theme: effective execution is the linchpin of successful strategy.

Kevin breaks down the key concepts of his book, structured around the "six C's" that are critical for avoiding common pitfalls in strategic execution—co-creation, clarity, capacity, communication, coordination, and coaching. He emphasizes the importance of bringing teams together in the co-creation phase to ensure buy-in and alignment on the strategy, a central pillar in fostering commitment across the organization. The conversation touches on the significance of clarity in communication and the necessity of creating a space for people to provide feedback and understand their roles.

Throughout the episode, Scot and Jason explore Kevin's practical strategies and actionable advice for leaders looking to strengthen their execution capabilities. Kevin offers insights on leveraging constraints creatively, encouraging listeners to view limitations as opportunities for innovation, much like how companies like Costco manage to maintain low prices while driving efficiency.

As the discussion unfolds, the trio delves into the nuanced nature of workplace culture, highlighting the benefits of psychological safety, the impact of social incentives, and the importance of regular communication channels to keep everyone aligned within the execution framework.

Moreover, they touch on fascinating concepts such as pre-mortems, a proactive method of anticipating potential failures before launching a project, differentiating it from the traditional post-mortem analysis. This mindset shift encourages teams to address concerns upfront, minimizing the likelihood of catastrophic missteps in execution.

As the episode wraps up, Kevin shares his hopes for the book's impact, inviting listeners to access "The Strategy Trap" at their local bookstores or online. He emphasizes the vital interplay between strategy and execution, urging leaders to recognize that a well-crafted strategy is only as strong as its execution plan.

Join us for this enlightening discussion filled with practical lessons, captivating anecdotes, and a wealth of insights from an industry veteran. Tune in, and let's embrace better execution practices for a thriving business landscape!

Episode 335 of the Jason & Scot Show was recorded on Friday, October 10th, 2025

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For this episode we have an experiment for you. The NRF big show concluded Tuesday Jan 13th and Jason was invited to 'tie the bow' on the conference in the last keynote:

Commerce Disrupted: Rise of the AI Native Consumer.

For this podcast, we recorded the keynote's audio so you can experience the keynote. If you'd like to see the video we shot as well as the audio it's available here->

https://www.youtube.com/@Retailgentic

The slides are available for you to download in PDF Format here.

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EP333 - Jason Del Rey The Aisle

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Chapters 0:39 Welcome to the Json and Scott Show 2:23 The Amazon Book Debate 7:43 Inside Jason's Media Journey 10:50 Jason's New Venture 11:14 Launching The Aisle 19:25The Name Game 21:53 Blocking Bots on The Aisle 24:53 Sneak Peek of Upcoming Interviews 32:05 Is It a Bubble? 39:00 Exploring Conversational Commerce 46:10 Upcoming Event Insights 49:31 How to Subscribe to The Aisle 50:12 Closing Thoughts and Thanks 50:24 Predictions for AI Integration 54:02 Closing Thoughts on Industry Standards Welcome back to the Jason and Scot Show, where we celebrate episode 333 with a truly special guest. Recorded on Thursday, November 19th, this episode features Jason Del Rey, a prominent e-commerce journalist and the author of the acclaimed book, Winner Sells All: Amazon, Walmart, and the Battle for Our Wallets. Jason is launching a new paid newsleter about AI era of commerce "The Aisle." With a staggering combined history of over 30 years between Jason Goldberg, Scot Wingo, and Del Rey, this conversation dives deep into the evolving world of commerce and the exciting new venture that Del Rey is embarking upon.

Kicking off the episode, Jason G and Scot share their long history with Del Rey, discussing his illustrious career covering e-commerce for major publications like Inc. Magazine, Ad Age, and Fortune. They reminisce about Del Rey's past appearances on their show (episodes 67 and 183) and set the stage for his latest project, an independent media company called "The Aisle." Del Rey recounts his trajectory into the e-commerce world, starting from covering digital media companies at Ad Age to eventually becoming an Amazon expert while working under media icons Walt Mossberg and Kara Swisher at All Things D.

Del Rey reflects on his experiences as a journalist, highlighting his strong relationships with leading figures in the retail space, including interviews with Jeff Bezos, Doug McMillan, and Mark Lurie. He discusses the events he hosted—particularly the Code Commerce series—where he connected influential retail CEOs and tech leaders. As the conversation progresses, Jason G and Scot delve into Del Rey's motives for launching The Aisle, underscoring both personal and professional motivations. Del Rey candidly shares his views on mortality and the urgency to pursue one's passions, a perspective deepened by the early loss of family members and friends.

Transitioning into the specifics of his new venture, Del Rey reveals that The Aisle will cover the future of commerce through the lens of AI and technology. He outlines his plans for a paid subscription newsletter focusing on everything from product discovery and conversational commerce trends to disruptive changes in online advertising. With features like intimate dinner events designed to foster candid dialogue among industry leaders, Del Rey aims to create a community that engages deeply with the evolving landscape of commerce.

Listeners also learn about The Aisle's structure, including tiers of membership which offer a variety of benefits, from exclusive newsletters to off-the-record consultations with Del Rey himself. As the discussion unfolds, Del Rey emphasizes his experience-based approach to journalism, believing that deeper connections with his audience will allow for richer reporting and analysis.

In a light-hearted exchange, the hosts discuss the nuances of conversational commerce and the evolving nature of how consumers interact with brands. Del Rey shares insights from his discussions with industry leaders, exploring the distinctions between textual and voice interactions in commerce. The guests speculate on the future of these trends, engaging in a spirited conversation about the balance between hype and genuine innovation in the AI commerce landscape.

Before closing the episode, Del Rey enthusiastically introduces listeners to his first interview for The Aisle, featuring John Collison, co-founder of Stripe, discussing the future of payments and commerce. The episode wraps up with Jason G and Scot reflecting on Del Rey's journey and the exciting future that lies ahead for him and The Aisle, inviting their listeners to engage with the new publication that promises to deliver valuable insights into the world of commerce.

As always, if you enjoy the show, consider subscribing and leaving a five-star review on iTunes. Join us next time for more engaging discussions about the future of commerce and technology!

Episode 333 of the Jason and Scot Show was recorded on Thursday, November 19th.

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EP327 - Kelly Goetsch Order Network eXchange (onX) Standard

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In this episode of the Jason & Scot Show, recorded on Thursday, November 6th, hosts Jason Goldberg and Scot Wingo welcome back Kelly Goetsch, now the President of Pipe17. They dive deep into the evolving landscape of e-commerce, order management, and the impact of AI on consumer experiences, taking us on a journey through the dynamic developments of the industry.

The conversation kicks off with a nostalgic nod to a previous episode, highlighting the rapid shifts in technology and market dynamics since Kelly last joined the show during the height of the microservices boom in July 2021. The discussion emphasizes the transformation of order management systems (OMS) and how current customer expectations have been reshaped by giants like Amazon, pushing brands to adapt to new fulfillment models. Kelly explains how Pipe17 positions itself uniquely in the OMS space, competing not just with traditional systems but also embracing a network-based approach, citing their aim to redefine order operations for the modern era.

Throughout the episode, listeners learn about the innovative concept of the Order Network Exchange (ONX) and the Commerce Operations Foundation, which aims to standardize communications between selling channels and fulfillment systems. Kelly describes the vision of a seamless, integrated environment where data flows between systems in real-time, vastly improving responsiveness to customer orders and effectively managing inventory across various platforms. The team delves into the significance of the Model Context Protocol (mCP), which allows AI to interface more effectively with various applications in real-time, exemplifying the transformative potential of AI within commerce settings.

The conversation takes an intriguing turn as the hosts discuss the current state of e-commerce, focusing on how emerging technologies and shifts in consumer behavior are influencing future sales trends. Kelly expresses a bold prediction that more than 50% of e-commerce transactions will be influenced by AI in the near future. The dialogue also spans the evolution of payment solutions, summarizing the landscape of competing systems and the potential for disruption.

Jason and Scot further probe the notion of the web's declining dominance compared to new AI-driven shopping experiences. Kelly shares insights about the changing nature of discovery channels and how AI can reinvent customer interactions in meaningful ways, potentially replacing traditional web browsing models. Amidst these discussions, Kelly highlights the importance of fostering collaboration within the industry, illustrating how cooperation can lead to overall growth and improved customer experience.

As the episode wraps up, the conversation touches on the necessity for companies to become agile, moving away from prolonged evaluation processes towards a model that values continuous improvement. The discussion reinforces the idea that standards may provide the needed flexibility for businesses to adapt more readily to accelerating changes in technology.

Tune in for this captivating episode, filled with rich insights into the future of e-commerce, AI's pivotal role in shaping customer experiences, and the transformative efforts underway at Pipe17!

If you enjoyed this episode, please consider leaving a review on your preferred podcast platform, and don't forget to subscribe for more engaging discussions and industry insights!

Episode 332 of the Jason & Scot Show was recorded on Thursday, November 6th, 2023.

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EP331 - E.L.F. Beauty CDO, Ekta Chopra

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0:42 Welcome to the Jason and Scott Show 0:57 Live from Las Vegas 1:09 Guest Introduction: Ekta Chopra 1:51 The Best Panel Ever 3:06 Ekta's Journey to Elf Beauty 4:26 Understanding Elf Beauty 6:28 From Cosmetics to Multi-Channel 8:02 AI in Retail: The Future 14:22 Maintaining Company Culture 22:30 The Impact of TikTok Shop 25:31 Attribution in a Multi-Channel World 29:19 Implementing AI at Elf 34:52 The Future of AI and Retail 40:53 Balancing AI with Humanity 46:21 The Importance of Loyalty Programs 48:04 Conclusion and Farewell Welcome to a special live edition of the Jason & Scot Show!

In this episode, recorded live from Groceryshop in sunny Las Vegas on September 30, 2025, hosts Jason Goldberg and Scott Wingo celebrate the return of in-person podcasting after three years, reminiscing about their origins in the live podcasting scene and the upcoming 10-year anniversary of the show. Together, they welcome special guest Ekta Chopra, the Chief Digital and Innovation Officer of Elf Beauty, who shares insights into the fast-changing landscape of beauty and eCommerce.

Ekta discusses her journey to Elf Beauty, a brand that has consistently emerged as a bold disruptor in the cosmetics industry. She explains how Elf was innovative from the start, selling $1 cosmetics online at a time when digital platforms were still developing. She proudly notes how the brand has evolved from its original direct-to-consumer model to a successful omnichannel powerhouse with a portfolio that now includes elf Cosmetics, elf Skin, and collaborations with other beauty brands.

The discussion naturally transitions into the role of AI in eCommerce and how Elf is leveraging AI tools to revolutionize customer engagement and product development. Ekta emphasizes the importance of being where their community is by adopting new platforms such as TikTok, where Elf has successfully engaged consumers through authentic connections with content creators. The episode also dives into how the brand is navigating the evolving landscape shaped by AI, including enhancing search capabilities and content strategy to stay relevant and connected with younger consumers.

As the conversation progresses, the hosts discuss the importance of data and customer-centric strategies in the age of AI. Ekta shares the significance of the Elf loyalty program in creating a seamless customer experience and maintaining relationships with consumers. The commitment to "human-in-the-loop" processes ensures effective integration of AI technologies while addressing ethical concerns.

Listeners are encouraged to check out Ekta's informative Substack, "AI Chef," for insights into the intersection of AI and commerce, where she shares her ongoing learning journey and best practices for integrating AI into business operations.

This exciting episode wraps up with a nod to the future of commerce, the balance between technology and humanity, and the continuing evolution all brands must undergo as they adapt to the changing marketplace.

Join us for this engaging conversation filled with wit, humor, and a valuable glimpse into the future of beauty and eCommerce.

Episode 330 of the Jason & Scot Show was recorded live from Groceryshop on September 30th, 2025. Don't forget to subscribe, leave a review on iTunes, and follow us on social media for more exciting news and updates!

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.

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EP330 - GroceryShop and ChatGPT Instant Checkout

0:38 Welcome to the Json and Scott Show 2:34 Catching Up After Two Months 2:59 Insights from NRF Europe 7:04 Retail Club Experience 13:22 Key Takeaways from Grocery Shop 24:09 Sampling Experiences at Grocery Shop 38:48 AI Trends in Retail 52:11 Closing Thoughts and Next Steps Join Jason and Scot as they celebrate recording their first live episode in three years for the Jason & Scot Show! Recorded on Tuesday, September 30th, 2025, this episode captures the excitement of being back together in person and highlights their dynamic discussions on the current state of retail and upcoming trends.

From reminiscing about their podcasting journey since its launch in November 2015, Jason and Scot dive into the latest happenings in the retail space, especially from the two shows they recently attended: NRF Europe and Retail Club. Jason shares insights from his time at NRF Europe in Paris, where he participated in engaging discussions about retail innovations and the necessity of multi-lingual capabilities in a diverse market. With impressive attendance and notable exhibitors, he reflects on the event's success and the importance of adapting to multiple regional markets within Europe.

Meanwhile, Scot delves into the Retail Club event held at Huntington Beach, California, highlighting its unique vibes with a beachside setup and a focus on AI-driven retail discussions. The event offered a refreshing departure from traditional conferences, focusing on interactive workshops and relationships rather than panels. Together, they explore the implications of AI in retail, including its transformative power over various operational aspects, and the importance of adapting to the evolving marketplace landscape.

Jason and Scot also engage in a lively discussion about AI's role in shaping customer experiences, their predictions for the future, and how retailers can effectively harness these technologies while remaining competitive. They examine innovations such as electronic shelf labels, which are becoming increasingly prevalent in stores. Scot can't help but reference his ongoing obsession with the concept of “Agentic Native Vertical Brands,” hinting at the evolving terminology in the retail sphere.

In the latter part of the episode, they discuss their experiences at GroceryShop, where significant trends are emerging in grocery retail—especially regarding macroeconomic conditions, emerging AI technologies, and the vital role of retail media networks. The conversations shed light on how AI can enhance not only the customer experience but also the operational efficiencies of retailers. The broad-impact implications of GLP-1 medications on consumer habits are discussed as well, marking a notable trend in grocery shopping behaviors.

Towards the end of the episode, Jason raises his anticipation for the upcoming trends in commerce, making it clear that the integration of AI into the shopping experience will continue to redefine how retailers operate. From discussions around inventory management, product recommendations, and dynamic pricing to the emergence of social commerce, this episode encapsulates the cutting-edge of the retail landscape.

Tune in for this inspiring and enriching episode filled with insights and excitement around retail innovation! If you haven't already, subscribe to the Jason & Scot Show for more engaging discussions and updates on the future of retail.

This episode was recorded on September 30th, 2025, at the GroceryShop conference, a fantastic gathering of thought leaders and innovators in the retail space, where Jason and Scot share their unique perspectives and observations on the fast-evolving landscape of retail.

Episode 330 of the Jason & Scot Show was recorded on Tuesday, October 30th, 2025.

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EP329 - Amazon Q2 2025 Results

0:38 Welcome to the Jason and Scott Show 12:57 Amazon's Mixed Earnings Report 18:07 The Impact of AWS on Retail 21:18 AWS Performance and AI Concerns 28:55 Amazon's Advertising Strategy 33:33 Amazon's Relationship with Google 35:24 The Future of AI Investments 39:44 User Experience and Advertising 42:42 Economic Uncertainty and Consumer Behavior Welcome back to the Jason & Scot Show! In episode 329, recorded on August 1st, 2025, we dive into the highly anticipated Amazon Q2 earnings report alongside other critical tech giants' earnings results. Your hosts, Jason Goldberg (the retail geek) and Scott Wingo, bring their expert insights and analysis of a rollercoaster earnings season that saw mixed results across the board.

Kicking off the episode, Scot sets the stage with a review of Google’s recent earnings results, which painted a mixed picture. While search revenue indicated a solid 12% growth, concerns about the impact of AI on search operations raised eyebrows. Google Cloud did not exhibit the explosive growth anticipated, leading investors to remain cautious. Following this, we turn our focus to the simultaneous announcements from Microsoft and Meta. Each company churned impressive earnings and strategic maneuvers, surpassing expectations and highlighting strong growth driven largely by their AI advancements.

Transitioning to Amazon, the top story emerges: the company reported Q2 earnings that, unfortunately, mirrored Google's mixed performance rather than the triumphs seen with Microsoft and Meta. Despite a revenue growth of 12% and operating income surpassing expectations, investors reacted negatively to AWS's performance, which failed to keep pace with its competitors. Jason and Scott dissect the factors leading to Amazon's stock drop post-earnings call and the implications for its sprawling empire.

Amazon’s retail performance, particularly in North American and international markets, sparks a lively discussion. Notably, the North American retail business beat expectations by 2%, and international retail excelled by 7%. The hosts clarify that while the overall performance was commendable, it left much to be desired when juxtaposed against AWS's stunted growth and other tech players' successes.

Delving deeper, Jason emphasizes the company’s continued enhancements to its supply chain, signalling improvements that strengthen their retail operations, crucial for maintaining growth amidst increasing competition. He also highlights an interesting trend: for the first time, first-party sales outpaced third-party sales, reflecting a noteworthy shift in Amazon’s marketplace dynamics as consumer spending leans towards everyday essentials.

As the discussion progresses, Scott raises a critical point about the evolving landscape of online advertising and the pivotal role it plays in driving Amazon’s growth. Despite a slight deceleration in year-over-year growth for the ads business, it remains a bright spot for Amazon, contrasting starkly with AWS’s performance and hinting at the challenges faced in balancing user experience against monetization strategies.

The conversation pivots towards AWS, where the hosts dissect the figures that fell below investor expectations—the margins declining for the first time since the previous year, raising questions about structural issues. The ambiguity surrounding Amazon's ability to capture AI growth is a focal point, with analysts expressing concerns about lagging behind competitors.

Nearing the end of the episode, a fascinating turn occurs when Scott sheds light on Amazon's recent decision to withdraw its shopping ads from Google. This pivotal move sends ripples across both platforms, provoking various theories about strategic shifts and implications for competitors. The duo shares intriguing insights into how this action marks a significant stake in the ground regarding data ownership and market positioning.

As the episode wraps up, Jason and Scott reflect on the broader landscape of AI, retail, and shifting consumer behaviors, suggesting that while Amazon remains a dominant player, its approach and evolution will be crucial in navigating future market dynamics.

Be sure to listen in for their final takeaways from the earnings calls and nuanced observations regarding the tech landscape. If you enjoyed this episode, please give us a five-star review on iTunes, and stay tuned for next week’s insights!

Episode 328 of the Jason & Scot Show was recorded on Thursday, July 23rd, 2025.

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Brittain Ladd worked at Amazon and helped them conceive of a model that was both cheaper than traditional package delivery and more convenient as well. The goal? To help Amazon (2.5% share) grocery catch-up and ultimately beat Wal-mart in grocery (25% share).

It starts with grocery distribution centers that are fully robotic/automated called Local Vending Machines (LVMs) instead of stores. These LVMS can fill traditional Prime vans with product, or they can fill 'cartridges' that then fit in a specialized Rivian that accepts the cartridge full of product and then robotically fulfills each stop on a delivery route via the robotics in the van. The final step will ultimately be completed by a humanoid robot.

Sound like science fiction? Brittain Ladd has seen the prototype van and in this podcast we go deep on how Amazon envisions this entire futuristic, zero-human-touch, supply chain working.

Want to learn more? Detailed article here-> https://open.substack.com/pub/scotwingorefibuy/p/scoop-we-have-the-inside-story-on?r=5av7y5&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

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EP328 - Navigating E-commerce News and Innovations in AI Answer Engines for Commerce

0:36 Welcome to the Jason and Scot Show 4:53 Consumer Trends in Retail 5:03 Upcoming Retail Events 8:42 Insights on E-commerce Growth 10:35 Earnings Season Insights 44:13 Amazon Prime Day Analysis 51:30 New Developments with Alexa 56:00 Predictions for the Holiday Season

In this episode of the Jason and Scot Show, recorded on Thursday, July 23rd, Jason and Scot delve into the latest shifts within the e-commerce landscape, emerging consumer trends, and the role of Artificial Intelligence in retail transformation. Jason has been on the road, engaging with industry professionals and moderating discussions around pressing retail topics such as social commerce and consumer behavior, particularly the growing usage of answer engines amid an evolving shopping cycle involving giants like Amazon and Google.

Scot kicks off the episode by teasing insights from Jason’s recent travels and virtual think tank participation, where they investigated consumer trends such as the surge of ethical purchases and the dynamics of social commerce influenced by platforms like TikTok. The duo explores the implications of consumers increasingly relying on answer engines throughout their shopping journeys, particularly in the wake of mounting competition from dedicated AI solutions.

Listeners are treated to an analysis of recent U.S. retail data, highlighting core retail sales growth—a modest 3.8% year-to-date—contrasting the slower pace of e-commerce growth, now at only 6.8%. The conversation turns to the dichotomy between successful retail giants like Amazon and Walmart, against a backdrop of underperforming categories like electronics and home improvement, veering into the impact of macroeconomic factors on consumer spending behavior.

The episode also takes a closer look at notable earnings releases, particularly how tech giants like Google are grappling with a shift towards answer engines like ChatGPT, disrupting traditional search methodologies. Scot shares insights on Google's recent performance metrics that seem to mask a creeping decline in organic search volume, while Jason echoes concerns about the current retail media landscape and the challenges it poses to user experience on platforms like Amazon.

With light humor and camaraderie peppering deeper analysis, Jason and Scot examine the implications of Walmart's recent hires in AI technology and strategy, reflecting on how retailers are pivoting to become more like answer engines amidst intensifying competition.

As they look ahead towards the upcoming holiday season, expectations are tempered by economic uncertainties and supply chain disruptions, hinting at an uneven landscape where larger players may gain traction at the expense of smaller retailers.

The pair wraps up the episode by expressing optimism for the future of AI in simplifying shopping experiences while also critiquing the current voice shopping functionality on devices like Amazon's Alexa+. Join them as they illuminate the complexities shaping today's e-commerce environment while addressing the pressing questions retailers must answer to thrive in an increasingly competitive landscape.

Don't miss out on their engaging discussions; be sure to subscribe for the latest insights into retail trends and innovations!

This episode is packed with valuable insights and anecdotes, perfect for retail enthusiasts and industry professionals looking to stay ahead of the curve. Enjoy the show and don’t forget to leave a review!

Episode 328 of the Jason & Scot Show was recorded on Thursday, July 23rd, 2025.

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EP327 - Agentic Commerce

Happy Fathers Day!

In this exciting episode of the Jason & Scot Show, recorded on Friday, June 6th, 2025, hosts Jason Goldberg and Scot Wingo dive into the latest happenings and insights in the world of strategic e-commerce, AI technologies, and retail innovations. This episode picks up where Episode 326 left off, continuing the engaging conversation sparked by their recent discussions around AI and its implications for the retail sector.

Kicking off, the duo discusses the monumental news that Fiji Simo, the former CEO of Instacart, has been tasked with leading OpenAI's consumer products division. Jason emphasizes the significant shift this represents for both Fiji’s career and the trajectory of OpenAI, pointing out her unique blend of extensive e-commerce experience and her focus on the future of AI. Both hosts speculate on how her leadership role at OpenAI could steer the integration of AI into commerce, particularly in areas like agentic shopping and advanced AI-driven search capabilities.

Shifting gears, Jason and Scot review an intriguing overproduced conversation between OpenAI’s Sam Altman and design visionary Jony Ive about a mysterious new device rumored to empower user access to AI. Scot and Jason share their thoughts on the potential implications of such a device, questioning whether it might be a powerful, screenless AI assistant or simply another Alexa-type solution.

The conversation then transitions into a critical discussion about the evolving landscape of search and commerce. Jason unveils his recently published point of view report on AI disruption in commerce search. He argues that while AI-driven search technologies are still in their infancy, they hold the potential to drastically redefine user experiences and efficiency in online shopping, making it imperative for brands to adapt their marketing strategies accordingly.

Scot highlights recent statistics from eMarketer that predict exponential growth in AI-related ad spending, setting the stage for a potential paradigm shift in online marketing and advertising dynamics. They explore whether innovative AI search engines like ChatGPT and Perplexity may challenge traditional platforms like Google and reshape businesses' approach to SEO and content strategy.

Both hosts don’t shy away from discussing broader social implications, such as the significant role of social media in commerce, especially platforms like TikTok. They reflect on how social media is transforming the way consumers discover and purchase products, paralleling it with the changes brought by AI technologies.

In a particularly engaging segment, Jason and Scot examine the recent foray into humanoid robots by Amazon, comparing it to other technological innovations like drones. While amused by the prospect of robots delivering packages, they share a similar concern regarding the practicality and future significance of such technologies. McDonald experts remain skeptical about whether humanoid robots will fundamentally change e-commerce, preferring to focus on the profound changes they believe AI will bring.

As they wrap up this marathon double heaer episode, Jason and Scot discuss how perceptions of shopping are evolving, particularly distinguishing between needs fulfillment and the discovery process, and how AI agents could redefine these experiences in a retail context.

Listeners are encouraged to subscribe, share their thoughts and reviews, and engage with the show on social media platforms and through Scot's new substack, Retailgentic.ai.

Tune in to Episode 327 of the Jason & Scot Show for an insightful exploration of the present and future of AI in retail, recorded amid their back-to-back sessions fueled by the wealth of information gathered during Jason’s global journey in e-commerce.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 327 of the Jason & Scot show was recorded on Friday, June 6th.

http://jasonandscot.com

Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of ReFiBuy.ai and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

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EP326 - Are Retail Media Networks Mid?

Happy Fathers Day!

In our previous episode (326) Jason made a comment about retail media networks sometimes being over-hyped. In response, Scot recruited all his friendsd in the the industry and inticed Kiri Masters to make a rebutle. Which she did via two part linked-in post and a podcast. So in this episode Jason doubles down and defends his position on retail media networks.

In addition to covering the state of retail media networks, Scot introduces his new Retailgentic sub-stack which everyone should subscribe to, and give a listen to his new video podcast focused on the latest Agentic Commerce news.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 325 of the Jason & Scot show was recorded on Friday. June 6th.

http://jasonandscot.com

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In this episode, Scot Wingo is joined by Forrester retail analyst Sucharita Kodali to dive into the emerging world of agentic shopping and the growing influence of generative AI in commerce. They cover: - The explosion of retail media networks - Why marketplaces are making a comeback - OpenAI’s retail ambitions (and that Instacart CEO hire) - GenAI adoption across retail use cases - The rising threat to Google from TikTok and AI search - What’s actually agentic vs. “faugentic” ⏱ Notable Timestamps: 00:06 – What is Retailgenic and what’s at stake in AI shopping 03:00 – Why retail media networks exploded post-COVID 07:30 – Instacart’s ad business & the OpenAI CEO move 10:00 – How big retailers are actually using GenAI today 14:00 – Is Google search under threat from ChatGPT, TikTok & Perplexity? 20:00 – Agentic shopping: hype vs. reality 26:00 – Could AI replace ticket brokers and influence high-demand shopping? 31:00 – The power of TikTok shopping and influencer-led discovery 33:00 – Closing thoughts on what’s truly “agentic” vs. faugentic 👉 Subscribe for more deep dives into the AI commerce revolution: https://www.retailgentic.com 📺 Watch episodes on YouTube: youtube.com/@retailgentic 🎧 Listen wherever you get your podcasts: Spotify, Apple, etc.

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Greetings Jason and Scot show listeners, here's another Retailgentic episode to hold you over until Jason and I can get our schedules to line up.

Today on the Retailgentic pod, we’re excited to share our discussion with Michelle Grant, Director of Strategy & Insights for Retail and Consumer Goods at Salesforce, to explore how AI agents are already reshaping retail, both online and in-store.

Reminder to subscribe to the retailgentic pod here-> https://retailgentic.transistor.fm/

The retailgentic substack newsletter here-> https://www.retailgentic.com

Finally, you can also check it out on YouTube here.

Enjoy!

Scot

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Greetings Jason and Scot show listeners. Today we are cross posting the first episode of a new podcast from Scot Wingo, the 'Scot' from Jason and Scot. Don't panic! The Jason and Scot show is still alive and kicking - Jason's schedule has limited our time together, but we're working on it.

While you wait, Scot has a new podcast that is focused on an area he's excited about - the disruption coming from AI Shopping agents. This podcast has three elements:

Retailgentic substack - www.retailgentic.com - Regular long-form content on strategies in the World of AI Shopping agent plus breaking news
Retailgentic pod - This podcast has a video option on youtube here: https://wwww.youtube.com/@retailgentic
Retailgentic pod - If you prefer the classic audio podcast, you can subscribe in your favorite podcast apps.

Where to find the Retailgentic podcast

o Apple/iOS podcast - https://podcasts.apple.com/us/podcast/retailgentic/id1816979446

o Spotify - https://open.spotify.com/show/5JfNVnENi8y1GnnW6beo7V

o YouTube - https://open.spotify.com/show/5JfNVnENi8y1GnnW6beo7V

o All others - https://retailgentic.transistor.fm/subscribe

Thanks for checking it out!

Scot

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Amazon Q1 2025 results and AI Commerce Happy Starwars Day!

In this episode we do a deep dive into Amazon Q1 2025 results. Amazon had an overall strong quarter with record profits from their retail business unit. Amazon GMV grew 7.9% in Q1 2025 vs the same quarter in 2024, three times as fast as the retail industy as a whole.

We also cover the latest AI commerce news, including ChatGPT product titles, OpenAI partnership with Shopify, PerplexityPro, and much more.

Subscribe to Scot's new substack and podcast, all about Agentic Commerce, called Retailgentic.ai in conjuction with his new startup ReFiBuy.ai.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 325 of the Jason & Scot show was recorded on Sunday, May 4th, 2025.

http://jasonandscot.com

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EP324 - Amazon Q4 Earnings

In this episode we do a deep dive into Amazon Q4 and Full Year 2024 results. Amazon had an overall strong quarter with record profits from their retail business unit. Amazon GMV grew 11% in 2024 vs. 2023, almost three times as fast as the retail industyr as a whole. Amazon's North American GMV also nearly matched Walmart's in 2024 (Walmart reports it's Q4 results next week).

We also cover the impacts and implicates of the de minimus ban in the US (which was lifted after only 4 days).

We wrap up by comparing Amazon's 2024 growth to the rest of the retail industry. Amazon, Walmart, Costco, Temu, Shien, and Tik Tok Shops representing 62% of all retail growth in 2024 (this is a revision from the 70% estimate we shared in the podcast).

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 324 of the Jason & Scot show was recorded on Monday, February 10th, 2025.

http://jasonandscot.com

Transcript Jason

[0:23]Welcome to the Jason and Scott Show. This is episode 324 being recorded on Monday, February 10th. I'm your host, Jason Retail Geek Goldberg, and as usual, I'm here with your co-host, Scott Wingo.

Scot

[0:36]Hey, Jason, and welcome back, Jason and Scott Show listeners. Jason, how was your Super Bowl?

Jason

[0:43]My Los Angeles Chargers did not do well in the Super Bowl this year. Or my adopted Detroit Lions.

Scot

[0:50]Well, as a chief digital payment retail advertising officer for a big ad firm, I'm sure you were there for the ads. What any ads catch your attention?

Jason

[1:02]Were there ads in the Super Bowl?

Scot

[1:04]Yeah. Yeah. It's supposedly one of the more expensive places to buy an ad.

Jason

[1:08]Yeah. Yeah. I mean, this is kind of hackneyed, but it's near $8 million for each 30 second spot now. And what people miss is that most of these ads cost more than twice that. That both the production of the ad is quite expensive. And then there's now this whole, it used to be that you just surprised everyone by running an ad. And what everyone has learned is you get a lot more mileage by hyping the bejesus out of your ad for weeks before the Super Bowl. And so now the Super Bowl is like step four in a 10-step process and it's all super expensive. So the money is higher than ever. I would not say it was a standout year for e-commerce. Like the last two years, like two years ago, we had this surprise new, not only Super Bowl advertiser, but surprise new retailer in Timu.

Jason

[2:02]And, you know, then last year they were surprised in that they bought so many ads. So that was remarkable. Over the years, we've had some really interesting Amazon ads. And then occasionally we have some weird venture funded, like digitally native direct to consumer companies try to make a splash in the Super Bowl. So I'm not sure I would characterize anything that this year as super standing out from an e-commerce standpoint. Instacart was like the most significant new e-commerce player to do a Super Bowl ad. I thought they did a good ad that was well received with the famous brands. And then, you know, there's some weird stuff. Most of these ads are just to increase brand awareness. And in fact, the way they measure them is things like unaided brand recall, which are, these are metrics that I personally hate. But one of the ads for Fetch, which is arguably an e-commerce company, it's a, you know what Fetch is, Scott? It's a, it's like a purchase affinity program.

Jason

[3:08]So... Brands buy promotions. They're from Fetch. Customers subscribe to Fetch, and when they take advantage of the discount on General Mills goods, they earn Fetch points, which they can then redeem for prizes. So it's, it's a multi-brand customer affinity, digital native customer affinity program. And they did an ad in the last two minutes of the Superbowl that was essentially open our app right now. And in the next five minutes, we're giving 120 people, $10,000.

Scot

[3:44]Well, and so the.

Jason

[3:46]The, yeah, you had to watch to the bitter end and the game was no longer interesting at that point. But the interesting thing about that is that this is one of a handful of attempts over the years to do real activation in a Super Bowl ad versus just generate awareness. So I don't think anyone thought it was super well done or super effective, but I admire the effort to try to make some of these ads work harder. Like you'll remember past years, there were interesting, like there was a one year where the ad was just a QR code that stood on the screen for 30 seconds.

Scot

[4:23]Yeah. Yeah. And bounced around. It did the bouncy thing.

Jason

[4:25]Yeah. To make it harder to scan, which is, yeah.

Scot

[4:31]Cool. I liked the Instacart. That one kind of caught my attention.

Jason

[4:35]Yeah, I was just sad that there was no Timu jingle to get earwormed into my head this year.

Scot

[4:42]Yeah, I was confused by the water bottle thing. I had never seen that.

Jason

[4:46]Yeah, that got kind of panned. That didn't get circle or whatever it's called. Yeah.

Scot

[4:53]Yeah.

Jason

[4:54]Yeah. So it didn't get great reviews as an ad, but it was super confusing. People didn't understand what they were even trying to do.

Scot

[5:00]Yeah, I thought it was like a delivery network. And then I was thinking, oh, we'll have to mention this. And I was like, wait a minute. They're only delivering water bottles. I must have misunderstood the whole thing.

Jason

[5:08]Yeah. It's a filtering, it's a filtering water bottle.

Scot

[5:11]Yeah. I guess I didn't understand why they were distributing a hundred.

Jason

[5:14]I guess they gave away like a million starter kit sample packs, but it was not clear to anyone watching the ad that that's what they were talking about or doing. They, they tried to get too much in a short ad, but I think the, the plot in theory was that the the celebrity who's the the guy from mean girls and or pitch perfect yeah um that he who apparently is a real life fan of the product and got this contract as a result of his like, social shares about the product that he inadvertently ordered a huge surplus of the of these these products and then had to give them all away.

Scot

[5:54]Well we'll have to have you do a live stream next year to explain the commercials to me.

Jason

[5:58]Yeah i think we should get someone that understands.

Scot

[6:05]I got none of that whatever you guys got so.

Jason

[6:07]Yeah yeah that's just all the water cooler conversation i get in my company today the coolest ad in our world i should have said is starbucks that did not advertise at the super bowl but they've created a new holiday which is called i think I think it's called like super Monday and so it's, everybody's like tired and low energy on the Monday after the super bowl. So Starbucks gave all, all rewards members a free coffee today.

Scot

[6:40]Yeah, that was smart.

Jason

[6:41]Yeah.

Scot

[6:42]The, it doesn't work for the kind of drinks we have though sadly.

Jason

[6:45]Not trying to use a little. Basic brewed iced coffee does count. So I didn't, I didn't go, but I could have gotten a nice coffee.

Scot

[6:52]Yeah. Okay. I liked, I thought it was interesting that the Dunk Kings were, or Dunkin' Donuts was basically making fun of Starbucks. They were kind of dissing them.

Jason

[7:03]Yeah. Yeah. I didn't like that at all. No. And that was kind of a sequel, right? Like that was a sequel from last year's ad. Although I think Matt Damon got bumped for Ben Affleck's brother. So that, I will say the, the. The david beckham ad was pretty cute.

Scot

[7:20]Yeah that was funny yeah.

Jason

[7:21]The other david yeah.

Scot

[7:23]And he kicked the ball.

Jason

[7:25]Yeah oh it's the thing i do yeah and so this is for people that didn't watch matt damon portrayed david beckham's long lost brother that his parents never told him he had and, and the other david grew up in america versus david beckham growing up in in england obviously But at the end of the ad, David Beckham explains that he's a pretty famous soccer player. And Matt Damon goes, you mean like Matt Damon famous? And David Beckham goes, more like Ben Affleck famous. And Matt Damon goes, oh, that's too bad.

Scot

[8:00]Ouch.

Jason

[8:01]Yeah.

Scot

[8:03]Cool. Well, today we are going to talk about Amazon's fourth quarter. So the, before we go into there, the setup was you, did the Department of Commerce ever come out with their data for, for the holiday or we're still waiting on it?

Jason

[8:21]No, they did. The December data is out. And so it ended up being a good holiday. November sales were really soft by historical standards, but then December sales were really strong. The partly, I think that's partly because the, October. Literally, the holiday season started in October this year. For the first time ever, they really got consumers to buy more stuff in October. And so then there was kind of a lull in November and sales picked back up in December. Also, just weird vagarities of the calendar. Cyber Monday was in December this year, which it's normally in November. So that had some impact. But cumulatively, between November and December, sales were up 4% year over year, which NRF had forecasted that they would be up two and a half to three and a half percent. So being up four percent is pretty solid.

Scot

[9:13]Yeah. Good. Cool. So then coming into, oh, the other thing I wanted to hit before we get into the deep dive of Amazon earnings is the end of the de minimis thing that you've been talking about.

Jason

[9:26]Yeah. See, we can do a super short version of this. When you import stuff into the United States, you have to pay duties and taxes on those things and you have to meet import requirements. So you can't import products that are made with, you know, dangerous chemicals or made by a child political prisoners or things like that. But we don't have enough inspectors to make sure that everything comes into the United States meets all those criterias. So for a long time, we've had this exception on the import thing, which is if it's a very small package of low value, it does not need to be inspected and you do not need to pay customs. So if you make a container full of t-shirts and send them to the United States to sell, you pay duties on that container. But if you put a single t-shirt in an envelope and ship it to a single customer, it's under the de minimis threshold and nobody has to pay customs on it. And it was a clause that was just to save on labor to process all this paperwork. No one wanted to collect $0.30 of duties and have to spend $5 processing that $0.30 payment. But over time, that threshold crept up and up. And under the Obama administration, it got raised to $600.

Jason

[10:42]And so there's companies like Shein and Timu shipped the vast majority of their packages into the U.S. When they first started via that mechanism. So they, in essence, didn't pay any duties or taxes. And, you know, a lot of people felt that's unfair, that Gap is paying a lot of duties because they're importing containers, a lot of stuff, and Timu is shipping individual packages to consumers and not paying duties. And so Biden actually...

Jason

[11:11]Issued an executive order to cancel De Minimis from China, but he wrote it in a way that it would be like carefully considered and slowly implemented. So it hadn't been implemented by the time he left. And then Trump issued an executive order on like a Thursday saying it's, it's closed on Tuesday over the weekend. And so everyone's like, oh man, Timu and Sheehan are going to be out of business. This is going to be great for Western brands and blah, blah, blah. and it's still all playing out. Who knows what really will happen. My own personal opinion is Timu and Sheehan needed De Minimis to get started and they took full advantage of it. They are now so big that they don't need it. And both of those companies have half the goods they sell are already in warehouses in the US. They were already paying customs on it. They mostly decided that the popular items needed to get to Americans faster. So they have one and two day shipping. That's all coming from the U.S. So they're not dependent on de minimis anymore. And so banning de minimis, I think, is an inconvenience to them, but I don't think it's a death blow.

Jason

[12:19]Also, it doesn't necessarily save you money to use de minimis because while you save money on duties, it costs you a lot more shipping money because you're usually air freighting something instead of ocean freighting it. And that's much more expensive. So arguably, there's a trade-off between the air freight and the ocean freight. And then the secret dirty thing of all of this is every Western brand also figured out this was a thing. And so all the athletic shoes you buy get shipped in a container, not to the United States, but to Mexico, and then de minimis into the United States from Mexico. And so a lot of people assume, oh, this is only going to affect these Chinese brands that we don't particularly like doing well in our market, but it actually is likely to have an equal impact on many big brands.

Jason

[13:07]Trump also banned a minimus from Mexico and Canada, but then that got reprieved. So at the moment, it doesn't affect those. Nobody knew how to and still doesn't know how to process all of this. So literally the post office stopped accepting packages from China altogether for a day because they didn't know how to do this. Nobody solved the fundamental problem that we don't have enough inspectors to inspect all these packages. So in theory, if we try to inspect them all, there's not going to be any more goods in the United States because it's going to take a year for anything to clear custom. So there's a lot of confusion and uncertainty out there. I just sum it up by saying Amazon took full advantage of not paying sales tax when they got started. And it was a huge advantage and it helped Amazon scale.

Jason

[13:56]When we definitively started charging sales tax on e-commerce companies, everyone's like, oh, that's going to put Amazon out of business. And of course it didn't, right? Like Amazon had already gotten so big that they were happy to pay taxes and kind of pull the ladder up behind them and not let other people start with the same jumpstart that they got. And now they're happy to play on a level playing field because they know they can win on the level playing field. And I would argue Timu and Shein are kind of in the same boat with regard to De Minimus. So I think it's not going to materially stop them, but it's going to change how everyone does business. And at the moment, it just created a lot of confusion and uncertainty for everyone.

Scot

[14:40]Yeah. Interesting. Yeah, I saw a screenshot that like most of them, you know, overnight they had switched everything to be from Mexico and native in the U.S.

Jason

[14:49]Well, that's the other problem. There's a way to whack them. When you write, oh, we're just getting rid of de minimis for three countries, you're just starting a whack-a-mo game. Like, everyone will move everything to Guatemala or Indonesia. And then you'll have to issue new orders.

Scot

[15:04]Yeah, it does close the door for other competitors to use it as a bootstrap method. So in a weird way, it almost like solidifies Amazon, Timu, and Shein as kind of like the leaders of this.

Jason

[15:14]Yeah, I think that's it makes it much harder for a new competitor to be born to compete with with these guys that have already used it to get to scale.

Scot

[15:22]Yeah, cool. So last Thursday was Amazon.

Jason

[15:25]Oh, Scott, sorry. There's one other thing we have to cover before we get to Amazon. I did an event for a client, a speaking event, and a picture of it went up on the internet. And my friend Scott Wingo has too much free time on his hands and posted a whole LinkedIn article, zoomed in on my sock in this picture, which revealed the logo of the client I was doing a presentation for. And it's gone like Jason and Scott viral. So all of my supervisors at Publisys are super impressed that I got caught wearing a logo. And I have Scott Wingo to thank for that. So thanks, Scott.

Scot

[16:05]You're welcome. Hey, you wore the socks. It was funny. I was talking. I did another post where I went to a Starbucks one day and the new CEO, I don't know if you know this, but he's asking them if they have time to write little notes on the cups. I went to the Starbucks like two weeks ago and everything was lined up alphabetically. It was like one of those little delivery stations. And it all had like personalized notes. And I just like put it up there as like a really good example of small things are important for customer service and like wearing your client's socks. So little things like that matter.

Jason

[16:35]Amen. On the one hand, it was super awesome. On the other hand, the unintended consequence of that, Scott, is I now cannot go to any other client presentation without their socks. I just cost you thousands of dollars. Yes, yes. So let me just say, I've spent the last like five days, like scraping the corporate web company stores of a lot of retail and brands.

Scot

[16:58]Cool. So coming into Amazon's earnings, you know, it's really become all about AI these days. There's a lot going on in AI. First, we had Microsoft with Azure. They largely missed expectations on the growth of their AI piece. And then Google had a similar reaction. And what they're all saying is the demand is outstripping our ability to meet it where we're gpu and energy constrained and and fulfill a data center constrained so then everyone was kind of like oh boy it's going to be bad for amazon and there's a lot of little bit of a fear uncertainty and doubt in the market and then the big disruption happened when deep seek which is the chinese company there's there's been so much ink on this i'd be surprised if people hadn't heard about it they're.

Scot

[17:42]Their reasoning model, R1, came out and it was basically what they call open source. It's really open models, meaning open weights. You don't actually get the source code. So it's a little bit of a misnomer. I prefer open weights. But what that means is you can just basically download this thing and run it anywhere. And this is interesting because it's as good as the latest models from everyone that's charging quite a bit of money. And you know what what this the direct disruption here is it became very clear that the way this is priced is dollars per million of token million tokens so if you're going to use one of these llm kind of engines from an api perspective to power a feature or something like that it was really it was relatively very expensive in the early days of chat gpt and now it's gone from it's basically turning to zero very quickly so a lot of people were beating up Amazon for not having their own multi-billion dollar investment in an LLM. They are an investor in Anthropic, but they don't have their own LLM. So it's interesting because Jassy's been saying, we're kind of neutral. We just want to host them all and let the customer pick and the customer is going to go where the data is. And we have a lot of data.

Scot

[18:56]So then that actually ended up, DeepSeek R1 ends up really being a big benefit to companies is Amazon for the reasons I mentioned, but also Apple, because it turns out the way DeepSeq developed this thing, the whole model is pretty efficient because it only lights up a little part of the model instead of all the parameters. It uses this expert network thing.

Scot

[19:19]And anyway, so there's a, you know, Apple has put a lot of neural nets on chips near memory, which this model works really well for. So there's kind of like two unexpected winners in this, which are the two companies that didn't spend billion dollars on models, which were Amazon and Apple. So then, so that was kind of the setup going into it. And then...

Jason

[19:41]Scott, there's one super important stat about DeepThink.

Scot

[19:45]Yes, DeepSeek.

Jason

[19:46]DeepSeek. They should have called it DeepThink, by the way. But apparently Meta has 20 AI execs that all have an, each have an annual salary that's greater than the total training cost of DeepSeek.

Scot

[20:00]Yeah. Yeah, that's pretty crazy. It also kind of shows that these export controls may have backfired because they made them, they constrained them so much, they came up with like a really clever way to do it. So it was all very interesting. And then we didn't have any Walmart coming in. That hasn't happened, right?

Jason

[20:18]Yeah, Walmart has a very peculiar financial calendar, but what would be the reporting for their sales in Q4 of the calendar year happens on February 20th. So that's next Thursday.

Scot

[20:33]Yeah. Okay, so then Amazon came out, and much to the relief of everybody, their revenue was in line. So it was kind of a meet. If you have kind of miss, meet, and beat, it was a meet expectations on the top line, but they beat on the bottom line. So earnings per share came in at a buck 86, which beat the estimate of $1.48 by 20%. So a really nice kind of profit beat there on earnings per share.

Scot

[20:58]And then the guidance is what Wall Street would call soft. So Wall Street already thinks they're going to know what the guidance is. And they look at this midpoint, there's a range, and they do all this kind of triangulation. And it came in a little bit below. But they have a history of that. So people weren't too concerned. So I think there was a bit of a sigh of relief that things at Amazon were pretty good and there wasn't a big miss on AI. And then I think they got a nice benefit. Now, the stock was down a little bit. I think that just kind of happens. It's recovered most of that since then. It did signal that a relatively conservative guidance going forward where they were going to grow between 5.4% and 8.5%. Again, they beat this guidance like for the last eight to 10 quarters. So I think people know there's some conservatism in there. They did say, you know, giving the environment with like this de minimis thing, these tariffs and all this stuff that they wanted to be a little careful there. Also, everyone, they did signal in the call that they're going to invest a lot. And we'll talk about that in a second. So they're going to kind of enter this invest phase again. And a lot of it is around AI, but it's not models and things. It's really just kind of supporting AWS as a part of it. But they're also investing a lot in AI applications, they call them, for the retail and the supply chain part of the business. And we'll go into that.

Scot

[22:23]So then they dove into kind of more of the retail side and some of the macro numbers. Why don't you take that over?

Jason

[22:30]Yeah. So what they typically disclose in their earnings call is the retail business unit revenue, which is not the same thing as their total sales or what we would call gross merchandise value. So the revenue number they reported was that Q4 was up by 10.5%, which was good and above expectations. That was like $188 billion for the quarter, which would be a total of $638 billion in revenue for the year. They said online stores grew at 7% year over year, while physical stores grew at 8.3% year over year. That physical store number is interesting because, you know, the bulk of the Amazon physical store fleet are these Whole Foods that they bought. And then over the last five or six years, they've opened a bunch of store concepts, Five Star, Amazon Books, Amazon Go, and Amazon Fresh Grocers.

Jason

[23:32]They've closed most of those concepts. They only have a handful of the Go stores left and the grocers. So the number is back to mostly being Whole Foods, which hasn't been a great growth story. So the 8.3% growth for physical stores is somewhat encouraging for Amazon on Whole Foods. And I don't know if this is coincidental or not, but the CEO of Whole Foods got named the head of olive retail for Amazon or olive grocery for Amazon rather.

Jason

[24:01]So those were good numbers. I'm most interested in how much stuff they sold, which they don't tell us. They give us some data, like their breakdown of first-party and third-party sales. And we're able to back into an estimate of GMV. And all the really smart, big-brain stock analysts put together these big models and do the math for me. So in the old days, you and I used to do models. But now I just get a way prettier spreadsheet from Morgan Stanley and Citibank. So the Morgan Stanley model is already out. And they think GMV for Q4 in North America, which is, you know, mostly what I like to talk about on this show, was up 11.4%, which is huge. The, you know, again, like retail is growing about 3.8% in Q4. So it's Amazon's growing three times as fast as the overall retail industry. And then, you know, you look at that on a full year basis and Amazon sales for the, in North America, GMV was up 11% year over year, which is huge.

Jason

[25:09]And somewhat even more impressively, those sales are getting more profitable. The fulfillment network is getting faster and more efficient. The cost to serve is going down.

Jason

[25:21]I think they had a stat that like same day and early next day deliveries grew 65% versus the number of deliveries in the same quarter last year. And so if you remember, about a year and a half ago, they pivoted from this national model to this regional model of distribution, and it's totally working. They're delivering goods way faster and cheaper. And so what kind of the interesting unexpected thing here is as they're able to deliver goods faster, the mix of goods that customers are buying from them is changing. So they used to not be good at selling everyday essentials, but now that they're so good at same day and fast next day delivery, they're selling a lot more of those essentials, which is taking a huge bite out of grocery. And I would argue even a huger bite out of like drugstores and convenience stores. So the, for a long time, you know, analysts are always like AWS is the growth and retail is this necessary evil and blah, blah, blah. Well, I would argue retail was really the star of, when you peel back the onion on the numbers, retail was really the star of this earnings call for them and is really helping to, it's contributing a lot of dollars that are now getting invested into AI cloud capabilities.

Scot

[26:44]Yeah. Cool and then on the marketplace side the third-party seller business accounted for 62 percent of paid units kind of has ebbed and flowed between 58 and 62 for a while i mean q4 it does surge up because the first party business gets swamped and sells out and then the third party is kind of there to to take up the slack that's up 60 from 60 so in q3 it was 60 and then here it was 62. I believe last Q4, it was also 61, 62. So not a big change there. That's kind of steady state now. The revenue grew 9% year over year. These numbers used to be crazy at like 20, 30, 40, 50%. But again, we've kind of settled in with overall retail on a lot of the business. And then that came in at 47.5 billion is the revenue from third-party seller services, which includes some of the pieces of FBA and whatnot. And then the ad business is my favorite. That's the best business.

Jason

[27:40]I know Scott waits with bated breath to talk about the ads every year. So again, ads was a super robust growth driver for Amazon. I think the trailing 12-month run rate for ads, so Q4 was up 18% on a year-over-year basis. That Q4 number would put them at nearly $70 billion run rate for 2025. But trailing 12 months, it was $56 billion of ads. And, you know, remember you sell a banana at like 4% gross margins. You know, you sell an ad at like 80% gross margins and that's being like conservative. And so this, this ad business contributes a tremendous amount of free cashflow and profit to Amazon.

Jason

[28:29]A couple of notes here. The vast majority of this ad are sponsored product listings and search. And that's true for most retail media networks. But increasingly, Amazon's a more complicated ad network because they do now have a lot of network programming. They have an NFL contract. And this ad number isn't just the retail media dollars. It's all of their ad dollars. So there may come a day when, like, just like we have to have a kind of a third party model to estimate what GMV is, there may come a day when we have to estimate what percentage of the ad revenue is retail media versus other flavors of ads.

Jason

[29:11]But as a result of this huge success that Amazon has had, everyone else in the retail industry is worked up into a huge lather over retail media networks. So, all the big agencies like mine, you know, have now hundreds of people that, you know, are talking about and helping brands and retailers execute, helping retailers build retail media networks and helping brands spend more money on those retail media networks. And every tiny little retailer is hiring a bunch of ad execs to launch their own network.

Jason

[29:41]And while I do think this ad business is great for Amazon, I think it's pretty good if you're Walmart or Instacart, I think it's wildly overhyped. And what people are missing is the only people making money on retail media networks are retailers with huge traffic at the top of the ecosystem that all have one thing in common. They're marketplaces because all of those third-party, those sponsored product listing ads are being bought by third-party sellers. It's not being bought by the first-party sellers. There's a little bit of revenue coming from first-party sellers, but that's the revenue that they used to get that they called shopper marketing dollars or trade dollars. The growth engine here is marketplaces get to make money selling ads. And so I just point all this out because I see more and more like small regional wholesale retailers with no marketplaces spending a fortune to launch a retail media network thinking they're going to have the same success on a smaller scale as Amazon. And it's not true that this retail media business is tied directly to the success of the robust third-party marketplaces that you predicted. Well, when did you predict marketplaces? About 70 years ago, was it?

Scot

[30:56]Yeah, it feels like it.

Jason

[30:58]Yeah. So just an interesting part of this whole thing. But for sure, if you're Amazon or you're another big retailer like Walmart or Instacart, it's another competitive advantage that helps the big get bigger at the expense of the smaller players.

Scot

[31:14]Yeah. And then I love that business and not facetiously because it's basically pure margin. Like it just makes the whole thing work. I do feel like it's got to, as a consumer, whenever I go to kind of top of the funnel, wherever I'm kind of like researching and try to find products, I feel like it's definitely, kind of ruined is a strong word, but greatly diminished the shopping experience at Amazon, which is always debatably not great. It's very kind of transactional to begin with. It's very hard to find the product you're looking for now because you're just like inundated with ads at this point. I think they've, they've reached the, you know, almost jumped the shark levels of the amount of ads, but that's a personal preference, I guess.

Jason

[31:57]No, no, no. I think most people agree with your evaluation there. Like, you know, they're for a long time, Amazon tried to make this argument that it's always about the customer experience and customers like these helpful ads. But I think that's, that's a pretty hard argument to make. It's, it's every digital platform in the history of mankind, like started out super useful and ad free and they slowly turned up the sponsorship over time, right? So when Google was 10 blue links, when you did a search, it was super useful. Now, you know, all the pixels on the front page of Google search are paid for, you know, Facebook used to, you know, Elevate all this organic content from people in your social graph. Now it's predominantly ads. TikTok with Instacart with the interest graph and now predominantly ads. It's the same thing. The problem is if the product is the ad and not the customer satisfaction from selling goods, this is the foreseeable outcome. And all of these businesses have just realized selling ads is a better business than being a wholesaler.

Scot

[33:06]Yeah. Cool. So then they rolled into the AWS part of the program. The AWS revenue reached $28.8 billion for the quarter, growing about 19% year over year. And its operating margins were 36.9%. That's actually an improvement of 732 basis points. So, you know, even though, you know, this thing is growing really quick, it's both growing fast and improving margins, which is good. And then you can think about AWS as having kind of three things. There's like a storage component where they can store your data, and that's commonly called the S3 family of offerings. And then you can basically rent, compute in traditional fashion, which is CPU. And then you can rent AI, which is on a GPU. So there's kind of like storage, CPU, and GPU.

Scot

[33:56]I think margins went up because of the strong demand for GPU. When supply outstrips demand, you can have pretty aggressive pricing in there and higher margins. So I think what's happening with the advent of AI is the workloads are really tilting towards that GPU side, which are much higher margin. And speaking of AI, Amazon is one of the two companies. So Google has their own GPU called a TPU and Amazon has Tranium and they came out with the version two of Tranium they announced was generally available. And it is much cheaper than other GPUs, which basically what they're the other big player in town is NVIDIA. So that's kind of what they're saying. And they still offer NVIDIA, but you get to pick. So what they said when they announced Tranium two is if you choose that is 30 to 40% better price performance and other GPU instances. So let's say your company and you want to host this deep seek open weight model, you now can host it on Tranium and run it yourself. It won't connect to China because you're controlling the infrastructure and you can basically have your own model. All you can eat just paying for the GPUs. Whereas when you go to like a open AI API or Anthropic or anything, you're paying for the GPU, the model and their margin. So this is what's driving that price per million tokens down towards zero.

Scot

[35:13]And in fact, to that end, they basically said that they would have had a much better quarter on AWS, but they are at maximum capacity for these GPUs, both their in-house and third party. And this is the same story that we're hearing from everybody is there's so much, so many people want to put out these GPU based AI workloads that they don't have the infrastructure for it. And it's not only the chips. So they're chip constrained, data center constrained, and energy constrained, and refrigerant constrained, and so on and so forth. So it's kind of a crazy time that there's so much constraint around this one part of something everyone wants.

Scot

[35:52]They did, when they file their 10Q, they put out a backlog and it was pretty material, which got people excited. So there was like some backup data to that. And then, you know, they did announce they're going to make some investments to the tune of $100 billion in 2025. And this is crazy because Meta came out and said something like 25 to 30. Microsoft said a number that was big, like 65 to 75. And then Amazon one-upped them all and said $100 billion. So that's pretty eye-popping. They didn't specifically say exactly how that's going to be, but it was like in the conversation of we're at capacity for AI. So I imagine they're going to build a literal tons of these Tranium chips and deploy them as well as whatever GPUs they can get their hands on from the folks out at NVIDIA. I already mentioned that it feels like they're really doing well here. And they talked about that. They didn't specifically talk about DeepSeq, although they quickly announced that they had it on their infrastructure.

Scot

[36:51]Jassy's been saying all along that they're not going to bet on an LLM. They're going to be neutral. But what they're going to bet on is people are going to want to run them near their data. And so because they have all these traditional CPU workloads, they have all their data. So if you're a big ad company, you're running all these calculations on ads, you're probably doing that in the cloud. You want the data to be near the compute so that it's fast. And now if you're going to run any AI workloads, they're going to want to be near the data because they're usually not just running an LM, you're running it through your data through like a retrieval augmented generation so that you can get insights from your data and either present them internally or to customers. So Amazon has really set up very well for this. And this part, a lot of the, you know, prior to kind of recently, most of the GPUs went towards training these models. Well, training is becoming a commodity, and it's really the inference part, which is where the models are actually running. And so they're really well set up for this whole thing. So I thought that was really interesting that they had the foresight, and they ended up being right. You know, they and Apple were the ones that were right, and everyone kind of thought they were crazy for not investing hundreds, tens, if not hundreds of billions of dollars in these things.

Jason

[38:07]Yeah. Yeah. That worked out pretty well for them. Yeah.

Scot

[38:11]The jury's still out, but like, as of today, it feels like they made a pretty good decision. Now, if, you know, OpenAI is the only one that has a, you know, ASI and AGI and all these fancy, you know, superhuman like capabilities, then maybe it's a problem, but seems like, you know, even then, are you really going to want that to be kind of running through your corporate data or something? You know, that starts to be even kind of scary. So I think this use case of making my internal data smart has many, many decades to run before it runs out of steam.

Jason

[38:41]Yeah, I hear them all talking a lot too about this AI application layer that they're investing in. So not the underlying LLM, but all these industry-specific, vertical-specific application APIs that sit on top of those LLMs. So like at NRF, they were focused on the hundreds of retail-specific patterns they had for AI applications that get to take advantage of every time there's an iteration or an improvement in the underlying LLMs.

Jason

[39:16]I wanted a couple of things that jumped out at me on the AI side. Number one, in our last podcast, you made a prediction about the profound impact of agent-based AI in commerce. And we started to talk a little bit about like, is this friend or foe to retailers? Are retailers all going to be blocking the AI agents from scraping their sites? Or are they going to be partnering with the agents? And I just want to say that that whole narrative got like hugely picked up and discussed on LinkedIn. It's super interesting. And we're definitely in the near future going to have to do a deeper dive on the podcast on the implications and ramifications specifically on retail of all this AI. But I do want to point out in the short term, you know, it's not all roses. There's two big negatives to AI. Like number one, every time Scott Wingo does a search on perplexity, it is taking out a small rainforest in Brazil.

Jason

[40:12]So like it's not clear at the moment like that all these things can scale, that there's enough electricity for all these things to scale. Unless these more efficient models like DeepSync end up winning. Right. Because one of the benefits of it is like it's a lot more compute efficient to to build a new model. But the the bigger negative ramification to me is you cannot buy a darn graphics card for good video gaming in the world anymore yeah all the all the the ai hosts have have bought all the chips and and you know if you just want to run call of duty at 240 frames a second you you are mostly out of luck which is quite irritating in the goldberg household.

Scot

[40:56]Yeah and whatever was available, the crypto bros grabbed. So you're kind of third on the wait list there.

Jason

[41:02]Yeah. Yeah. So I'm, I'm a little bitter about that, despite the fact that I'm, I'm very bullish about the profound impacts AI is going to have on commerce. I will say it is interesting in the, in the AWS world, because it feels like there's, there's two kinds of compute loads in the, in the world. There's the traditional CPU based compute loads that, you know, Amazon's been making a lot of money as people migrate from on-prem compute loads to the cloud. And then there are these new GPU-based AI compute loads. And the GPU-based compute loads are totally constrained by capacity. Like Amazon could sell more loads if they had more chips. They only have so many chips, and that's why they're going to spend a fortune on chips. The it does appear that the rate of growth of the cpu loads has slowed down which what is a worry sign to some investors because they they have excess capacity there if there were more people that wanted to move more of their loads from their on-prem to the cloud amazon could make more money today whereas if more people wanted to do ai they like they're they without more chips they really can't do anything.

Jason

[42:20]And so what's interesting to me is that it has not slowed down because all the world's compute is on the cloud. Arguably, well less than 25% of all the world's compute is on the cloud. So there's still plenty of compute happening on premise that could be moved to the cloud. But I think the double whammy is that all the easy compute loads got moved to the cloud And all the ones that had a particularly high ROI of being hosted on the cloud moved. And now all these older legacy compute loads are harder to move, are less appealing to move. And we were joking earlier, a lot of them are probably written in COBOL. And so, yeah, it's going to be interesting. They may ironically require AI to port all the business logic and COBOL code to cloud loads to kind of reinvigorate the cloud growth.

Scot

[43:18]Unless there's some kind of a simulator thing or, you know, emulator mode, there's no running COBOL up in AWS. So those loads are going to be stuck on some old mainframe for a very long time until something can rewrite it.

Jason

[43:32]Yeah yeah but it won't surprise me if the the ai bots get really good at porting all those those cobalt applications to to some modern architecture on the cloud.

Scot

[43:41]Yeah open eight sam just yesterday he was sam altman was speaking in japan and said they have an internal open ai, developer agent that they think is the top 50 developers in the world and they think they'll have the best one in three years yeah and these he says all this wacky stuff and it's kind of like, it's easy to say because it's unverifiable. So, you know, it's very hard to tell if he's hyping, but he's a pretty, you know, a lot of what he said has actually come true. So it's like, there's evidence that he's not making stuff up.

Jason

[44:15]I think that's very fair. And then there, like there are real world examples, maybe not quite that profound, but like of this stuff working, right? Like, so going back to Amazon earnings, like on the investor calls, they've talked a lot about, I'll tell you what workloads AI has been awesome for us on coding is porting all of our end of life Java 4.1 code to Java 5 that in the old world would have taken a hundred million man hours to do. And now takes like 10 man hours because of AI, right? Like I'm, I'm dramatically exaggerating because I can't remember the numbers, but, but it's, there are things that used to be hard and expensive to port that are like, are real business savings for big companies like Amazon now as a result of the AI being an adequate coder. So forget even being one of the best coders in the world. Just being adequate is saving Amazon a fortune.

Scot

[45:08]Yeah. I hate technical debt like that. Rewriting for some new version. Yeah.

Jason

[45:13]Doesn't add any benefits. You have on Sundays. So I want to bring this all home for our audience that's mostly focused on commerce, right? So if we zoom back to the retail side of Amazon, I'm just going to recap for you that Amazon probably sold $540 billion worth of stuff in North America, which was 11% more than they sold the previous year. So they're, they, they added $56 billion in sales this year.

Jason

[45:48]The U.S. Department of Commerce said that all of retail grew 3%, 3.6% this year over last year. So 11% growth is way higher than the industry average. And the whole industry added $183 billion in sales. So Amazon alone is $56 billion of the incremental $183 billion that happened in North America in 2024.

Jason

[46:20]So then the other huge retailer is Walmart. So you'd love to compare Walmart and Amazon growth to U.S. Department of Commerce. But as we mentioned, Walmart's earnings aren't going to get released until the end of next week. But we have three quarters of earnings and we have estimates, right? And at the moment, people are estimating that Walmart's Q4 is likely to grow about 4%. So if they see 4% growth Q4 this year versus last year, it means that Walmart will grow 5% for the year. So half as fast as Amazon, still meaningfully faster than retail, right? Retail is growing at 3.6%. Walmart's growing at 5%. Amazon's growing at 11%. That means that Walmart contributed another $26 billion of incremental sales, if that plays out. And then our friends at Timu, Sheehan, and TikTok probably captured about $50 billion of sales in 2024 that they didn't have in 2023.

Jason

[47:23]So you take $26 billion from Walmart, $56 billion from Amazon, $50 billion from Timu, Sheehan, and TikTok, and that's $132 billion in growth. When the entire industry had $183 billion of growth. So it basically means Amazon, Walmart, and those three Chinese companies are 72% of all retail growth, which is super scary. Obviously, the big are getting big, and we're seeing this huge gap open up between those leaders and everyone else. The other super interesting thing, if these numbers are right, it means Amazon sold $540 billion worth of stuff in 2024. Walmart in North America will have sold $547 billion worth of stuff. So Walmart in North America is still slightly larger than Amazon. And when I say Walmart, I mean Walmart Inc., including Sam's Club in the U.S.

Jason

[48:21]Walmart has international sales. Amazon has even more international sales. The U.S. economy is faring pretty well. A lot of other economies in the world where Amazon in particular does business are not faring as well. So there's more headwinds on the international side of Amazon's business. But apples to apples in North America, this is really turning into a two-horse race with these Chinese entrants taking a huge bite of the market, but clearly not taking a bite out of Amazon or Walmart, which is super fascinating and super concerning.

Jason

[48:58]And Scott, I roll all this up and I say to myself, huh, all of these companies that are growing, the thing they most have in common is their growth and or their primary business model is all coming from marketplaces. Like increasingly you can't name a huge super successful e-commerce wholesaler that buys goods and resells them the like amazon keeping 62 of their sales as third party is even more impressive if you remember i said that amazon selling way more essentials than they ever did before historically essentials were all one p so for them to keep 3p at 62 that means 3p is growing really robustly based on the mix change at Amazon. So they're increasingly, I'm looking at all these numbers and I'm going, man, it is just getting harder and harder to make a living selling other people's stuff that you either have to make your own stuff and sell it to consumers and be content not to be one of the largest retailers in the world. Or if you want to be one of the largest retailers in the world, you have to be really good at a marketplace. And then that unlocks all these supplemental revenue streams and retail media revenue streams and all these other things we've been talking about on the earnings call. So you may have seen this a long time ago, but like, It's increasingly seeming possible that marketplaces will eventually kill off the wholesale model, which is crazy to think about.

Scot

[50:24]Yeah, it's kind of like what happened in China, though. So it's, you know, it's something that a lot of people have predicted for a while. It's actually taking longer than I thought. I'm a little perplexed why all of e-commerce isn't growing a little bit faster, but that's a topic for another time.

Jason

[50:39]Yeah. So last week we did an overly long show. And so this week we worked really hard to bring it in slightly under our typical hour. So I'm happy to say we have not used up all our audience time, but hopefully this was a helpful recap on Amazon's earnings, a forecast into Walmart's earnings next week, and gives everyone a really good kind of feel for how 2024 played out in North American commerce. I'm always Debbie Downer. I want to leave everyone with one piece of good news. The U.S. Government data for January sales comes out next week, but the National Retail Federation has a new data source called the Retail Monitor, which uses a huge panel of credit card data. And that data came out this week and they report that January sales are up 5.7%. So, again, all of last year grew at like 3.6%. Holiday grew at 4%. January being up 5.7% over last year is really encouraging. and certainly we'll hope to continue that momentum for the rest of 2025.

Scot

[51:42]Look at that Jason ending on a positive note. Who would have thunk it?

Jason

[51:46]Yeah, it's the new wear your clients logos and think happy thoughts version of Jason.

Scot

[51:53]Cool. Well, thanks everybody. And until next time.

Jason

[51:57]Happy commercing!

View Details

The expended edition of this podcast is 80 minutes long. We're sorry, if we had more time, we'd make a shorter podcast.

0:00 - 27:30 NRF Big Show Recap
27:30 - 59:00 Recap of 2024 Predictions
59:00 - 80:00 2025 Predictions

Watch a complete recap of NRF Big Show 2025 here 2024 Predictions Recap Jason:

Retail Media Networks go In-store. At least 1 top 20 retailer launches a digital in-store ad network YES
AI is even hotter at end of 2024 than now. Most text boxes in E-Com are GenAI powered. A least one retailer has an AI based auto-replenishment solution with significant adoption. YES
Bifurcation drives at least two more retail bankruptcies, including 1 national specialty retailer, and one general merchandise/dept store. (two top 50 retailers) YES
China companies focus more on West and get more traction. Shein successful IPO. Temu US gets to at least 75% of target US E-Com. No
Grocery E-Commerce goes from $95B to $125B in 2024 (after being down in 2023 per Bricks meets clicks). No

Jason Score: 3.0

Scot:

Amazon relaunches Alexa on a native LLM No
Temu falters as people realize it’s wish 2.0 No
RMN is currently $52b, growing 20% y/y, accelerates in 24 to 30% and $67b (coresight has the 52 datapoint) No
Instacart who’s stock IPO’d at $33 and now is $23, solves ads and pops to 40 YES
While everyone thinks Shein/Temu takes share from Amazon, they end up hurting Nordstrom, Macys and Target instead - materially (10%+) focus on apparel, maybe take target out? Yes

Scot Score: 2.0

In a rare upset victory, Jason takes the 2024 predictions crown! But can he keep it?

2025 Predictions Jason:

Shein & Temu are NOT impacted by changes to De Minimus (which either don’t happen or are ineffective). They ay be impacted by Tik Top Shops and/or Trade War tarrifs but not by changes to De Minimus.
Tik Tok is not permanently banned in US (prediction made before scheduled ban was to take place). Tik Tok Shops is fastest growing $1B+ retailer in 2025.
A major auto manufacturer launches a DTC offering in the US in 2025 (other than Tesla).
Retail Media Networks undergo consolidation in 2025 as smaller retailers realize they can't go it alone.
Live-streaming/VR/Voice Commerce are all materially insignificant in 2025. No financial evidence that consumers care about green or purpose driven brand with their wallets.

Bonus: - AI Agents hottest trend in commerce (but I don’t know how to measure it)

Scot:

Facebook acquires eBay puts them out of their misery finally
Temu loses its newness/out of the honeymoon period and people realize it’s a gimmick - down 20% in 25 vs. 24, even more with tariffs
AI agents become a double edge sword for retailers (headless/composable) vs. no ux, I predict 10 large retailers block them, but the rest embrace
Marketplaces have a new leg of expansion into a variety of places even an LLM - let’s call it 5 new larger retailers
Personalization is out, memory is in, but still silo’d -

Bonus: AI automates and optimizes the supply chain in ways we humans can’t, or at least analyzes the data in such a way -OR could be quantum computing.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 323 of the Jason & Scot show was recorded on Thursday, January 23rd, 2025.

Transcropt Jason: [0:23] Welcome to the Json and Scott show this is episode 323 being recorded on Thursday January 23rd that's a lot of 2 threes I'm your host Jason retail gee Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot: [0:37] Hey Jason and welcome back Jason Scott show listeners for episode 323 being recorded on 123, Jason you are in the post honeymoon phase of the NRF Big Show 1 of my and I'll have to be honest with listeners kind of not favorite shows because it's in New York during January and I'm allergic to cold weather and I always have a hard time getting there and out because of the snow and then also it's a show that's over weekend so it kind of crushes the whole work life balance thing so hope you had a fun 1 I was not I did not attend this year.

Jason: [1:14] Very often it's over a holiday weekend it's like.

Scot: [1:17] And yeah so in the holiday weekend as well for for fun yeah.

Jason: [1:20] Yeah yeah I think for as long as I can remember we've been going to that show and complaining about it and the the the usual answer is of course due to its 114 year old show we're not changing it because you're whining um, which fair enough, I will point out good news for you Scott global warming it doesn't snow in New York anymore so it hasn't it was cold but like there there used to be an annual blizzard and they literally haven't had any snow in like the last 3 years which is a little spooky, um and I have great news for you if if you thought it was a lot to go to 1 in RF a year guess what we get this year.

Scot: [1:57] 2 nrf's.

Jason: [1:58] 3 NRF or depending on how you count 4 NS.

Scot: [2:02] Whoa are they going to call them Big Show small show Medium show.

Jason: [2:05] No so for a while they've had so they have a few other shows so they have the NRF Big Show which is what we're talking about in in New York in January 114 years old 40,000 people at 10 mostly Brazilians, they've had what I'll call the small show which is technically now called NRF Nexus it's had some other names in the past that's in Southern California in the summer and I really like that show I'll be I'll be at that show, I'll I'll be doing a number of gigs there and I encourage people to go there because it's a way better boondoggle we all hang out and eat good food on the beach and, in his way less stressful than than in our Big Show.

Scot: [2:41] I can sign up for that yeah that's uh no blizzards sign me up.

Jason: [2:45] Trono in Rancho Palo Verdes it's a good it's a good spot it's where Rico started.

Scot: [2:48] Oohnice.

Jason: [2:50] Um they have like a loss prevention show which is probably not relevant to mow most of our listeners but the big news is they are the Big Show has gone International so last year they had Big Show Asia for the first time in Singapore I was not there but it was by all accounts a big success and so, this year we'll have year 2 of Big Show Singapore, and then they're now expanding to Europe so this September will have NRF Big Show Paris. So Scott if you want to go well you know my my corporate headquarters is there my boss is there so we'll we'll host everyone in his office on the shampoo Jose.

Scot: [3:29] I would love that I have a lot to chat with your boss about I feel that you're being shorted on your title and it's been too long we need to expand your title so that's going to be my number 1 you know point on the agenda.

Jason: [3:41] Yes it is high on my list to get you in front of our tours to renegotiate my package.

Scot: [3:47] Yeah I'm there I will I will Ari Gold this thing and we will get.

Jason: [3:50] Yeah I know he our tour listens to every episode so be ready our tour he's coming Scott's coming for you.

Scot: [3:55] Yep I got your I got your number first of all I'm going to loosen him up with some wine and cheese French people like that right and some croissants boom.

Jason: [4:03] Yeah but I kind of don't think you can loosen a French person up with 1.

Scot: [4:07] True it may be a bad strategy.

Jason: [4:09] Yeahfun strategy but it just may not work out the way you hope.

Scot: [4:14] Well how is the show I saw that you were you know doing some really good instagramable pictures out in front of some signs and looking spelt and you had your cool eyewear rocking did you how did how are all the balls and Galas and the and you did a bunch of content give us a give us a rundown what we're give us the behind the scenes.

Jason: [4:35] Well so the number 1 takeaway from internet Big Show is that retail geek is Overexposed so I apparently they couldn't get any good speakers this year because you haven't been going so I was on stage 4 times which is more Jason than anyone should want.

Scot: [4:51] There can be an honorary Kardashian if you keep that.

Jason: [4:54] Yeah yeah I I'm not sure that's that'll be 1 more item off my bucket list honorary Kardashianthe, so I mean the show went well it continues to grow it felt super vibrantit was very it was cold but clear.

Jason: [5:13] The the kind you know you and I have been to so many of these shows that I feel like, somewhat predictable at this point for those that haven't been a big show it's a heavy networking show there's a lot of private events that maybe aren't even published and are invite only and, it's 1 of the the the few, events where I get all those invites so you're right like you know I I went to a lot of dinners and a lot of Galas and saw a lot of, mutual friends that are of course ask about you and are bitter that I'm there and you're not um but it's a lot of fun to catch up with people and certainly you know I got to a chance to talk Shop with a lot of people which is 1 of the big benefits to me, you know there are some interesting on-stage content I'm not going to do a super deep recap on the podcast because, in in NF Big Show recap would be an hour and the good news is I recorded an hour webinar yesterday so in the show notes I'll put that on and if you want if you want an hour of a big show recap, you you can get it there but like at a super high level kind of 3 3 big takeaways that that we highlighted in the recap from Big Show the, continuing to be 1 of the big topics that all these retail shows that they're all heavily leaning into I have some controversial mixed feelings about our.

Jason: [6:32] Exuberant over retail media Networks, so every every retail on the planet is launching 1 every V you know there's a thousand vendors that somehow raise money selling like some service for retail media networks all the the retailers now come to these shows and have booths so there's Giant, Amazon Walmart booths at these these shows trying to sell people ads they've they've kind of turned into media shows, and so NF has a whole extra day of the show if it wasn't fun enough to go over the weekend you can now attend retail media day which is all day Saturday the day before the show starts on Sunday, so a lot of talk about retail media networks a lot of vendors a lot of content on the stages. 1 of my biggest session I did a a session on the featured stage and it was a new format for them it was a debate.

Jason: [7:24] And so they had a much smarter sort of a retail thought leader Christina Russo and I on stage together and they they pulled all of, the the popular retail Talking Heads and ask them to surprise us with questions and then we debated the answers and so longtime friend of the show tsukareta had a question like hey Jason aren't all these retail media networks a scam, and, I I kind of felt like I think she thought she was that was a gotcha question for me because she I think she thought like working for a agency that you know is generally super excited about all media formats and has, you know hundreds of people at the moment working on retail media networks I think she thought that would be a controversial question, I basically answered like it's absolutely a scam and the vast majority of all these are going to fail, so I think that probably surprised Christine a little bit that she had to take the the pro retail media position after I after I jumped in on the con position. But, there is a lot of talk about retail media networks it's going to show up in our predictions I'm sure there are people making a lot of money on retail media networks but they also they're not going to be as ubiquitous they're not going to translate to the small retailers as well as everyone thinks and, as you and I know the dirty secret is like all the retail media money is in third-party marketplaces it's all those third-party.

Scot: [8:46] Yayanother win for third-party marketplaces.

Jason: [8:50] Yeah it's almost like you saw all this stuff coming like 20 years ago.

Scot: [8:54] Yeah yeah they uh.

Jason: [8:57] Until you get a good new idea I'm going to keep giving you props for the old 1.

Scot: [9:00] Okay I appreciate ityou can do my negotiating with my boss.

Jason: [9:02] Yeah uh soyeah I'm not doing that because I've met herum.

Scot: [9:09] Yeah she's tough.

Jason: [9:11] Yeah but fair tough but fair. So 1 big Trend retail media networks love them or hate them there's a lot of discussion about them a lot of a lot of activity in that space the most predictable big trend is of course AI so, half the Boost of the show you if you if you didn't read carefully you would actually think it was an Nvidia Booth they had like, bigger logos than half the exhibitors they they did a keynote with John furner John's the CEO of Walmart us and and the the head of retail at Nvidia was on stage with him talking about all these, these interesting retail use cases in 30 seconds or less the Takeaway on AI is, there's a ton of successful AI efficiency stories where retailers and brands are doing something in Commerce they've always been doing but AI allows them to do it way better faster and cheaper than before and so there's, there's increasingly you know tons of money being saved by using AI for efficiencies.

Jason: [10:13] And that that there's some pretty interesting ones and some pretty clever ones and a lot of smart vendors, at the show coming up with that stuff but the the big prediction the coming very soon part of AI That's more game-changing that's sort of a new shopping experience that didn't exist before, is agent-based Commerce it's what so-called agentic AI so if you went to Salesforce Microsoft Google, sap, Amazon's Booth like the the biggest words in the booth were agentic Ai and the the you know all all these big vendors are in a knife fight if I know you follow the, the kind of core AI space, you know openai launched their agent this week which is uh operator which is super interesting and exciting perplexity launched their agent of course you know Salesforce and Microsoft have, uh and Google all have big big plays and agents and so, I'm I'm relatively bullish on on agents disrupting Commerce and fundamentally changing some shopping experiences and breaking search for example I'm making search a lot less important and a lot less relevant.

Jason: [11:25] I think all that could happen I think it's really risky to think about the time Horizon for that and at the moment if you're familiar with the gardener hype cycle, agents are kind of still C climbing up the the hype Peak like they have not fallen into the trough of disillusionment yet.

Scot: [11:45] Yeah we're going to talk about agents in the predictions so.

Jason: [11:48] Hello I should have I should have known I should have held some of my.

Scot: [11:50] Uh passion a lot of them are kind of like glass-based which I think's interesting but you and I know you can't have a great shopping experience just you know kind of looking like you're a browserso if you say you know hey.

Jason: [12:02] Yeah I think that's a fast early wave to proof of concept A lot of this stuff but that's that can't be how it all works in the long run.

Scot: [12:09] Yeah I'm excited you know I've had a fair amount of exposure to the perplexity and it it's okay on a surface level but it falls apart on some basics in our world and then I think I think the glass-based nature of Operator by glass I mean it has to scrape it's it's not.

Jason: [12:22] It it acts like a human clicking buttons on a browser.

Scot: [12:25] Yeah yeah so we'll see ya.

Jason: [12:28] Microservices and apis.

Jason: [12:30] The so that that was a super interesting 1 and then the third big topic from NRF Big Show was just kind of the state of the industry NRF released, their final data for annual sales the US Department of Commerce came out with their data the day after the show, and you know everybody in the hallways talking about like hey how'd you do did you do well did you not do well what's your budget look like for this year or are you spending more than last year less than last year what's your forecast like and so there and what the heck do you think is going to happen in the new Administration and how is that going to affect all of your business plans right and so there's a lot of, those kind of conversations and and again go listen to the the the interf recap for the Deep dive but the the super high level is, it's it's kind of mixed mixed news in 2024 we sold 7.4 trillion dollars worth of stuff which is a ton of stuff, but the NRF doesn't like to talk about that retail number they like to talk about core retail which is, all of retail sales less automobiles gas and restaurants so 2024 we sold 5.3 trillion dollars worth of stuff core retail stuff, that is up 3.6% from the previous yearso the question you might ask is hey Jason is 3.6% good, and the answer is it's okay NRF predicted that this year we would grow between 2 and a half and 3 and a half percent so 3.6 is above the top end of, prediction yeah.

Scot: [13:58] A small butt I said we they crushed their number.

Jason: [14:01] Uh so they beat interest prediction the 10-year average growth which you know growth is slowing down a little bit but the 10 year average growth is 4.1% so 3.6 is less than 4.1, last year's number was 3.9 so 3.6 is less than than 3.9 but so all these numbers are kind of in the range it's a huge number so you know a tenth of a percent is is Meaningful.

Jason: [14:25] But the real butt is half of all that growth half of that 3.6% growth Amazon Walmart T-Mobile and Tik Tok shops, so you pull those those 5 retailers out and is a way below average year for the rest of retail, and add on top of that that, consumers were hugely value seeking in 2024 they were trading down a less expensive Goods so we sold more or less expensive stuff which is a lower margin the discount rate was uncharacteristically high so we sold stuff at deeper discounts and so you know all these retailers that are not 1 of those top 5 Growers.

Jason: [15:04] Had a mediocre sales year and an even worse profitability year and so you know in the hallways the talk was oh the overall industry maybe did okay we didn't do so well and our Focus next year is, economic fundamentals like austerity we're we're trying to save money wherever we can we're not doing big grandiose plans bunch of retailers are likely closing stores and we've already seen that play out in the week since nrfa Macy's has announced, another huge wave of of store closuresit's it's going to be a challenging year in retail and I'm not sure the, the vendors have fully felt it yet but like when I hear all these retailers talking about how they're cutting back on all their plans and then I go look at the 450 vendors that are all hoping to sell new it technology to all these retailers, I'm like it's going to be a lean year for all those vendors that are trying to sell new new search engines and new platforms and and new new products and services to all these retailers in 2025.

Scot: [16:07] Yep it's busy out there did the Department of Commerce their their this is where you get the other and then the really good 1 for e-commerce comes out much later has have theywhat what did they say about e-commerce does that come out.

Jason: [16:20] Yeah so so you are correct we get at the moment we havenon-store sales is what it's called um and it, it grew about 10% year-over-year, um so what that likely means is that e-commerce will end up growing at about 7 and a half to 8% is my prediction right nowso so retail grow brick and mortar total retail, grows at 3.6% e-commerce grows at twice that at 7 and a half to 8% so e-commerce is still the fastest growing part it's 1 out of 5 of core retail now right it's over 20% of core retail sales so the law of large numbers is starting to kick in when you and I started doing this retail was still growing at 4% but e-commerce was growing at 20% right over the last 10 years e-commerce has grown at 15% and now we're starting to see it tick down, 7 and a half percent and I I think that's a natural progression as as e-commerce has gotten more mature.

Scot: [17:21] Yeah it does still feel slow like if you'd asked me 20 years ago where it would be in 2005 I would have said oh it will be at 30 or 40%, 20 20% just feels low and it's historically low compared to not historically but it's low compared to like most other countries right so the UK is much higher and.

Jason: [17:41] It depends on what you mean by the most uh there are countries way higher so so there are countries in Europe.

Scot: [17:46] Yeah not in.

Jason: [17:47] Europe is a mixed bag but like UK is higher Asia is much higher it's very hard to count in Asia there's not good data so you you will hear a lot of people say that e-commerce is over 50% in Asia and it might be there are other people that are say that will say it's more like 40% you there's there's a bunch of countries in that kind of 30-ish percent so, you know certainly there's no endemic reason in the United States can't hit those same same kind ofPeakswhat I would say is, not every industry got affected by e-commerce at the same time like like you know I you like to joke about how I started my career at Blockbuster they were they were affected by e-commerce a long time ago right um borders was affected a long time ago Toys R Us pretty long ago Circuit City all those companies you know were affected at a different rate, but there were always new categories that were you know just had this massive adoption of e-commerce that you know kept Goose the number and there are fewer and fewer categories with really small e-commerce today right so it's mostly cars and Grocery and again we're like rightly or wrongly most of us are pulling cars out of the numbers we talked about so, so yeah you know they're just our fewer kind of untapped markets to to to grow.

Scot: [19:07] Gotcha should we any other uhwhat was like the back room conversations like give us no specifics of course but like what else was so retail media networks a lot of an AI anything else that that is like aon people's minds.

Jason: [19:22] Yeah I you know I think everyone is like really, concern like there's the a huge variety I know you and I love to talk about politics on this showthere's a huge, collection of potential policy changes in the current Administration again NRF happened the day before Trump took office right and so a lot of the talk is hey are we gonna have way lower income tax and is that going to cause everyone to spend like a drunken sailor are we going to have huge tariffs and start a massive trade war and not be able to sell anything, you know is deregulation going to help us is is Tik Tok gonna get shut down is the minimum is going to get shut down, you know there's a there's a lot of uncertainty 1 of the best attended Keynotes was David Solomon who's the the CEO of Goldman Sachs and him kind of pontificating on the potential impacts of the new Administration on the, on the economy and the the long and the short of it is no 1 really knows there's a bunch of, you know potential policies that would be favorable to the economy there's a bunch of potential policies that might be erosive to the economy you know some of those policies will be easy to enact some of them will be quite difficult to enact and so like on the aggregate, what all is going to happen over the next 2 years and what's that going to do to the economy I think, there's more unsure it's always uncertain and there's more uncertainty at the moment than it feels like they're typically is so you know.

Jason: [20:50] A lot of folks had a disappointing year last year and then they're staring at a lot of uncertainty this year and it it just creates a general disease.

Scot: [21:01] Bummer sounds like not a happy ending but this is a fun fact Dave Solomon is a DJ as well.

Jason: [21:07] I did not know that that did not come up in his in his keynote oddly enough I think he would have like at least.

Scot: [21:11] I thought maybe he would like uh spend some tunes before and after yeah.

Jason: [21:15] Picked his own walk-on music I'm sure A-Rod got to pick his own walk-on music so you'd think.

Jason: [21:23] Oh by the way the, the other big news the internet cave like the NF has always been like a show that was about this content and other shows figured out that you could get way more people to come to your show by having, celebrities and musicians and and so like the shop talk shows always famously have an interesting concert right and so the NRF cave this year and and had a big concert and so we all got to see flow ride up.

Scot: [21:49] Whoa.

Jason: [21:50] Yeah now you really regret that you didn't go I know it.

Scot: [21:53] I did but I've seen you at these things you you go to the event and you have like maybe 1 drink and then you check out and go do email or.

Jason: [21:59] I make sure I make sure that some people get some selfies with me so I'll show up on the socials and then I do what what has been described to me as an Irish exit.

Scot: [22:10] Yeah yeah because uis have some slides that were due 3 weeks ago that you're gonna.

Jason: [22:13] That that is.

Scot: [22:14] You can work till 1:00.

Jason: [22:16] Often often true you're actually giving me PTSD by just talking about it.

Scot: [22:20] Yeah when Jason Goes to these shows the the first thing he does is start with a Starbucks that's a manual that's a must and then, people people that are waiting for slides no to wait at the first Starbucks so he right at the counter after he's ordered there's a line of people waiting for for slides and her ringing him about Decks that are due weeks ago it's hilarious.

Jason: [22:38] And let me just say as we continue to go further and further author reservation here uh, 1 of 1 of the biggest improvements at the NRF is that the the 2 Starbucks have got at Javits Center which wasn't always true by the way that's exciting to me to just say there are 2 Starbucks at Javits Center the 2 Starbucks have gotten wildly efficient at mobile ordering even at a trade like it used to be this huge cluster of disaster and you you you just have to stand.

Scot: [23:05] Massive.

Jason: [23:06] Line for hours and when they turned on mobile order it was highly unreliable and you'd have to wait 30 minutes like it, they've kind of figured it all out now like and so I found it much much easier to I knew exactly how far away I needed to be from the Starbucks to place my order and I walked up and, it just feel you feel like George Jetson when you like.

Scot: [23:27] Skip the line yeah.

Jason: [23:29] That whole line and and grab your Starbucks and make it to your next meeting on time with Starbucksuh.

Scot: [23:34] And if the people are waiting on slides are in line now they have a hard choice to get out of line to bother you for slides or and then you can just dip in and out and they don't have time to catch him so that's.

Jason: [23:43] People waiting for their slides for me have a lot of hard choicesthe and they're usually disappointed but Scott I feel like you are procrastinating long enough if you haven't thought of any good predictions by now they're not coming to you.

Scot: [23:58] I think I'm ready I it was tough because, it's a hard time to predict things because there's so much change like oddly when it's kind of slower it's easy to predict stuff so we'll see this will be a fun 1 it's going to you know the rate of change and Chaos makes it hard to make predictions but.

Jason: [24:15] Yeah I did.

Scot: [24:15] It's uh that's why we make the big bucks so we have to buckle down and I did it.

Jason: [24:19] I was in 3 different sessions where the first slide was predictions are very hard especially about the future and and what's which is a great quote what's funny is all 3 of them attributed the quote to a different person.

Scot: [24:33] You should say also attributing quotes is hardit's harder than predictions.

Jason: [24:39] Yes so uh so offline I did a deep dive in who actually said it in so we could we could get into it but it came from CERN um but yeah the it was not Mark Twain it was not Yogi Barra.

Scot: [24:53] The particle accelerator people started.

Jason: [24:54] Yes yes exactly um.

Scot: [24:56] Would quote as a body.

Jason: [24:58] Yeah but the the the VC version of that that quote that I thought was pretty pretty apt for NRF wasthe the pace of innovation seems to be outrunning the pace of adoption.

Scot: [25:11] Yeah it is yeah it's kind of crazy. I get some of these AI newsletters and I I keep a little running list of things I want to go put you know try out and it's like literally 200 long right now and it's like okaywell I'm not gonna get to all but like maybe you know maybe I'll get to 4 of those.

Jason: [25:27] I know and I I'm like, the open AI like they dropped their agent it's a at the moment like to get it this month you have to step up to the hundred dollar a month account and there's part of me that like oh this is super interesting and valuable I should just do it but then I know I'm going to use it once and then move on to the other 200 things on my list and it like it just doesn't feel good so part of me is like wait till it drops down on my 20 account.

Scot: [25:51] Yeah that's just enough where it's kind of unless you're on your uh your work credit card then go crazy.

Jason: [25:56] Yeah but our as I mentioned our tour is listening to this and so until you negotiate I'm afraid to go there but so predictions about the future are hard what about predictions of the past how how did we do on the predictions from last year.

Scot: [26:08] Yeah let's go re so as a reminder for those of you that are new to the show every year we make a prediction usually in the January time frame and we then review it and add forward-looking predictions we have a long history of me being better than Jason at this so we'll see if that that holds on and then what we do is we read each others and then grade and then there is a formal, rebuttal period that lasts approximately 90 seconds no longer no less and now I'm just getting we're not a super rules of the road on this but, yeah so I'll go through Jason's for predictions for last year so this was in 2023 Jason predicted these things for 2024.

Jason: [26:51] Hear him because I don't remember him.

Scot: [26:53] Jason prediction number 1 1 of your favorite topics you've already talked about retail media networks go in store at least 1 top 20 retailer launches a digital in-store ad Network, I think this is definitely happening I don't know if it's going to I don't know if 1 of the top 20 maybe if I was going to guess I would say maybe Walmart has done that because they seem, Dev screens but they a lot of them are almost like you know Walmart today type things I don't really think I've seen them advertised other stuff, but um I'm going to ask you you can go ahead and rebut away I don't know how to grade you on this 1.

Jason: [27:30] Yeah so all of my my good friends at Walmart please take note Scott is a legitimate Walmart Shopper and and.

Scot: [27:36] I love Walmart.

Jason: [27:37] He does we both do and he has he he is rightly noticed that the ads in your store so yes it did happen e-marker said it was not huge they said about half a billion dollars in in revenue for in-store ads in in 2024 which you know compared to the total size of of retail media is not, huge but Walmart is selling ads on 170,000 screens now a lot of those screens are screens that had up other jobs in the store so things like the TVs and the TV department or the the screens in the deli department but 170,000 screens is still a lot of screens that are in front of 190 million Shoppers that walk in that store every week so Walmart certainly you know makes it on their own a bunch of the European guys have also done it so Tesco sainsbury at Big gers in the UK have done it Home Depot I believe is predominantly in store so they have What's called the Orange apron media Network and it mostly is selling in-store experiences Rose also has the lows media Network which which sells ads in store so I think we gota lot here so I'm giving myself a yes on number 1.

Scot: [28:47] All right I will agree to that. Jason's prediction for 2024 made in 2023 number 2 AI is even hotter at the end of 2024 than now and in this sentence now means back in 2023 this is so confusing, most I'm I'm making it so clear for our listeners though so most text boxes and e-commerce are G powered at least 1 retailer has an AI based Auto replenishment Solution with significant adoption. I don't see a lot of Johnny AI powered searches I've tried Rufus and that is that is a swing and a miss if you're counting Rufus I'm going to call foul on that.

Jason: [29:28] So I gotta be honest this is a tricky 1 for me I don't know how I feel about my prediction I will fully disclose I thought, a AI search in particular would be even more ubiquitous by now than it is right so in 1 cents I want to say oh yeah didn't make it objectively like all the things that I sit here sort of did happen so so we could debate about, roof is being an awful experience which I totally agree with Doug Herrington did a keynote in NRF and said that Rufus has answered 500 million queries last year right so.

Jason: [30:02] That's a lot of queries yeah so so that that Alone 1 would argue you know technically makes my prediction correct Walmart did Roll Out Auto replenishment so Walmart Plus members can get suggestions in their cart based on their past purchases that they did not ask for for for better or worse so so there are some some Auto Replacements in there, Amazon Walmart Tik Tok have all aifi their their search boxes instacart and then, like in particular the grossers are leaning into this Auto replenishment so a lot of the vendors that serve the grocery space there's a company called Alami that does a lot of uh predictive ordering and there is a standalone retailer a direct to Consumer grocery store called Hungry root which is exclusively predictive AI so you don't go shopping for Stuff, you fill out a profile and hungry root decides what to send you based on AI and surprises and Delight You by sending you stuffum.

Scot: [31:02] You don't go shopping for stuff stuff goes shopping for youshopping powered by AI.

Jason: [31:07] Shopping becomes implicit so I don't know how to score this like part of me wants to give me half credit like because I I do think, literally everything I said in the prediction happened but like it didn't happen at the scale that I thought it would and it and the experiences are, more meaning nothing Burgers like all those Auto replenishment things I mentioned are super interesting none of them are selling, meaningful volumes of stuff so I don't know part of me wants to go 0.5 on this 1.

Scot: [31:36] I'm feeling generous you you announced on the show you're taking me to Paris and we're going to meet meet your boss so I'm pretty excited by that trip and we're gonna have wine and cheese so I'm gonna I'm gonna round that 1 up and give it to you.

Jason: [31:46] Gotcha I I don't you may have already pre-impact conference room at our office and in Paris does not have Wi-Fi but it has a private kitchen and Chef so to give you an idea of our priorities.

Scot: [31:57] Oh and a view of the Eiffel Tower I I assure you.

Jason: [32:00] Arctic Triumph like.

Scot: [32:02] Oh even better.

Jason: [32:03] Yeah like literally NBC rents my bosses balcony to put their TV cameras for the tour to France. Yeah so we'll sit out there and have fancy glass of French champagne served by the pubis chef but don't hope to search for the internet while you're doing it.

Scot: [32:20] Yep and then you'll ask me how the cheeses and I'll say Jason this cheese is Gouda.

Jason: [32:25] And then someone will call and ask for their slides and I'll say I can't send them to you because there's no Wi-Fi at pubisum.

Scot: [32:29] Perfect.

Jason: [32:32] Yeah but I'm not bitter awesome so I'm taking the win to a 2 for 2 should we just stop thereoh.

Scot: [32:38] The the we go to 5 so your number 3 prediction for 2024 made in 2023 bifurcation drives at least 2 more retail bankruptcies including 1 National Specialty retailer in 1 general merchandise slash department storeparenthesis 2 top 50 retailers so I'm going to party city that was in, those in the year like that didn't happen in January that happened like.

Jason: [33:04] Good news it happened twice.

Scot: [33:07] Party City twice.

Jason: [33:08] Party City twice in 2024 yeah uh so the second.

Scot: [33:11] Count those as your 2.

Jason: [33:13] I'm I'm gonna count the 2 of those as my specialty retailer but but there were sadly more right so the Container Store Express Jo-Ann's the general Merchant which is not quite as general merchandise as I would like but the the the the general Merchant in my mind that that failed last year was Big Lots.

Scot: [33:31] Were you with me on this tour we did at Container Store.

Jason: [33:35] I don't I don't get invited to any of the cool stuff.

Scot: [33:38] And we were talking to 1 of the sea-level people and I was asking him about e-commerce. Maybe I don't remember and he basically went this long spiel about how they'd never wanted anything on their site that wasn't available in the store and I thought, I said to him that's kind of strange because other people most people view it the other way they have this like concept of this endless aisle and they view having an unconstrained space is he's like what is the customer going to do and they see it on the website and its not available in this toy.

Jason: [34:06] Yeah I will say that's more.

Scot: [34:07] Well.

Jason: [34:08] Uh I I I get that that would be an announcement that would be an atheist to you and to a lot of people and like I think when we think of the most successful e-commerce sites they now have hundreds of millions of skus there are examples out there Target basically only sells, online what they have in the store Costco and Sam's Club only sell online what they have in the clubso the there's ways, there's ways to make either either model work but uh.

Scot: [34:35] I blame the bankruptcy on it personally I haven't read anything so I'm just gonna I I found it like a strange so I'm going to blame the whole thing.

Jason: [34:38] But uhyeah I'm not sure Container Store was a a fast-moving early adopter of digital.

Scot: [34:46] No no no they they just launched their site too so this was like 2012 or something.

Jason: [34:51] Yeah yeah so sadly I I regret that I got number 3 right.

Scot: [34:56] Yeah that's kind of an easy 1 to get done you could have done most that's another reason uh number 4China companies so you have 3 right uh 2 TBD, China companies focus more on the west and get more traction shien successfully IPOs, and tiemoue us gets to at least 75% of all us e-commerce I made from that 1 of Target, Target do you mean.

Jason: [35:23] I meant the retailer Target that the team who was at least 3 quarters as big as Target in e-commerce.

Scot: [35:29] Okay well we know Sheen did not do.

Jason: [35:31] Yeah so I'm giving myself a Miss on this because of that right um so China companies focus more on the west, what's interesting is that happened and then it didn't last year so I think there was a eeo last year when, the Chinese economy was doing very poorly pendwa Duo was all in on the US market as the US got less and less friendly to Chinese companies and there's all this talk about banning and all these things they all kind of, de-emphasize the US and move to Europe and other markets so, so I think there was for part of the year a big focus on the west I guess if you count Europe as the west then that definitely happened, shein tried to do an IPO in the US it got kind of they got spooked they tried to move it to the UK there's some talk about them doing 1 in Asia this year and there is still some traction about them coming back to the US so, I don't know what's going to happen with Sheen I obviously didn't get that prediction, right so I'll take the the miss here but I will also say I I wildly underestimated how much better team it would do than Target so, Target sold about 20 billion dollars on the line last year she and sold 54 billion about half of it in the US 42% in the US so so Teemu outsold Target online in the US.

Scot: [36:48] Wow that's impressive on its own.

Jason: [36:50] Yeah so a lot of impressive stuff in there I blew it when I threw the IPO into the into the prediction so I'll take the loss.

Scot: [36:57] Yeah the um so it's interesting because T-Mobile they kind of came on the scene in 22 when they ran a Super Bowl ad right like that's I think the, you knew about them earlier yeah, and then LA and 23 they ran a lot more Super Bowl ads have they announced if they're going to be in so the 23 24 have they announced their 25 Super Bowl plans you probably.

Jason: [37:22] That they have not in some cases advertisers predisposed what they're doing but a lot of them like to keep it a secret and I believe, team who has never discussed their Super Bowl plans ahead of time they totally were surprised Advertiser in 23 they were the biggest Advertiser in 24 as you you rightly remembered they they bought us huge controversial amount of of add time for the Super Bowl, if memory serves they probably spent like thirty million dollars on media for that 1 day um and then you know everyone in my agency like think, that they're they're Super Bowl presence is just awful because they made the ad themselves and it's you know a Cheesy animated cartoon with a with a you know kind of candy jingle and I have to keep pointing out to them that that adds sold 50 billion dollars worth of stuff which 1 of our clients did that. Um and they don't they don't like that so so let me just say myself and all the creative directors at pubis have a slightly different definition of what makes us successful Super Bowl ad.

Scot: [38:30] Yeah I'm looking at the list of people that have announced it's a bunch of cpgs as you would imagine and then the only 2 I kind of see out of our world would be GoDaddy which is a stretch and then instacart so.

Jason: [38:39] Yeah yeah I think I think.

Scot: [38:40] It'll be uh I think that may be their first did they do 1 last year I don't remember.

Jason: [38:43] Instacart has done 1 before they're I can't get in all the details but there's going to be a few e-commerce companies that are first-time.

Scot: [38:50] Ooh breaking news.

Jason: [38:54] Yeah we will not be at the Super Bowl this year is any football team that I remotely support itmy my my La Chargers like briefly had hope we made it to the playoffs I was wearing a charger Jersey 2 NF this year and we got trounced and then you know my adopted family all my in-laws from Detroit have been super excited about the lines this year and they they took.

Scot: [39:14] Ooh that was a disappointing 1 yeah yeah okay all right so you are. Yep 344 and then we've got your last 1 the last 1 Number 5 grocery e-commerce goes from 95 billion to 125 billion in 2024after being down in 2024, per bricks meets clicks was that I guess that's the name of a report that you you grocery people love.

Jason: [39:40] Yeah we do I do not love it but it is the most consistent data I have on on grocery e-commerce and I miss this 1 so, grocery did grow we went from from 95 billion, to 105 billion but we did not get to 125 billionlast time I do really specific easily verifiable predictions.

Scot: [40:02] Well we we went to a phase where we couldn't verify them and we're just like looking at each other like what do we do so that's that's where the screw from I know you've forgotten so 3 out of 5 we'll give that a 60%, gentlemen see all right you had a bonus live streaming metaverse crypto still not a major thing in e-commerce oh you blew crypto crypto is where it's at, management stops blaming performance on retail crime nope and smaller retail media networks fail, let's see live streaming check metaverse check crypto not major things you got all those rightman I still think management blames.

Jason: [40:39] I I don't I actually think.

Scot: [40:40] I saw the Walgreens guy just said.

Jason: [40:42] He he said it was wrong he said they were wrong so.

Scot: [40:46] It turns out when you lock everything up in the store people don't buy as much.

Jason: [40:50] He he absolutely did say that but before he said that the CFO had to say maybe we cried too much about like a literal quote in an earnings call maybe we cried too much about shrink because it was pointed out that while they were locking up all the product allegedly to stop shrink, the amount of shrink they reported on their income statement was lower in 2024 than it was in 2023 um.

Scot: [41:14] Because they locked up all the productit worked.

Jason: [41:17] And so then they didn't sell any so there's a catch showing 2 there but like the CFO said said on the air we cried too much about shrink and the NFL the NRF had to retract all of their shrink data and stopped reporting on shrink um so I'm saying it doesn't matter there's no points for the bonus but I'm saying that absolutely happened.

Scot: [41:37] So that NRF shrink data shrink.

Jason: [41:40] The NRF has been reporting shrink for 20 years they have a dubious methodology they send a survey to people and say did people steal stuff from you. Yeah and whoever answered that survey, for the last 20 years has answered it exactly the same so the the rate of shrink as reported by the NRF like is what is perfectly consistent for 20 years, um so if you believe in that stated stated survey methodology which we know I do not, then then everybody's way over complaining about shrink because it didn't go up but what happened is a bunch of retailers publicly blame shrink and then the NRF data didn't support that and it was a black eye and so the NRF like literally, a they they reported something that said shrink was way up, and then they had to retract that and say that their data was incorrect and they stopped publishing the survey and said they're going to invent a new better data set and publish it in the future which we haven't seen yet so.

Scot: [42:39] This seems like Jason working behind the scenes this feels like a someone that Goldberg.

Jason: [42:43] Saying it's it's a it's a complicated Quagmire of a mess but the takeaway for everyone it's a bonus so we're not arguing for points the takeaway for everyone on on this podcast should be do not put your product and product jail, uh if you have to put your product in product jail just don't carry it.

Scot: [43:00] Well there's this thing called convenience and if you have to call someone if you're going to the Walgreens for 6 things and you have to call 6 times and have 6 unlocks and it takes 6 hours.

Jason: [43:09] On a webinar today and the host had all these data sets and 1 of them is convenience is not King and you know he talked about how people are willing to you know get a great links to get what they wanted um and and then you know he asked me like how do you feel about that I said I don't know if convenience is King but I know that inconvenience is Satan.

Jason: [43:38] Yes yes never never.

Scot: [43:40] He hates observed measured data that's that's usually wrong.

Jason: [43:42] Do just ask people what they what they think they're going to do.

Scot: [43:46] Yeah do you feel like you're being compensated fairly that's a good 1 there's a lot of good ones, all right well I think you did pretty good let's see how I did.

Jason: [43:55] I think 3 out of 5 is better than my historical average.

Scot: [43:58] Yeah it is yes usually it's 1 so you crushed it 3x it.

Jason: [44:03] Gotcha, all right now let's get to Scottsand I'm I'm I also didn't remember Scott so I'm looking at them and the first 1 makes me so happy already, so prediction number 1 Amazon launches Alexa on a native llm.

Scot: [44:23] Yeah did I say was tried or no no I didn't say try okay they tried like 3 times and failed and they've I think already in 25 they tried again and failed so yeahthis is kind of sad you know I I have a.

Jason: [44:34] Thisyeahit's super sad.

Scot: [44:38] Amazon is not a day 1 company anymore and they're a day.

Jason: [44:42] It is day it is Day 2 at Amazon I'm sorry to all my friends at Amazon but I think it's pretty clear um.

Scot: [44:47] Yeah.

Jason: [44:47] The what's funny I will disclose I was a little miffed at you when you made this prediction a year ago because I'm pretty sure I pointed out to you when I saw this prediction before the show that Amazon had already announced they were doing this and I'm like it's not fair to predict something that Amazon already said they're doing, and and you I think didn't have time to make any new predictions so you just stuck with it and like even though they announced that they were going to do it in 2023 they tried 4 times in 2024 and couldn't get it so so Amazon's lack of execution caused me to win 1.

Scot: [45:20] Yeah I read an article and it's from that that seattle-based publication that sometimes gets some juicy Amazon information do you remember the name of it I can't, it's on the tip of the mount.

Jason: [45:30] Is it the Seattle Times is that the.

Scot: [45:32] No it's got like a you know a techy kind of a name, but it's interesting this is like I remember reading it like in October November and an Insider was explaining why they're so delayed and what they found is the and they're using I think anthropic underneath the the hood.

Jason: [45:47] Will not originally several of those efforts they tried to build their own and then they they gave up and then they went to anthropic exactly.

Scot: [45:54] Well this guy you know this reporter fared it out and you know it's it's anonymously sourced so it's hard to it's like so specific to what seemed pretty Legit To Me that the the problem is you you and I are big fans of Ale XA and we have a lot of them and they're really good at like the little Atomic tasks like setting alarms and some little things like that I like to play music and stuff, so what they did is they they had this problem that once they they took their current programmatic stuff which is the simple little things and then they added the LM well once an LM was on it would refuse to do the atomic things and in fact it would be get sassy you would say you know hey you know what's the weather and it would say well you know, do you just want to know it would want to have a conversation it was very chatty so it would never just get to the point and they they haven't figured out how to fix that, so they have this world where like you're going to have to kind of pick you know their current state is the lm1 is really good if you ask it a nuanced question like you know how do you know how do these things work or something how do microwaves work and it would be happy to chat with you about that but if you ask it like you know what the weather is today it wants to kind of like you know, ask a bunch of follow-up questions and we'll just like remember you're in Chicago and tell you the weather.

Jason: [47:04] Yeah so I I'm going to say 2 things about this number 1 there it's so funny what how how big a factor expectations play in your satisfaction like I I have dozens of these devices in my home we I don't know how long we've you and I have had them now but like is it 8 years something like that it's a long time um when I first got them this was magic like this was like, 1 of the the best most reliable Technologies and I liked this so much better than a light switch right and there's all these use cases raising a kid timers or a huge part of my life and and they're great for all these timersso they work exactly as well now as they did 8 years ago but now I'm nothing but frustrated and annoyed by them, the rest of the world has gotten so much better while they've Stood Still and I I get that that that solving the big problems and the atomic problems is is hard but like here's a baby step just every time you come back to me and say I didn't understand what you say send that to an llmlike every time you said I don't have a light name that like maybe ask the llm what what it thinks I meant like but yeahI'm I'm a little bitter I'm waiting for a better version and they're you know they're competitors Apple and Google like, I mean arguably I would I would have a better quality of life right now if I flushed all these things and put Apple or Google Hardware in their place.

Scot: [48:30] Yeah while we were chatting 1 of the research assistants popped in and the article I read was from that Seattle 1 but it was actually inside there it sourced you know you know how these things go like it takes you 8 clicks to find the original Source it was actually PC World how's that for.

Jason: [48:45] Ah oh yeah niche.

Scot: [48:47] Ben Ben Patterson wrote it so if you're interested in that we'll put a link in the show notes it was a it was a good, I found it kind of interesting to kind of like understand what could they possibly be working on and it was like oh that does seem kind of important seems like you want to nail that 1 you can't go backwards on the basics right.

Jason: [49:03] No okay 0 for 1 so number 2Teemu falters as people realize it's wish 2.0how do you feel you did on that.

Scot: [49:11] That 1 I clearly lost because I I bet against you and you won so just mathematically I was I was doomed there so that was a bad 1.

Jason: [49:20] I will say their pace of growth slowed way down in Q4, so so I would argue less because people realized it was wish 2.0 and more because Tik Tok shops, stole a bunch of the the customers from it and Tik Tok Tik Tok shops is potentially a better version of T-Mobile but yeah still they sold 54 billion dollars last year they sold you know 20 25 billion in the US so not wish 2.0 yet.

Scot: [49:45] Yeah when you I'll talk about later. Uh so I'm a batting zero here retail media networks is currently 52 billion growing 20% and accelerates to 30% growthand and 67 billionrun rate so, you did say they're very hot so did I come close on this 1.

Jason: [50:06] You you are in the ballpark you know again you were smart enough not to quote a particular sourceand the the sources that that we use most often so e-marketer which you know does a lot of publishing in the space they said 56 billion in 2024so right order magnitude but you did you did miss it by like 10 billion.

Scot: [50:30] Dang it how about the growth rate it did accelerate I think right.

Jason: [50:33] Yeah so the data set I'm looking at right here does not have 2023 in it so I don't the22% 22% growth rate.

Scot: [50:42] Just like acceleration dang itcome on retail media networks get your act together you and Amazon get in there and figure stuff outall right it was a rough year for predictions for meall right number 4.

Jason: [50:55] Uhyeah I I'm I don't like doing public math but I feel like you're gonna have a hard time beating me at this point.

Scot: [51:03] Yep I'm hopelessly behind.

Jason: [51:05] Uh so number 4, whenever you're in trouble go with the stock prediction that's that's what I always say number 4 instacart whose stock IPO at $33 and is now at $23 $23 as of this prediction show in January of 2023 solves ads and Pops to 40 uh dollars a share.

Scot: [51:27] It was January of 24 yeah but yes you got the dollars right but the time was January 24th.

Jason: [51:32] Okay got it so.

Scot: [51:34] If they had done it on January 23rd that would impressive because I would have been predicting the IPO price and where we'd be.

Jason: [51:39] And it would have been even more predictive if you bought at that point yeah um so what happened in their their stock is this dollar sign cart is that who we're talking about.

Scot: [51:48] Yeah I questioned it at 45 right now so I beat that 1 and therefore I get 2 points by my mouth.

Jason: [51:54] Yeah and for any listeners that weren't already clear on this if you want to adopt either of our stock picking you should adopt stocks.

Scot: [52:03] Yeah this is like you know how the NBA they have the 2-point things and then the 3 this was like a 3-pointer for me so it's like a 2-pointer it's kind of.

Jason: [52:09] Got it all right all right um I did I feel like your foot might have been on the line so I'm only giving you 1, all right and then rounding out number 5 well everyone thinks T-Mobile uh well, wait while everyone thinks she and tiemoue take share from Amazon they end up hurting Nordstrom Macy's and Target instead materially 10% plus focus on apparel maybe take Target out okay maybe there's some notes in there on the prediction um.

Scot: [52:40] Um yeah.

Jason: [52:41] But so high level you're saying.

Scot: [52:43] I wasn't sure if we knew the I didn't I was trying to like I wasn't sure if we I I occurred to me that Target probably doesn't report on apparel and it doesn't matter about merged from the Macy's because they're mostly up here but yeah that's like what I was talking about.

Jason: [52:54] I see what you're saying yeah yeah yeah.

Scot: [52:55] But let's just say target has a rough year is my prediction. This is what's known as a prediction Recon.

Jason: [53:05] Yeah so how do how what do you how you're grading yourself on this 1 I'm curious.

Scot: [53:09] I didn't think so I don't think Nordstrom and Macy's are reported yet so we don't know but I don't think I do think Amazon fought back which was interesting like I would never, I thought that I thought they would fight back just in the current mechanism but they came out with their I always forget the name of this what's their to competitor.

Jason: [53:29] Uh Hall.

Scot: [53:30] Yeah, you know I think that's interesting in its own so maybe it was actually wrong because I don't know I don't know if Amazon would have come out with that or I guess they did you know I don't think they've slowed Amazon down by any take and I do think they've taken share, from the Omni Channel people.

Jason: [53:47] Yeah no I I think you are right here so so I I feel like objectively there's a pretty easy way to say this Amazon probably is going to end up growing at twice the the average rate of retail so nobody took share from Amazon.

Jason: [54:01] And so like I you know as as as well as she and and tiemoue did it it had to be coming out of other people I think it's a little unclear exactly who they came it came out of, you know you're right like they do skew a little apparently and you know that a lot of apparel returns that did poorly Nordstrom didn't have a good year their their stock went down and the family was able to buy the company back like, but so that's not going to be because they lit the world on fire in 2024 a spoiler alert, Macy's you know continues to struggle in their turnaround they just announced hundreds of More Store closures and Target did okay they have kind of fallen out of the, the kind of top tier you know running they're not growing as fast as the Walmarts and and Amazons of the worldbut they they probably, tread water which is probably disappointing for them so don't know if how much shared Sheen or team specifically took out of them but I think it's it's totally correct that Sheen and tiemoue did not grow at Amazon's expense I think it's also true that Amazon is, you know intrinsically nervous company that you know look tries to look at the future and hedge its bets and I think that's why they they launched hall for the the potential of these services to impact Amazon not because of the the material impact it was already having.

Jason: [55:19] So I'm giving it to youyeah so that puts you at 2 out of 5so a rare a rare win I feel like we should just, like we've already used an hour of the podcast got so I feel like we should just forgo next year's forecast and just you know carry the the champion forward a year.

Scot: [55:37] Gone out on top is smart yeah I I understand your prediction your your desire to do that but the listeners would be very.

Jason: [55:45] No the listeners do deserve better they do they do deserve a a shorter tighter better edited show which they're not getting so we should at least give them the predictions. But I do think we should try to be concise uhokay you want to go first or you want me I uh I I would love to hear yours.

Scot: [56:00] Yes I can go fast all rightdo you want to go first or you wantwhy don't we go with yours because we heard your that will keep us alternating you go.

Jason: [56:12] So prediction number 1 Sheen and tiemoue are not I I underscore not impacted by changes to Dominus so there's the Biden Administration announced that they were, they were going to suspend a minimum from China and a lot of people thought oh man that's that's a death null for Shen and tiemoue, and I'm predicting that either those those diminished changes won't happen or even if they do happen that they're not going to materially impact Sheen or team machine and team are already too big and they're they're now not using de minimis for a bunch of their deliveries, so I think they announced their goal this year is to deliver 80% of their their European orders from factories they already deliver 50% of their us orders from factories so I don't think I don't think to minimize slows down she and her team who, that's a question I get asked every week by reporters by the way, more likely if she and tiemoue don't have a great year it's going to be because Tik Tok shops does really well or trade Wars you know knock everything off but but it's not going to be because of Dominusso that's prediction number 1, prediction does that shock you or don't care or somewhere in between.

Scot: [57:17] Wellokay so you're putting tariffs in so it's an and the minimum so you don't think tariffs or diminish are going to slow them downbut tariffs could could slow yeah tariffs are going to like hurt.

Jason: [57:31] Disregard the tariffs I actually said I I I I hedge there which I shouldn't have I I said they may.

Scot: [57:37] I I heard tariffs 100% you're saying though not the any tariffs.

Jason: [57:41] No no no I said they could be impacted by tariffs but they won't be impacted by changes to de minimis.

Scot: [57:46] Ah okay.

Jason: [57:47] Um but even tariffs aside I I just yeah I think it's going to be an a good year for Shen and tiemoue and even better year for Tik Tok shopsum, so prediction number 2 I'm just sticking all all Chinese retailers all the time now and this 1 In fairness I have to point out I wrote a week ago, and then Scott realized that he wanted to have the 123 date and so we didn't we didn't do the show this week but but so a week ago I predicted Tik Tok will not be banned in the US but the more important part of my prediction was Tik Tok shops will be the fastest growing retailer that does over a billion dollars in Revenue in the US in 2025so you could debate with, banned or not they kind of got banned for 2 2 hours but more relevantly they're going to be the fastest growing retailer in 2025, the the billion dollar threshold is just to eliminate tiny little companies that you know grow at some huge rate because they're tiny.

Scot: [58:47] Are we gonna how are we gonna measure that because they don't disclose have you found a good third party that does.

Jason: [58:52] No but a bunch of analysts will a bunch of third parties will follow them and I'll I'll do a aggregate of the the Morgan Stanley and and City Bank estimates of of their their sales.

Scot: [59:02] Okayall alone.

Jason: [59:04] All right all right and sometimes they they are it it's debatable if you should believe them or not but sometimes they the bite dance does say something, about their size in any case prediction number 3 a major auto manufacturer launches D to C offering in the US in 2025.

Scot: [59:21] Hm a major Auto okay it doesn't have to be a us could be any auto manufacturer can you count Tesla in this 1.

Jason: [59:29] No because they already are D to C.

Scot: [59:32] All right okay.

Jason: [59:34] So it has to be someone other than than someone other than Tesla has to have some real Sales Direct to Consumer bypassing the the third-party D or Network.

Scot: [59:43] So Hyundai is sung on Amazon but it's through the dealer Network so that would not count if they added like another 1 to that. Okay all rightwe're gonna have a feeling we're gonna have to come back and check some of these nuances because you can get a little slippery in your predictions Mr retail geek.

Jason: [1:00:00] Suddenly you lose 1 year and suddenly you're all competitive interesting umprediction number 4, retail media networks go through a major consolidation in 2025 so a lot of the smaller networks realize they can't, succeed on their own they don't have the success that they they thought they would have and in 2025 we start to see a lot of federations of multiple retailers, that are throwing throwing their Edge units together to try to get bigger volumes.

Scot: [1:00:30] And then does that mean so they're not going to like the retailers aren't going to merge but maybe there'll be some kind of a way for their inventory and sales teams or something.

Jason: [1:00:37] Their ad networks will merge yeah so you buy an ad for all the regional grocers in the northeast of just from Wegman's.

Scot: [1:00:43] Yeahyeah that 1 sounds like a pretty pretty logical 1 just kind of a question of when like the trick timing on these is always tricky.

Jason: [1:00:50] Timing turns out to be way harder part of predictions than you and I have each had a really wise prediction that we would predict 3 years in a row be wrong and then get tired of predicting it and have it come true, uh which is heartbreaking but so my fifth predictionI I feel like I might be, repeating tradition this was my bonus last year but it's my actual prediction this year who I streaming VR and voice Comm Commerce are all materially insignificant in 2025 no evidence that consumers care about green or purpose-driven brand with their wallets. So uh again this is because I get calls every week from reporters that want to do a article about how what a big deal live streaming is or or VR Commerce or how everyone has to have a green Mission or they're going to fail, and it's all a bunch of March so I'm chromogen me is saying none of those things are going to be a big story in 2025um, and then I did write a bonus again and the reason this would have been my fifth prediction but I actually couldn't figure out a smart way to measure it and so I I opted to not, not put it in there although debatably the the 1 I replaced it with is also tough to measure but my bonus is AI agents are the hottest Trend in Commerce and so we we talked about that in the in the NRF recap but I I I think the our agent space is going to be really really interesting and eventually very meaningful to Commerce.

Scot: [1:02:14] We should do a deep dive on on that we we're behind deep Dives every time we say deep deep dive we we haven't had time to do it but.

Jason: [1:02:20] Yes we'll make it happenall right so what do you got Scott.

Scot: [1:02:26] All right Amazon relaunches Alexa on a native element just kidding I'm I have a I have officially given up on that 1 sorry Amazonyep.

Jason: [1:02:33] Yeah so I'm grateful that you gave up because that means I have a chance of actually getting a better 1 this year.

Scot: [1:02:44] Okay on this 1 I think Facebook, is going to acquire eBay and put them out of their misery so eBay has been on this kind of like, painful decline I'm a I'm a huge eBay fan and it's been kind of sad to watch them like not keep up with the times and I was initially excited they bought a guy back Jamie I think it's his name is Ion or something like that and uh he he's a really nice guy and he was.

Jason: [1:03:08] In a way I think yeah.

Scot: [1:03:08] Category guy in a way and you know I just think it's like too big of a beast and kind of too far gone and got an innovator's dilemma problem all kinds of problems so I think Facebook buys it and they kind of merge it in with Facebook groups in some way and and Marketplace and to kind of figure out a way to to to re reimagine it as kind of a peace inside of the social network and you know and they probably get the ad piece and all the data and it. It it probably makes sense just.

Jason: [1:03:40] I love that I love that I also love that you call it Facebook and not meta.

Scot: [1:03:44] Yeah refused to um I think they're going to regret that they prior to do they're probably going to like change to some kind of an AI.

Jason: [1:03:50] I think that wasn't wasn't that my fifth prediction I think was that it's on yeahthe metaverse is material eiroa.

Scot: [1:03:58] Okay I'm going to redo I'm not going to redo my Alexa and I'm going to revisit the T-Mobile and I still think if your premise is like silly gamification and cheap junk that that's going to catch up with you so I think it's going to catch up with them this year, um yep so I have a you know specifically they're going to be down at least 25% year-over-year from 24 to 25.

Jason: [1:04:18] I love this cuz we violently disagreed so that'll be fun to watch again in my perspective Teemu possibly could be down but if they are it's because someone will be selling the cheap junk better than them not because nobody's buying cheap jump.

Scot: [1:04:30] Yeah just I don't know, all right okay this 1 may explain may take some explain so AI agents become a double-edged sword for retailers because a these agents can be a couple of things and.

Scot: [1:04:43] I'm a retailer, I think I'm okay with an agent like embedded on my site like my agent you know my my thing on my site my experience so I can draw I'm not sure I want the external agents, you know making me a back a headless serviceand you know especially if you're you and I know a lot of these retailers make, bunch of their money off you know the add-ons the, that they they almost don't if they were just became a transactional part of a hey agent I need to get dog food book a trip to La this that and the other they they start to lose money because a lot most most of not all their margin comes from the little things and it's add-ons it's you know all the little things and I think I think they they will that's the double edge so the prediction is, I think1, okay 10 10 the larger retailers will block them and I think it's going to be like the Amazons the Walmart's the targets those types of folks but I think the rest of them if you're a if you're a big 1, you're going to want to you're going to have enough power that you're going to want to block it and you'll be okay and again this is not the use case of its on your site this is like a third-party entity is using you as a, you know an endpoint for an agent to buy something um and then I think everyone else will will kind of Welcome them and and maybe even make it easier so it's going to be like a really weird, bifurcation for how retailers handle that that new thing.

Jason: [1:06:12] Got it yeah yeah no I totally get it, I mean yeah every everyone wants to be the AI agent no 1's to be a sharecropper on someone else's AI agenttoy get it like I I think for the fulfilling product I also think that's true on the data side by the way like the best agents are are they going to be the ones that know the most about your life and so you that would argue for interoperability right like the agent ought to be able to see read your Gmail and read your travel schedule.

Scot: [1:06:37] Oh I have a prediction on this too.

Jason: [1:06:38] Yeah oh okay I'll shut up on that then um but they're all they're all going to want to be well Gardens and be agents that only have you know are the only 1 that sees their data is how they're all going to try to win in the in the short run at least unless consumers make them change.

Scot: [1:06:52] Well there's a throwaway line in the I also I came very close to spending the $200 to get to the operator but I also showed some constraint yeah yes.

Jason: [1:07:01] You make me feel better about my decision I was worried you were going to say that's that's ridiculous Jason you should just spend money.

Scot: [1:07:06] When they're it's like they have they have a throwaway line in there and they're like oh an operator you know once you pay uh it will remember your payment information for next time and I was kind of like, wow you know that that that raises a lot of questions Jason and I have a lot to talk about when we play with this thing I worried like a lot of these companies.

Jason: [1:07:24] Going to we're going to leave the hose in your armtake more blood on it whenever we want it.

Scot: [1:07:27] Yeah is that piece is there a PCA compliant PCI compliance this thing's scraping me entering my credit card and like where is it storing it.

Jason: [1:07:35] Oh I'm sure I'm sure they have a bunch of adults that are super focused on PCI at uh at openai.

Scot: [1:07:42] I can't tell if that's.

Jason: [1:07:43] The same people that made sure they didn't use Scarlett Johansson's voice right.

Scot: [1:07:47] Yeah so I'm a little you know when I try this I'm going to use my credit card that that uh I use for these types of experience.

Jason: [1:07:55] The 9-year-old video game player say it's a little sus.

Scot: [1:07:58] Yeah it's totally Seuss there's no risk just riskless um, okay number 4 marketplaces have a new leg of expansion yay marketplaces into a variety of placesmaybe even 1 of the LMS get some religion around marketplaces, and then this kind of ties in you made this interesting point that there's connective tissue between marketplaces and RNs and I think what happens is all these people have rolled out our MNS and they're going to say they're going to pull all the little ad levers and all that jazz that you guys are doing the ad world with you know, ad units and number of AD units per thing and then they're going to it's going to slow down they're going to say Hey what if we had more products how do we get more products on our site because that's going to be more page views well what's leaning into marketplaces so I think we're going to see this another I think rmns are going to retail media networks are going to pull marketplaces into more places that maybe previously haven't done them.

Jason: [1:08:49] So is this specific prediction here then 5 major new retailers will launch a Marketplace is that what you're sayingoh awesome okay.

Scot: [1:08:58] Major would be like let's call it the top 200 or whatever you know yeah not.

Jason: [1:09:01] Suresure significant retailers yeah okay.

Scot: [1:09:05] If retail Geeks uh you know merch store rolls it out.

Jason: [1:09:07] I know I know a bunch of vendors that sell that sell Marketplace Stacks that that are just thrilled to see that prediction.

Scot: [1:09:13] Yeah the the miracle folks have done a good job.

Jason: [1:09:15] Exactly who I was thinking ofuh they have a lot of competition these days by the way.

Scot: [1:09:21] Yeah there's software is tough man.

Jason: [1:09:23] Yeah as you wisely predicted the SAS had its moment but it's pretty pretty will bear to entry these days.

Scot: [1:09:31] And then number 5 and this is just my phrasing but it should resonate with you personalization is out and you know, I call it memory so so some of these LMS you're using and if they see an interesting fact about you they'll say I've added that to my memory or they'll give you a prompt that says hey Jason I see you're talking a lot about your cat, I'm going to remember you have a cat okay, that type of a thing so so I do think that that's going to be where you know these things will start to ask hey if I had access to your Gmail just this 1 time and I knew a little bit more about you and that could be the types of products you've ordered your upcoming trips to your point your calendar I could make your life a little bit easier so we're going to start trading off this convenience for data and I think it, it's gonna be painful because it's gonna be stored probably at the LM level with 1 of the big LMS and it's not going to be cross LM so someone could figure that out, I don't know if that's to figure out but, it's going to kind of be stinky in a way because it will be a lock in because that lock in a convenience will make it relatively painful once you know lm1 knows all the stuff about you that your left-handed you have a dog and a cat and you prefer Pringles over let you know whatever your preferences are across travel all these different things that's going to be so convenient that it's going to be hard to break that and and it'll be hard to, extract them and make them portable and no 1's going to want to have them extractable and portable.

Jason: [1:10:59] Interesting yeah I think it's a super interesting point I think it's going to be fascinating to watch it all play out I'm not exactly sure how we'll be measuring this 1 a year from now but II like it, I feel like the answer though Scott is super simple if just every piece of personal data about all of us was just on the blockchain and anyone that we give permission to could just tap into all of it.

Scot: [1:11:20] Well said it had a coin if it had a utility coin.

Jason: [1:11:23] Yeah and the only problem is we need the power of about 12 sons to power all the the compute for all that but yeah.

Scot: [1:11:31] Well actually it's kind of funny that you know everyone was freaking out about crypto and power that's like that's a drop in the bucket compared to the AI power you asked chat gbt to help with your homework and you just like yeah.

Jason: [1:11:42] Take out a rainforest.

Scot: [1:11:43] 80 80 Bitcoin transactions I I don't know but like it's a it's kind of crazy.

Jason: [1:11:47] Yeah I have a lot of clients that ask how they can use generative AI to achieve their their ecology goalsreally.

Scot: [1:11:55] Uh yeahget a lot of solar panels.

Jason: [1:12:00] Yeaha lot of solar panels like planets worth um awesome yeah you have a bonus.

Scot: [1:12:06] Bonus and and you know you kind of I don't know if you count this in your replenishment kind of thing but but there's a lot of supply chain is hit kind of a, not a wall but there's some problems in there that are hard for humans there's a set of problems that start to get these you know multivariable Solutions kinds of things and some AI so a really good 1 a good analogy that may not seem like a good, connective 1 on the surfaces drug Discovery so there's these things like folding proteins and things to figure out a different drugs and how to develop them and if they're candidates for solving certain things, it ends up at its simplest in a computer science standpoint it's like, it's these uh 4 5 6 7 8 dimensional problems where you end up having these you know surface areas colliding and crazy ways and you're looking for they have lots of collisions in there that could be answers and you're trying to find the optimal.

Scot: [1:12:58] And that's a set of problems that that happens when you get a lot of complexity of of of the trade-offs become you know, hard to even enumerate like if I do this then this happens and this happens supply chain has a lot of that right like if I if Jason orders the product here and it goes it needs in Chicago and he waited a day he could have gotten this added to the box and that does this and it's that and the other, so so there's some really you know they're using both Ai and interesting ways that they're different types this is more like the Deep Mind type of a thing where there's a, there's a winner State at the end not a not a natural language kind of thing, another 1 that's really interesting and I've gone pretty deep on this and it's pretty crazy is we don't have time you know but I'll just kind of introduce the topic here within the world of quantum Computing you have 2 types of computers you have cubits which are going to be better and they're good for, you know doing crazy calculations in parallel and and stuff that we don't even 100% understand the other 1 is there's a this thing called Quantum annealing where you load, the problem into this uh quantum computer, and then you cool it down and then there's something about the quantum nature of it that it goes right to the low point it finds the answer relatively quickly or a set of answers that are you know are almost guaranteed to be 1 or 2 of the the, the optimal answers so uh I've actually talked to people that are like looking at this in supply chain and and trying to figure this kind of stuff out and that's going to be interesting like it could be.

Scot: [1:14:21] You know right now we're getting like 1 and 2% kind of things out of supply chain but maybe we get like a 5 or 10% off something like that so.

Jason: [1:14:28] Scot I love that you found a way to work Quantum cubits and a kneeling into what minute 1 hour and 18 of the puck.

Scot: [1:14:36] It's a little bonus for the people that stick around you got to give them got to give.

Jason: [1:14:40] No no no I will I will say, it's super interesting and I like the the the very early versions of this kind of stuff is already showing up at at in the NRF vendor so there there are now like people have moved on from these kind of like, like Old School Ms to we'll call it a supply chain or order orchestration so instead of like, new Legacy systems to do these things like interoperability of all these disparate data sources to, to be way more efficient and so the you know there there were vendors like next nextuple or pipe 17 at interf this year that are already using AI to optimize supply chain in ways that you know humans couldn't see or understand which is pretty cool.

Scot: [1:15:22] Awesome well if you stuck with us this long listeners we appreciate it and that's uh before you go to bed start learning about Quantum and kneeling and then we'll uh we'll do a deep dive if there's enough demand.

Jason: [1:15:32] Yeah yeah we'll have a question and answer show in the listeners can explain it to us um, it's got its we we say it's happened again that we've run out of time but that was 15 minutes agoso we've blown way past time everyone complains that we have been publishing enough shows so be careful what you wish for, as we we hit some almost epic choir length podcast this week. Always a lot of fun talking to you I think the predictions are super interesting I'm going to cherish my rare annual win for at least the next you know 2 or 3 hours, and sure appreciate everyone sticking with us as always if you find Value in this show jump on iTunes and give us that 5-star review the AI robots love the 5-star reviews our corporate our our AI overlords are going to want them.

Scot: [1:16:21] Yeah congratulations Jason on the big win it's 10 years in the making you finally finally got 1.

Jason: [1:16:27] I might I might have a future in this industry after all and until next time happy Commercing!

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EP322 - 2024 Holiday Recap

Episode Summary: In today’s episode of the Jason & Scot Show, Jason and Scot recap the 2024 holiday season, and give a preview of the upcoming NRF Big Show.

The week of January 20th, we'll be publishing our annual predictions show.

If you enjoyed the episode, help us reach more listeners by leaving a five-star review on Apple Podcasts. Thanks for tuning in!

Episode 322 of the Jason & Scot show was recorded on Wednesday, January 8th, 2025.

http://jasonandscot.com

Transcript Jason [0:23]Welcome to the Jason and Scott show this is episode number 322. Being recorded on Wednesday January 8th I'm your host Jason retail geek Goldberg and as usual I'm here with your co-host Scott Wingo. Scot [0:38]Hey Jason and welcome back Json is Scott showed listeners happy New Year Jason. Jason [0:45]A happy New Year and happy holidays Scott it's it's been a while it's been it's fun to catch up. Scot [0:50]Yeah you're kind of crummy when do you start giving people a hard time for saying Happy New Year I I was kind of a little worried because I was thinking I bet Jason draws the line at third or fourth of January and here we are on the 8th so I feel like. Jason [1:05]I accept all all well wishes I'm totally merry Christmas happy holidays as long as you want any of those variations are totally acceptable despite the fact that I'm nominally Jewish. And I'm New Year's at least through January my lights are still up out front. Scot [1:21]Okay good I'll I'll try to for the Valentine's show I'll make sure I don't say it that though I'll stop from there forward. Jason [1:29]If it helps people not judge me I think my Amazon smart plug is broken so I think the holiday lights might not be on. But they're still out there it's too cold to go out and get them is the problem. Scot [1:41]Yeah yeah you and I both went warm places for the holidays so that was good because I think we're both facing a cold spell here and I think actually here in North Carolina we may get snow whereas in Chicago you're not going to isn't that weird. Jason [1:56]That that is super weird even if we're both getting snow I'd be a lot more worried for you than me because I feel like we're we're a lot more used to it but yeah it's even weirder that like it's not not snowing here and you guys are going to get get dumped on. Scot [2:11]Yeah yeah we're just going to shut down and hopefully we don't lose power, the so it's been a while since we laid down a pod there's a lot we could talk about any any trip reports you you've been super busy you've done some vacationing but you grocery shopped before the break and then we definitely want to talk a little bit about holiday to kind of go through some of the tea leaves that are starting to come out on how things happened let's start let's start with a trip report anything interesting there. Jason [2:38]Yeah so at least anyone worry I have been traveling a lot I just got a note from my my favorite vendor United that they've invited me to their secret. Highest status program for for another year and this year I'm going to cross 2 million miles with United so um. Yeah I feel like that I had mixed feelings about that like it's a a cool accomplishment slash it kind of signifies that I have a sad life. Scot [3:05]And it's like congratulations all you do is fly would you like to fly some more. Jason [3:10]Yes and the general answer is no um so I did do a lot of traveling last year there were a bunch of trips running right up to holiday but, but a lot of them were sort of Private Client gigs more so than, industry events and I've been on 2 weeks of vacation so I frankly can't remember where I was right before those but the Big Show of course that I don't think we talked a lot about was was grocery shop which, isn't you know focused on the food restaurant and grocery industry in October in Las Vegas and that show continues to get. Bigger and better longtime listeners of the show will know kind of I talk a lot about how. Every industry is getting wildly disrupted by digital just not all at the same pace so some of the you know first categories to get disrupted. Digital where things like like Borders bookstore and Blockbuster video and then Circuit City and Toys R Us and the gap. Jason [4:08]And that at the moment it's the Auto industry in the grocery industry that are getting most disrupted by digital so I feel like grocery shops are particularly interesting show because, in many ways that's where all the, the rapid Evolution and action is in the in the digital space so it was a a good vibrant show and. 1 of the things I'll I'll give props to the show organizers for is you know they always get good Keynotes they always get big names on stage but they share more so than many years in the past I felt like. A lot of the Keynotes had like actual interesting. Information and insights in them it was less like sort of CEOs giving the the prepared PR. Can speech and more talking candidly about what was working and what wasn't working and and you know what the priorities were going to be and what was being deemphasized in the future so I I would just say overall again it was back in October and we're in January now so. Don't press me for for a ton of specifics but I walked away. Feeling like there are a lot of useful takeaways and of course like all the all the networking and hallway conversations were were super helpful as well. Scot [5:21]Cool were you leader of any sessions. Jason [5:25]I was as per all of these events I'm I'm wildly Overexposed and so I I both presented a session I also moderated panel. The like I probably can't even remember exactly who was on my panel so. Scot [5:45]It's been a long time you've got you've got vacation fog we'll give you a. Jason [5:47]I do I do I'm gonna call it vacation fog and hope it's not dementia but yeah. Scot [5:53]Yeah and then on the holiday recap we kind of have to wait that first week of February last I looked is when Amazon's going to announce and then right after that I think you got some Walmart and some of the other folks Target and whatnot kind of put out their data so we won't really know what happened until we get some of that but several of the folks that do pontificate have some data out did you see any data that was interesting that you want to run through I I I saw some of the Adobe stuff I was going to just run through. Jason [6:21]Yeah well so maybe I'll just wait the groundwork a little bit like so again there's. In general we see 2 kinds of data like there's people that talk about what happened in retail which is all all of retail so it's brick and mortar mixed with eCommerce and then there's people that just talk about digital so I know you're going to jump into the Adobe 1 which is, exclusively talking about e-commerce, but of course a long time listeners of the show would know you know the history of the last 10 years is that retail tends to grow about 3 to 4% a year, and e-commerce has grown about 10 to 15% a year for each of the last years so 2024 is an interesting year we you know it's still a week or 2 before we have the final data for the the whole year, but with 11 months of data. Retailers slowed down a little bit like it's growing closer to 3% than 3 to 4% and e-commerce has slowed down it's grown about 7% this year versus the typical 10 to 15% and. Jason [7:22]You know it could be that this is a down year it also could be the law of large numbers as e-commerce is getting you know to be a bigger and bigger part it's hard to grow as fast so it's e-commerce is still growing at more than twice the speed of retail. But that's that's a smaller Delta. Then it has historically been so that's kind of the the backdrop coming into this holiday and then this is 1 of the weirdest holiday seasons of my career. So traditionally what we always talk about is. There's an arms race to start holiday earlier that like you know retailers used to open up their stores on. Black Friday the day after Thanksgiving and they were creeping earlier in the earlier in the morning on Friday originally when I started my career they opened at 10:00 the normal opening time and then they're like wait I'm going to open at 9:00 and get people to get in the line of my store before your store and then I'm going to open at 8, and then retire starts saying hey we're actually going to open Thursday night after dinner and then oh we're going to be open all day Thursday, and fast forward 30 years hey we're going to run our big Prime day sale in the middle of October right and so, every year we talk about how holiday starts earlier and earlier and these sales start her early and earlier but here's the Dirty Little Secret. Jason [8:39]The retailers may offer deals earlier and earlier but consumers have never spent earlier. So if we look at October sales growth it's the same every October for the last 30 years so I get it has it it's not like October has become more important over time as these sales have gotten early and earlier and so when. Amazon announced a huge sale in October and Walmart and Target quickly followed suit I actually. Kind of thought it was a nothing burger like I I didn't expect it to have a big impact and. I was wrong so October is actually been 1 of the most robust months of growth we had this whole year like it was a big spike much bigger than we had any other month. And I thought oh man that's interesting like these these sales really are having a meaningful effect this year. But then we got into November in the first 2 weeks of November were abysmal. And so you go huh we we had a bunch of big sales in October it appears people jumped on those sales uh we sold more stuff in October than ever before but we probably just pulled a bunch of demand in that would have happened in November because. Jason [9:47]The beginning of November was awful and so then we got to Holiday the turkey 5 week and you go well what's going to happen is it going to stay soft like it has most of November but it actually bounced back and so we had this, we had this low from November 1 through November you know 26 and then, it jumped up and we had a pretty robust not not like World beating but a pretty robust turkey 5 and so then you go wow you know and by the way the turkey 5. Extended into December this year because of the the way the holiday schedule works, um and then we've all been real curious to see what would happen in December and the real answer is we don't have the December data yet we have a couple data points so. Jason [10:30]Market MasterCard spending pulse. Is 1 of the companies that publishes an estimate of total retail sales and they published an estimate of November 1st through December 24th so not catching the last minute holiday shoppers, that said all of retail for November and December was up 3.8% so if that's true. Will take it that's that's the industry average growth that's the high side of the nrf's forecast for holiday this year and it, would kind of mean that that, December sales were pretty robust to make up for the kind of anemic November sales so so that's, the big data that I followed about overall retail and then you know we have some better more granular data on the e-commerce side and that that's where like that adobe data comes in so you want to you want to break that down for us. Scot [11:24]Yeah it's kind of interesting as you as you talk about you know kind of pulling it in October we we always talk about the shape of the holiday right and we used to have kind of this you now as you described it it sounds like a w where the the left side of the W is like that October Spike and then you had a little decrease in early November and then the turkey 5 you come is the middle of the W and then you come back down and then we always seem to have this procrastinator kind of pop at the end I don't know about you but I I fall into that for a lot of my things I'm kind of like I get busy at work and I'm like, holy cow it's December 18th I better think about this holiday thing so you always see a little bit of a spike and some of that's driven it's kind of a self-fulfilling prophecy because that's when all the best prices happen there's the you know the Garff used to call it. Turkey chicken game of chicken discount chicken do you remember that. Jason [12:17]I do I do. Scot [12:18]Yeah I saw he changed jobs that was you're not going to be able to do selfies with him anymore yeah Rob gar. Jason [12:24]Going to do selfies with Rob and I, uh NFS coming up in a few days so I I hope to see them and we'll for sure take a selfie but you're right Rob Garff a long time friend of the show and I I want to say 4 or 5 time guests left Salesforce this year so a big big change he was kind of, face face of Commerce at Salesforce for a long time. Scot [12:42]You have to give us a an inside scoop of what's going on there it reveals secrets you get from the show on our podcast, okay so on the Adobe data, you know they they they call this November and December and they're saying online came in at 8.7% year-over-year growth which to your point is kind of below that 10% where we've been going. But we're getting to a scale where it doesn't surprise me I I think ultimately the lines for retail and online just kind of merge and blend and kind of become the same thing they did say that Shoppers they called it event based they were waiting for events which were basically price drops and they were kind of I guess they don't want to say discount chicken maybe that's not as uh fancy so they called them Event Event based shopping. Jason [13:29]Yeah and if you think about it was invented by their competitors at Salesforce so yeah. Scot [13:34]Yeah oh true yes sorry wrong uh wrong 1 and then this I thought you I thought interesting and it basically said groceries was the fastest growing at 13% so I guess with inflation people were just gifting groceries or or did groceries are just growing fast enough now that you know that's just faster than the holiday what what's your read on that 1. Jason [13:55]Yeah well a couple of things so like when when if adobe's right that it grew e-commerce grew 8.7% over holiday to me that's that, totally makes sense and put your point it's lower than what we would historically expect but it's actually higher than the year to date averages for e-commerce so e-commerce is growing about 7%, through the you know the whole first 11 months of the year so growing 8.7% over holiday actually means. Jason [14:26]E-commerce was a more important factor in Holiday than brick and mortar which I I believe and think was true so that that was kind of my first takeaway from the Adobe data and and as I mentioned, you know there's some really mature categories in e-commerce I mean you know 90 something percent of all books and music is is digital now right like you know well over 50% of electronics and toys. Jason [14:50]Our digital 50% of apparel is digital but. You know less than 8% of groceries are digital so it's still it totally makes sense that grocery e-commerce is growing faster than anything else I don't think it's gifts. Although you know people host a lot more over holidays so they do spend more on groceries than usual. But I think it's just reflecting the the fact that we had lots of busy families that were availing themselves of the convenience of grocery delivery. And you know another Factor overlaying all of this is we we've had this kind of thing that I like to call A vibe session this year that. Consumers have really curtailed their spending on non-essential purchases so when you break down the actual categories uh all year people have spent a lot more on deeply discounted goods and on food and have to have and they've spent less on want to have so you know consumer electronics it's actually been a poor year a parallel you know has been a little mixed but generally a poor year Home Improvement has been kind of a poor year. Jason [15:58]But you know these these have to have categories like grocery have been 1 of the stars all year so if you kind of factor in that, you know people have tended to spend more on grocery just in general and the e-commerce is a you know more substantially growing part of of grocery than it's ever been before it makes sense that grocery would win the e-commerce race for holiday. Scot [16:23]Yeah interesting. Then they said this the so groceries number 1 at 13% the number 2 category was Cosmetics at 12.2% I think the Wingo household contributed a. A pretty big piece of that, I go to Sephora a lot against my will and then they said that category hit 7.7 billion and then they pivot into discounts they made this quizzical statement where they basically said retailers discovered that for every 1% price drop demand went up 1% being forces I was like well let's look at the edge if you dropped 100% demand would go up 100% it seems like demand would actually go up more if it was 100% off anyway I didn't really understand what they were trying to say there it's it and it made it seem like it was just like new revelation I'm like wait a minute this is called. Supply demand curve and I learned it in economics anyway I must have misread it or something I didn't kind of like grow what they were trying to say there. Did you did you have a hot take on that 1. Jason [17:24]Well just a reminder most of the people that were good at Econ economics like don't get jobs at Adobe so I I would just remind you of that but no. I'm just kidding all my friends at Adobe who are super smart um the yeah I. Of course like lower prices generally drive more sales that that certainly true it's probably not a linear scale I think they're more saying like observationally like on their data set that it happened to play out this year that that there was kind of a linear, who asked the city between price and demand but the my bigger takeaway is I think. Jason [18:02]This was a highly promotional holiday period right and this was kind of expected I mean again overall 2024 was a soft year in retail. We we just we'd had a couple really good years after the pandemic of of really strong growth and this is going to be kind of a. You know we'll be lucky if we get to out to an average year it's probably going to be a below average year of growth and, you know there are all these extraneous factors like you know there's there's positive and negative economic indicators but the consumer confidence has been really poor they're they're only spending on Essentials they're all trading down to cheaper Goods so you know more discounted goods and value Goods, and there was a super polarizing election that you know distracted a lot of people and it was the shortest holiday season we we get on the calendar with fewer days between Thanksgiving and Christmas than we ever than we get any other year. And so for all of those reasons retailers were desperate to sell stuff and what desperate retailers do is they discount deeper and so what we always worry about in these kind of years is that retailers will. Jason [19:11]Go deeper discounts to kind of hit their Topline sales goals and clear out their inventory but it actually means that their margins, are going to be really poor and that's 1 of the things I really worry about this year is, I think when all the dust settles we're going to find out it was a below average to average holiday season but way below average on profitability right and that's going to have a carryover effect in 2025. Scot [19:39]You know that's what's really matters right you know you can sell the Top Line doesn't matter it's the basically the profitability. Jason [19:46]Bonus on the top line. Scot [19:47]True but I have a feeling the more sophisticated people are are the kind of caught on to that trick they talked about Electronics was the deepest discount to your point of demand being kind of sluggish at with a 30% off there and then toys was number 2 at 28 toys is just a. Terrible category these days because kids don't really want toys they want to just play electric electronic games we're talking about. You can't climb baby geek anymore but you know uh. Jason [20:15]The little geek we're going with. Scot [20:16]Little geek retail geek Junior. You know he's into games and wants digital currencies and stuff the good old Roblox dollars and and whatnot so yeah it toys are just tough so that that 1's kind of an easy call at 28% and then they said apparel had a fair amount of discounting to 23%. So I thought that was interesting traditional Trends we've talked about for. Kind of going on a decade at this point you know this may I hope you're sitting down but a lot of people shop on their phones that was up to 55%. Another call out I thought was interesting was they they saw a buy now pay later a pretty significantly at 9.6% year-over-year and you know. It's hard to tell if that's kind of a new consumer Behavior or there's all this data that's out there that shows the consumer's kind of increasingly Under Pressure they're they're starting to get a bit of a debt thing going and. Interest rates going up have made made home buying slow down all those kinds of things are putting pressure on the consumer so, it's hard to tell the buy now pay later people would tell you know it's a whole generation likes to buy that way I'm a little skeptical that maybe it's just the you know part of the the consumer being under pressure that saw a climb there. And then they on that they said Cyber Monday was a record day for buy now pay later where it it came very close to a billion I guess 991.2 million of transactions had buy now pay later. What do you think is buy now pay later surging so is that about. Jason [21:45]I do think it is I I do think it's it's kind of a combination of 3 things like I do think it's legitimate that that younger consumers look at debt and credit differently then then older consumers and and so I there is a legitimate thing that's hard for people our age to understand which is like even consumers that you know young consumers that have economic means to buy something. Don't like to go into like debt on their credit card and they do view these like fixed installment things where you you know buy something on 4 payments as. Jason [22:22]Is a different kind of debt than credit cards and so I do think there's an actual consumer preference for younger consumers to, that credit vehicle so I I think that's what genuinely part of it and the buy now pay later Services continue to grow and be more ubiquitous so they're just offered, more places more retailers have them and more retailers are offering them both online and in store than ever before so, so there's more places you can use it and there's more consumers that have a preference for it that's part of it I also think, there were more distressed consumers coming into holiday so there were you know more consumers that were forced to use it and the the thing that I don't love for the economy and that scares me about these services, are some of the really inappropriate categories, that consumers are using buy now pay later for right like if you're buying a durable good and you you buy it on installments and you know that like we could argue about the economic Prudence of that but I I don't personally have a problem with that. But if you're buying a monthly consumable on installments. That's concerning right so you know you shouldn't be buying food on buy now pay later right and yet like buy now pay later is showing up and getting used at grocery stores. Jason [23:33]The that you mentioned Cosmetics are up Cosmetics is 1 of these weird categories where there's been this bifurcation. There's some inexpensive Cosmetics that are kind of an affordable luxury and they're doing really well, the the true expensive luxury cosmetics and the whole luxury category we saw get really soft and Q4 this year and historically, luxury is the category that survives economic downturns right because you know more fluent people tend to be. To be more resilient but this time around we have this kind of it's It's a negative vibe as much as it is an economic factor and so even a fluent people are like, don't feel great about the economy I'm going to cut back on my spending and so luxury overall especially in the United States. Jason [24:18]Got really really soft but buy now pay later got used a lot for like consumables like lipstick and things like that so that's a a little bit of a, a worry and so I I think you've got kind of and then the the third factor that I think helps buy now pay later is, people don't like pulling their credit card out of their wallet and typing it into an e-commerce site it's just a pain in the neck and economies that have digital wallets like China sell a lot more stuff online than econ then economies that don't have big digital wallet penetration, and so for some American consumers, PayPal and Shop pay our digital wallets for some American consumers Amazon pays a digital wallet but for some American consumers a firm is a digital wallet and so there is a, lower friction more convenient checkout experience that that you know I'm not saying it's the biggest part of buy now pay later but it's another incentive that some consumers have to use it so I think, the combination of those 3 things. Jason [25:18]You know younger consumers with different attitudes about credit consumers that you know are buying stuff that they don't necessarily have the cash to pay for and consumers that like the convenience of. Of the buy now pay later checkout flow all are helping buy now pay later continue to grow for the moment and we'll have to see if that. That carries forward but it's definitely a big thing. Scot [25:40]Interesting the other data and I know you love this is from MasterCard spending pulse and they said retail X Autos was up 3.8% and that was kind of they had a couple other things but I know that that 1 has not 100% tracked the the Commerce Department data that that is the gold standard. Jason [25:58]Yeah yeah so it's weird it it it should be a really good data source all all of these data sources are dubious right like the only. Jason [26:06]Economic indicators are really care about are the public retailers earning statements right because those those are like audited um and and you know. Tend to be pretty reliable although although Macy's had a glitch this this last quarter that was kind of interesting. The the retail earnings reports are are are pretty credible all of these estimates the the US Department of Commerce data I I'm deep in that data I use it all the time I find it really helpful but you know it's it's very flawed at best and then most of these other data sources are more far than that so so MasterCard data is, a big panel of credit card users right and MasterCard has a lot of users so it it should be a good data set. You know there's a lot of people that pay with cash and so the the MasterCard data set is skewed and the economists at MasterCard would say they normalize the data to reflect All American spending even though they only see a subset of American spending, but I have to say historically of all these data sources I've seen the most fluctuations in mastercard's data versus everyone else's so, they're the only ones that have put a flag down for December and they're saying it's 3.8% which again would be decent I hope the other data sources they will get next week come in and are similar but I I'm. I'm not prepared to to say I'm very confident at this point what what the December numbers are going to be. Scot [27:33]Yeah what was the I missed the Macy's flood what was that all about. Jason [27:36]Where like a week before they they were scheduled to do their Q3 earnings call. They acknowledged a massive fraud by an employee in their accounting department and had to delay their earnings and restate their earnings for the last several quarters. Scot [27:53]Wow holy cow that's a that's a pretty material fraud. Jason [27:58]Yeah yeah and yeah you never that's never a fun message to give to the market and then you know of course. Meses is in a really challenged category department stores just aren't doing well and are generally declining and so you know odds are we're there and they did you know come out with a soft earnings report, you know that there's a couple favorable things in it but the top line is is that they're shrinking. And you know that's bad news just anyway and then when you have to you know taint it by saying and we're not even sure that that that all the all the losses we've reported the last 3 quarters like aren't even the full story it's it's it's. Investors do not love that. Scot [28:37]Yeah that's terrible all right 2 other topics I want to talk about we have NRF coming up and you're going to be attending for the Json and Scott show where do you expect him to see there. Jason [28:49]Retail media networks and AI I think everything is going to be a retail an AI driven retail media Network. Scot [28:56]Some combinations of the letters a r m n i looks like a uh Wheel of Fortune kind of thing. Jason [29:03]Yes and generally I throw up in my mouth every time I hear either of those acronyms so it's kind of it'll be a super pleasant pleasant week we. Scot [29:11]Well I can't wait to hear your show report. Jason [29:13]Yeah I have approximately 10,000 emails in my inbox right now which are you know from someone that wants to meet at NRF that is inviting me like today. Despite the fact that my internet schedule booked up about 3 months ago. To see their new Innovative AI driven retail media Network solution to that's going to revolutionize the retail industry. That's that's the exact extent of the pitch no more detail than that. Scot [29:40]Do people say as the chief digital Commerce retail payments officer at pubis do you have any uh are you interested in e-commerce in in retail Solutions you must get the craziest email. Jason [29:53]Yes exactly yes whenever they do that exact pitch I know it's from you. Scot [29:59]Yeah for those of you that see Jason make sure you give him a hard time about his title that's it he he really enjoys it it's the only thing that brighten his day and being pummeled by the AI and Retail. Jason [30:11]It it does because every time I hear it it makes me think of Scott and and Scott Scott is just 1 of my happy places. Scot [30:17]That's nice, 1 thing I saw in this kind of came from my you know so so I do investing here in the Research Triangle Park area in a bunch of startups and, you know AI you're going to do this but AI gen AI to be specific and you know the the change in consumer behaviors from that are really fascinating so a lot of these folks that Source deals and they're trying to you know do lead gen by emailing you constantly, no none of these companies you're not in their target but they they do send out a lot of cold emails. Scot [30:50]None of that works anymore except LinkedIn which is kind of odd because I get so much LinkedIn stuff I can't even hardly use the messenger. But anyway and then the other thing they said is content strategies under a lot of pressure because, the amount of traffic going to these these blogs and other kind of you know content you put out there hoping to get some inbound interest is kind of falling off a cliff and you know I talked to a couple of them and dug into it and and then I started poking around back into our world of retail and e-commerce and and started to see some interesting things. Scot [31:21]You know number 1 what you're starting to see is SEO is changing and you know search engine optimization because Google largely dominate search with like let's call it 80% share and you know it's been pretty well known how the algorithm Works they do tweaks and things and whatnot but it's generally well known with patreon and all that stuff for for decade now or decades, but what you're trying to see is enough traffic is starting to go through openai perplexity and some of these things that and it's pulling the content up a layer your site your content that you put out there may have been part of the answer but you're not getting the traffic anymore and therefore people aren't seeing the form to generate a lead or you know oh my gosh this this is a vendor that can offer me a solution to problem X on researching so so that's interesting and then I I noticed in that same Adobe report that kind of had this little little call out where, they said and this is a quote 1 of the newest factors nudging spending is AI powered shopping assistance such as chat gbt and its competitors traffic to retail sites that came from gen AI powered chat Bots, shot up 1300% 1300 percent compared with a year ago holiday season now I'm sure it was small last year so maybe it was like 5 people in this year it's like you know. Scot [32:41]What's the math on that 1 6000 but you know just relatively that those kinds of numbers, but still I thought it was interesting that we're seeing it over in 1 part of the world and it it's definitely kind of forming over on the e-commerce side and then, a lot of it is Shoppers are now turning to that technology for gift ideas and for you know kind of what you would call the research and and maybe a little bit of finding the product but we've got this research you know what do I want to get, Jeep this guy named retailgeek he's hard to shop for certainly not a gadget because these are get 10 of everything and they're like how do you find find narrow it down and find it and then. What's the best format to buy it in so that that kind of top of the funnel it seems like a lot of consumers are using that and I thought that was pretty interesting and the quote from the Adobe dude was you have a consumer that's a very strategic and thinking a lot about their strategy around where they're buying when they're buying what's offering the best deal and then that's where they're using gen AI the assistants are helping the consumer and co-piloting that Journey so I thought that was interesting and then right before after we did our last pod but right kind of towards the end of the holiday I saw several articles but this Business Insider 1 was like a good Recaps where. Scot [33:54]You know there's been such an explosion of stuff out there that is increasingly hard to make a decision so there was this 1 article November 4th willing to it in the show notes and it basically was this couple trying to buy a mattress and they were just or a bed frame and they literally spent like 8 to 12 hours and just gave up they just kind of felt like it had become their job and I I do think that's kind of happening it's like it's so hard to find stuff in it I had this problem where I needed 1 of these you know dumb little dongles for my second HDMI thing for my camera and this 1 died and I had a webinar in 3 hours and I do Best Buy I had 1 but it was the 1 that's far away from me so I had to like find how instacart so then I had to back into instacart tell it. Scot [34:38]Work address and then I went to work to pick it up and like you know seems like all this stuff is out there but the you know the the consumers are just having a hard time parsing through it all so it it's going to going to be interesting to see next year I think we're going to find perplexity has some shopping features we talked a lot about chat GPT has to be working on it, Google Gemini has some really cool stuff that I've been using their deep research and and if it was shopping capable uh they also put out a paper about agents that actually kind of has a shopping agent little placeholder on it, travel agent you know so you could see them kind of turning Google shopping and Google travel into little agent things that go do stuff for you somehow or at least give you some information it's going to be really interesting to see how this changes e-commerce because the consumer, feels a pain point and they want wanted to change but I don't know what it's going to look like on the other side what what do you think about all that. Jason [35:33]Yeah yeah well so I I I think you're right I think it's complicated because AI is both an annoyingly overhyped buzzword that I'm sick of people AI washing everything and expecting it to sound interesting. And simultaneously I do think that there's there's a ton of AI use cases which are, totally disrupting traditional business processes all across the the Commerce ecosystem and and I think that this, kind of the idea that you started to touch on this idea of AI agents and you know people not having to go shopping for stuff and find stuff and do research and just have the the robots proactively solve shopping problems for you before you know you have them. I I I'm not going to say oh that's for sure the future and and all stores are going to go away, but I think there's a very high likelihood that it becomes a meaningful part of the consumer's tool set and I think it's going to be wildly disruptive so, I don't think it's, it's there yet and I so I don't think it's economically meaningful at this point and so in this Adobe data I feel like is a little bit it's ironic like it's it's they're kind of SEO keyword stuffing when they're implying that SEO is going away. Jason [36:51]But the, I I think it's a you know a very small number of people were using AI chat Bots last year and now 13,000 you know 1300% more which is still a very small number, but I think bigger picture we used to all discover products, at this place called the retail store on a shelf and now a huge huge percentage of Discovery happens at this thing called the search engine right and and you know 15 years ago that would have been unimaginable how important Google would be to the to the the shopping process today and increasingly I feel like that that search traffic is under threat part of it is from retailers with better databases so you do the search on Amazon or Walmart instead of on Google part of it is, then I would argue the biggest most disruptive part is on social that you're discovering new products to buy on Tik Tok instead of on Google and, you know it's still tiny but an increasing number of it is happening on these AI platforms and this is even really before the AI agents have rolled out like what happens when there's really powerful AI agents built in the series and Amazon and Gmail and they're all plugged into every email and text message we get. Jason [38:07]You know what what's the world going to look like then you know I think this is the disruption that we're all living through right now I think it's really hard to predict, exactly how it all plays out but I think you know if you're in the space you need to be paying attention to this and you need to be contingency planning you know how you're going to be good at all these things and what you're going to do you know as these things do become meaningful because I think it's entirely possible that, AI agents are as important to Commerce in 10 years as Google is today as the store shelf was 15 years ago. Scot [38:42]Yeah and what's it mean like to all your, all this front-end stuff when the e-commerce basically kind of was like headless Commerce but with a you know you're not putting a you're not building any front end there's just like the front door is now the. It's not even API it's like some kind of a a genetic thing that's like calling into the API and doing stuff like hey you got 1 of these uh what's your price okay I'll order 1 of those it's going to be it's going to be tricky because a lot of the things that add a lot of extra margin like check out add-ons and you know recommended products and you previously bought this all that stuff. Maybe it goes away in that world and in some extent so it's going to be I guess retailers are going to have a hard choice to decide to even want to participate in that and you know because in the early days. I remember like the Twitter's been at this like 6 times they've tried to have e-commerce and they always try to bypass the checkout and that's kind of like what perplexity is doing and you know you can imagine a bunch of retailers. Like I think it's 1-800 Flowers they get so much from all the upselling that they do that you know maybe there's certain sets of folks that just kind of opt out of that world but then if your competitor opts in what do you do it's going to be interesting to see what happens here. Jason [39:59]Yeah no and and 1 version of that is already happened like. The when I say we used to discover stuff on the Shelf we used to put a lot of stuff you didn't know about on the Shelf next to the stuff you wanted right, and you made all these unplanned purchases you made all these impulse purchases do you know what the most profitable real estate is in a grocery store it's the cash wrap. It's the the the Widow refrigerator that has 1 can of Coca-Cola that you can buy right as you're checking out that you drink on your way home from the, the the Kroger store, or the the mints or the gum that you didn't think you wanted that you decided you you had to have while you were standing there that those impulse purchases were a huge part of retail and when. Grocery has gone a digital grocery you know what nobody's buying on digital grocery single single cans of Coke or gum. Scot [40:51]Yeah yeah. Jason [40:52]Right um those those impulse items like nobody's figured out what the digital version of those impulse items are right and and you're you're absolutely right when when shopping goes from implicit I have to build a list figure out where I'm going to get that list, proactively go give someone money and then get all those things, to implicit like all the stuff that I need to run my life just magically shows up in my pantry and I don't have to lift a finger or ask anyone. Jason [41:18]Tons of opportunities I had to upsell and influencer brand selections, and you know Drive impulse purchases are going to go away and some people will see that and say doesn't matter if the future that's where I got to go and they'll embrace it and other people will say no I'm going to hang on to the old model as long as I can right and that that happened in retail too do you know who 1 of the greatest retailers is in the modern era it's Costco they're amazing do you know how much Costco loves e-commerce, they freaking hate e-commerce right like they they say on their earnings call why would I ever encourage someone to go to my website when they'll buy so much more stuff if I get them into my store right and so they're they're 1 of the biggest laggards in digital Commerce because, they're so good at brick and mortar and, like we're likely to see some of those same same kind of companies you know resist moving to AI agents or social commerce or you know what whatever things comes next but these are all the. The disruptions that are playing out right now right and it's it's super fun. Scot [42:24]Yeah yeah well guess what Jason it's happened again. Jason [42:29]We've wasted a perfectly good our of our listeners time. Scot [42:33]Yeah yeah and uh I meant to mention it at the top of the show but we were going to do our predictions but 1 of us which was me did not get a chance to work on them so we're going to make this a 2-part so we're going to this is kind of the the wrap the 24 w and then we're going to do our prediction show next time when Jason gets back from NRF and he's going to have an amazing trip report with with lots of Garff gossip. Jason [42:59]Yeah and here's the good news if you are going to interfere in New York this week I I leave Saturday I come back the following Thursday and you are a planning on on attending, any event or content at NRF, I will see you there because you talk about Overexposed I think I'm on stage like 8 times at at NRF this year so I owe so many decks that I haven't done yet. But it it's going to be fun I'm looking forward to seeing everyone I think there's going to be a lot of interesting stuff that you know it's going to be a real vibrant exhibit hall with a lot of new, new exhibitors there's an Innovation Pavilion which is always super interesting which is you know where a lot of startups go and and there is going to be a bunch of good content, it all wraps up on Tuesday I'm doing a session on the big stage on Tuesday which is kind of going to be fun it's like a point Counterpoint debate. So a good friend and way smarter colleague of mine Christine Russo and I are going to be on stage and a bunch of our our friends in the e-commerce industry have sent in video questions and Christine and I are going to debate. The the pros and cons of of each of those questions and so I'm desperate for people to go to the show attend that Tuesday session and route for me because I think, there's about 10 Christine fans for every Jason fan. Scot [44:18]The Jason fans are small But Mighty stuff well uh they'll be allowed loud and proud. Jason [44:22]My my wife and son are both going to root for Christine I'm just saying um so any any any help I can. Yes anyhow if I could get his appreciated but so yeah so so interest is going to be very fun but busy. And I as Scott alluded to I have already written my predictions for 2024 I do reserve the or 25 got to get better at that, I do reserve the right to update them if I learn anything new at NRF so so maybe the fact that we're doing the prediction show after NRF this year will give me a chance to to be slightly more accurate than I've been in the past which would not be a bad thing. Um but hopefully. Yeah you got some value out of this show and we've teased you with the next show in just a couple of weeks and as always if you if you did enjoy the show we'd love for you to jump on iTunes and give us that 5-star review. Scot [45:11]Thanks everybody and until next time. Jason [45:14]Happy Commercing!

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EP321 - Amazon Q3 2024 Earnings Recap

In today’s episode of the Jason & Scot Show, Jason and Scot dive into the latest developments shaping retail, tech, and consumer trends heading into the 2024 holiday season. Here’s a breakdown of the topics covered in this jam-packed discussion:

Amazon Q3 2024 Earnings Release
Amazon Q3 2024 Earnings Call Transcript

🎉 Holiday Season Sentiment & Retailer Anxiety

• With the holiday season shorter than usual due to a late Thanksgiving, retailers face the challenge of fewer shopping days. Consumer behavior trends indicate a shift toward essential purchases over non-essentials, creating mixed expectations for holiday spending.

• The impact of the election is expected to influence consumer sentiment, media spending, and holiday promotions, with Amazon and Walmart predicted to perform above market averages.

📈 Amazon Q3 Earnings Highlights

• Retail & GMV: Amazon’s retail revenue surged by 7.2%, with U.S. gross merchandise volume (GMV) rising 9.9%—nearly three times the industry average.

• Efficiency Improvements: Amazon’s focus on fulfillment efficiency under CEO Andy Jassy is paying off. The company’s same-day delivery options and regionalized inventory system have led to a 25% improvement in fulfillment cost efficiency.

• Growth in Essentials: With increased demand for everyday essentials, Amazon is capturing market share from traditional pharmacies, offering same-day delivery for prescriptions in select cities.

🏢 Amazon’s New Store Concepts

• Whole Foods & Amazon Grocery: A new Amazon grocery concept opened in Chicago, catering to convenience items like packaged snacks and sugary drinks, which contrasts with Whole Foods’ health-conscious inventory.

💸 Amazon’s Profit Engines: AWS & Advertising

• AWS: With a 19% increase in AWS revenue, Amazon is now operating at a 38% margin. Demand for AI-powered compute continues to push AWS growth, even as it faces GPU supply constraints.

• Advertising: Amazon’s advertising revenue reached $14.3 billion, growing 19% year-over-year. With a nearly 70% estimated gross margin, advertising may soon outpace AWS in profitability.

🛒 Rise of AI-Powered Search & Perplexity’s Native Checkout

• Perplexity’s Surge: Scot shares his switch from Google to Perplexity as his primary search engine, noting the emerging competition from OpenAI’s ChatGPT search. Perplexity now includes shopping links, allowing users to check out directly through Amazon, hinting at a new era of AI-driven shopping.

• Impact on Retailers: Retailers need to rethink SEO strategies as search shifts toward AI-powered “answer engines” that may fundamentally change how products are discovered and purchased online.

📡 What’s Next for Alexa?

• Amazon’s next-gen Alexa, powered by large language models (LLMs), faces delays into 2025. Scalability and usability challenges highlight Amazon’s shifting internal dynamics and potential headcount reductions in its Alexa division.

🔍 Is Google Search Under Threat?

• Perplexity’s and OpenAI’s expansion into search could spell trouble for Google. With monetization still in the early stages for these answer engines, the retail industry is watching closely to see how they’ll shape online shopping behavior.

⭐️ Tune In, Subscribe, and Leave a Review!

If you enjoyed the episode, help us reach more listeners by leaving a five-star review on Apple Podcasts. Thanks for tuning in!

Episode 321 of the Jason & Scot show was recorded on Monday, November 4th, 2024.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scott Show. This is episode 321 being recorded on Monday, November 4th, 2024. I'm your host, Jason Retail Geek Goldberg. And as usual, I'm here with your co-host, Scott Wingo.

Scot: [0:38] Hey, Jason, and welcome back, Jason and Scott Show listeners. Well, Jason, you've been out there traveling more than I have. What are retailers saying about the holiday? Are they lots of excitement? Are they more worried about the election and they'll worry about the holiday? what's going on out in the retail end.

Jason: [0:54] Yeah i feel like the the like webster word of the year is going to be anxiety obviously we're a day before election day and everybody's anxious half the country is going to be depressed no matter what happens there but i feel like retailers are also anxious about holiday it's a weird thing we won't we don't have to get into the whole thing but it's the shortest holiday season we get uh thanksgiving super late so it's five days shorter than last year. So there's fewer days to spend on stuff. Consumers have been spending slowly, trading down the lower priced goods, buying more everyday essentials and foregoing non-essential purchases for a while. And then the election is a major distraction. It also is really hard to buy media and break through all the noise. You live in a swing state. So I assume you haven't been able to turn on a tv or look at your phone for several days um yeah.

Scot: [1:54] Wall-to-wall and three inches of mail every day it's crazy.

Jason: [1:56] Yeah yeah and so like like even if you're not someone that's super focused on the election like it just like the black friday ads just don't break through all that noise and it's more expensive to put that by the media for those ads and all of those things so you know there's some there's some historical precedent in previous elections that you tend to get a little bounce in spending after the election, but no election's been this polarized before. So I'm less confident that history tells us exactly what's going to happen here. And then there's this huge vibe session thing still going on where, you know, people are generally pessimistic and anxious about the economy and, you know, laser focused on the price of goods and spending less, even though honestly, like most of the macroeconomics are actually like pretty solid. Like there's a lot of economic good news that you would ordinarily expect to translate to consumer confidence and more spending. Now there was a slight uptick in consumer confidence for the first time in a while this month. So there's plenty of tea leaves, however you want to interpret them, but there there's very little certainty. My I look at all this and I say, on average.

Jason: [3:15] The biggest retailers that are, you know, best at really being highly efficient and low cost. So the Amazons and Walmarts of the world are going to do reasonably well. They'll outperform the market. They'll have lower margins and a bunch of specialty retailers and big box retailers and people that aren't quite as efficient are going to have a really hard time. But, you know, I hope I'm wrong.

Scot: [3:39] Yeah. Wow. Lots of wasn't there. So we got through the the longshoreman thing. Right. And then isn't there a big budget thing where the government could shut down or are we is that been kicked into.

Jason: [3:53] It's kicked till post-election. It may still be in, there may be another budget thing in December. But again, like, depending on what changes in the House and Senate, like, that could be like a trivial additional continuing resolution or, you know, someone could go nuclear and try to shut down the government. So I think it is a risk.

Scot: [4:17] Yeah. Okay. I don't know. We'll see. So lots of mixed messages out there for retailers to try to parse there.

Jason: [4:25] Yeah, exactly. But we at least know what happened to Amazon in Q3.

Scot: [4:36] Amazon News. Your margin is their opportunity. Yeah, yeah. So on the eve of Halloween, Amazon announced their results. And coming into that report, Microsoft had reported kind of slowish cloud growth. Turns out they're having a hard time getting enough GPUs and they're really having to stretch to handle all their customers' needs, which you would think would be positive. But Wall Street is kind of because they also see this whole mixed signal thing. All they care about right now is short term signals. So they were kind of down on Microsoft. And then everyone and then Meta also reported and they had a great quarter, but then they said they're going to really ramp their spending on GPUs going into next year. So there's this really big kind of wall of worry around all this money on these GPUs, which are for AP.

Scot: [5:28] Artificial intelligence or ai and they're mostly nvidia chips so nvidia is off cycle so that i think they report in the 20s like right before thanksgiving so i'm going to be watching that one carefully so you know amazon is largely driven these days by aws so that was kind of feeding into that there's a lot of concern that amazon was either going to miss for a similar kind of thing like microsoft or they were going to announce they're just going to like buy an ungodly number of GPUs. So there was a lot of, I believe the stocks sold off going into the report, which was interesting. Usually Amazon kind of lifts a bit the day of the report. So those ended up being unfounded. They achieved an 11% overall revenue growth and operating income hit 17.4 billion and beat forecast by 18%. And that was the seventh consecutive quarter of operating income above guidance, which is good. So Jassy kind of like reset it low enough and has gotten better now that he's CEO of kind of managing expectations is kind of how I read that. And then the looking forward guidance was very well received. So looking at Q4, they kind of gave a band of seven to 11% growth. When you have 11% and you're going into Q4 and you're kind of showing 11%, that's good because a lot of people worry that they're going to project a slowdown Because when they do this, they've already got a month's worth of data. So in a way, Amazon being Amazon, they're pretty good at reading these tea leaves and kind of figuring out how the holiday is going to shape up.

Scot: [6:58] A couple of things I thought in the report I just wanted to call out for listeners. We've talked about this a little bit. This kind of really part of Jassy's era has been efficiencies. And he's really dug into the fulfillment part of Amazon. and it's been interesting to see the results. So they had a lot of progress on the cost of fulfillment and they attributed it to three areas. Number one, we've talked about this before, but they had this new regionalized inventory system where they're just getting better at spreading inventory and predicting demand across their fulfillment centers. So if they can predict, hey, it's getting cold in Chicago, we're gonna kind of balance some cold weather stuff there or anything in that regard. Obviously, that saves the money versus having to ship stuff across the country. So they've improved that over the last year, they've improved this system 25%. And it's interesting, I triple checked this because I thought I was hallucinating. I thought I had LLM bring, but they've, you know, many of these, these have resulted in 25% improvement. So this is not a typo.

Scot: [8:04] The, so when you get the product closer, not only is it lower distance to the customer, therefore lower costs, it's like in a closer quote unquote zone, but it also increases the number of products they can put in a box. So there are a lot of customers like you to get a daily Amazon box. And the more they can put in that JSON box every day, the better off there.

Scot: [8:25] Then they have really expanded the same day facilities, which results in more of the products being available same day. So they now have over 40 million customers a quarter benefiting from same day delivery. That's up 25% year over year, that number of customers that are having access and getting products delivered same day. And to deliver on this, they've built a bunch of new facilities and a lot of new processes increased. And that ends up really increasing customer satisfaction, conversion rates, and speed to reorder. And then the last one is robotics and automation. There was a lot of talk on the call and then some various notes and in the Q&A from Wall Street around this one fulfillment center in Shreveport. And that's what they call a quote unquote 12th generation system. So I think it's like their showcase where Amazon has put all their best automation ideas into this fulfillment center, and it is showing really promising results, which gets Wall Street excited because if they do it one, they can scale it across their network of north of 200 fulfillment centers. It'll take a long time, but these are the types of improvements that are pretty material. It also saw that fulfillment center and the things they do in there, which is lots of robotics and new ways of automating. It had a 25% reduction in the cost for fulfillment center cost per unit.

Scot: [9:43] That's pretty material. So let's say it costs $6 to ship one of these things. You can knock a dollar or two of that off. And this is Amazon and you're shipping some billions, tens, if not hundreds of billions of products. That is just basically margin that kind of falls to the bottom line.

Scot: [10:03] So together, these did help with that earnings beat. And they caused a somewhere in the four to 6%, let's call it 5% underage in what Wall Street was thinking shipping, total shipping spend would be. So, you know, the good news is they're making progress on these things. And it feels like it's still early days for, I think the regional, they're probably kind of at the end of that one. I think same day facilities, they have a lot more they can do there. And I think robotics, they're very early. So it feels like they've got another two or three years of runway for improving the economics of fulfillment.

Jason: [10:39] Yeah, I think in the press call after they released their earnings, the CFO even said that they believe there's headroom in all three. So they think they're going to continue to get additional efficiencies. And they talk a lot about those three things together, like fundamentally reducing the cost to serve is kind of the language for talking about all this stuff and what the average price is to get a box of goods to Jason's house.

Scot: [11:09] Yeah. Another theme that you'll kind of hear as Jason, I go through some of the pieces is this has really dramatically increased consumers ordering replenishables. So, so we'll talk about that.

Jason: [11:20] Yeah, yeah. So obviously the most interesting and important segment of Amazon's business is the retail part of the business. The numbers were all pretty favorable. So they hit $61.4 billion in revenue, which is a 7.2% year over year growth. It's a significant acceleration from the 4.6% growth in Q2. And it's a significant beat over Wall Street's expectations. It's like 3% over. So I think the revenue number was very encouraging. And a number of other retailers had reported and were saying that there were a lot of signals of the consumer slowing down. So this was, I think, surprising and well-received. Of course, listeners of this show will know you probably shouldn't care too much about revenue because revenue is a blend of the cost of goods for 1P sales and the take rate for 3P sales. So when we kind of are thinking of them as a pure retailer, the number we really like to know about is their GMV, their gross merchandise value, which is the value of all the goods they sell, whether it was on the marketplace or first party.

Jason: [12:31] And they don't tell us what that is, but…

Jason: [12:34] Citibank has released their estimates. Morgan Stanley's released their estimates. A couple other sites have released them. And in my pull of polls, the Morgan Stanley numbers are kind of right in the middle and most believable. And they have Q3 GMV in the United States going up 9.9%, so 10% essentially. In that same quarter, we know from the US Department of Commerce that core retail went up 3.6%. So Amazon grew almost three times as fast as the industry average, which, you know, Amazon's number one or number two are just retail out there. So that's super impressive. That's slightly lower GMV growth than they had in Q2, which was 11%. The number we'd most like to compare this to would be Walmart's number. Walmart doesn't report Q3 till November 19th, I want to say. So, so it'll be super interesting to look there. I would expect Walmart to come in somewhere between Amazon and the retail industry average. So above the retail industry, but below this 10%. So that in and of itself is super interesting. You know, Walmart probably beats the industry average. Amazon triples the industry average. Then we still have Timu Sheehan and TikTok shops out there growing faster than anyone's ever seen before. And so you've got, you know, Those five horsemen eating up most of the growth in the retail industry.

Jason: [14:03] One thing that did negatively surprise people a little bit was the mix of, which you alluded to, is the mix of 1P and 3P sales. So ordinarily for a long time, 3P sales are creeping up as a bigger and bigger chunk of the overall mix every year. I think it was 61% last quarter, maybe. And it dipped down this quarter to 60%. So that's the first time 1P sales have gained share over 3P sales at Amazon. And the management tells us the reason for that is increased demand for everyday essentials, right? So that's the cleaning products for your house, the, you know, affordable skincare products, the things you use in your bathroom and shower. Or all of those products are more often sold 1P than 3P on Amazon.

Jason: [14:57] And, you know, both because of the vibe session and the economic situation that I talked about earlier, and because Amazon's better at same-day delivery, they're winning more of these everyday essential trips. And that is shifting their mix slightly to 1P. In theory, it should also be eroding their margins because these items are lower margins. But Amazon did so well on the efficiencies and the cost to serve that you covered that those efficiencies more than made up for the lost margin from the slightly less profitable mix of products that they're selling with everyday essentials. So that's a super interesting trend. When you hear management talk about it, they're like, we love these everyday essentials, even if they are slightly lower margin because those customers are way more sticky and we get way more wallet share in the long run and the the more those orders we get the more volume we have to drive our.

Jason: [15:59] Cost to serve down and the lower our cost of serve, the more we can profitably fulfill all of this everyday essentials demand. And so this is a sort of a new flywheel for Amazon, if you will. But like one tangible proof point on this is they said something like when a customer sees a one-day delivery promise or same-day delivery promise, conversion rate is 20% better than when it's a two-day delivery promise. So kind of, you know, giving evidence to the fact that like consumers have an insatiable appetite for faster and faster delivery and the faster and cheaper they can deliver, the more they can sell.

Scot: [16:37] So- Where do you think they're taking that share from you? That's like Target and Walmart or like, you know, do you see any evidence of it?

Jason: [16:44] Target is totally possible based on the last couple of earnings calls, some grocery, the super vulnerable place that we'll talk about a little bit later is the traditional pharmacy. So Walgreens, Rite Aid, CVS, and then all the independent pharmacists. They're for sure taking share from those guys. And they talked about that in the earnings, which in pretty funny language. So I'll get to that in just a second. But it doesn't feel like it's coming completely at the expense of Walmart, because again, both Amazon and Walmart are growing faster than the industry average, but it's pretty much everyone else that sells everyday essentials that's dipping below. Side note, we're now seeing these Chinese direct-to-consumer companies start to lean into everyday essentials. So Timu has a ton of everyday essential goods on there. So the world has noticed that that's what consumers have an appetite for spending on right now.

Jason: [17:40] Interest rates are still a little high. People aren't moving houses. So people are not buying as much home improvement goods as they normally do. They're not buying as much, except for you and I are not buying as much consumer electronics as they normally do.

Jason: [17:52] And they're spending more on the center store grocery assortment. And so that's, you know, Amazon through great insight or luck or whatever combination you want to attribute it to, that shift to regionalization of their fulfillment center and this like laser focus on cost to serve has really positioned them to take advantage of this trend, where arguably four years ago, they wouldn't have been well positioned for this trend. They would have said this, that's all stuff that craps out that we can't realize a profit on and that we're discouraging sales on. Now they're encouraging sales on all this stuff. So that's interesting. And then the slightly, if there's a negative sentiment in the industry regarding all of this, it's, hey, 3P sales ticked down slightly, but the revenue that Amazon is earning from 3P sales went way up because Amazon has found a lot more fees to charge sellers than ever before. And so, you'll hear a lot of noise from the 3P seller community that they're, The overall, not the raw take rate, but the overall cost to sell on Amazon when all these fees and marketing services are factored in has never been higher and makes it harder than ever for three-piece sellers to truly be profitable.

Scot: [19:14] Yeah.

Jason: [19:14] So that's the story on online sales. I mentioned pharmacy another trend happening in our industry is you know the way pharmacies normally work is the traffic to a pharmacy is to get pick up your prescription and then while you're there you go oh I need paper towels and you buy paper towels by design they're the worst place to buy paper towels they don't have a great assortment and they they don't have a good price but you're already there to pick up your Lipitor prescription so you know you just want to save yourself a trip and you pick and you take them home from there. So the front of house of a pharmacy only works because of the back of house. And the back of house is under huge stress. There's like three companies called pharmacy benefit providers, and they get to dictate the price that a pharmacist gets reimbursed for every prescription they fill. And these pharmacy benefit providers are reimbursing the pharmacy less than the pharmacy is able to collect from the consumer. So on a lot of popular prescriptions, pharmacies are now at negative margins and all the chronic prescriptions, if you take something every day or every week, instead of getting a 30 day supply from Walgreens, that pharmacy benefit provider is making you get a 90 day prescription from mail order.

Jason: [20:35] So people are going to the pharmacy to pick up prescriptions less, which puts more stress on the front of the store. And then, of course, their lower overall profit, that 10% loss of traffic has a huge impact on their profits. And then they start freaking out about shrink and they lock up all the products and that chases even more customers out of store. And the pharmacies are kind of in a negative flywheel from all this. And Andy Jassy summed it up perfectly in one sentence on the earnings call. He said, brick and mortar pharmacies often require customers to make trips to forlorn physical venues with much of the selection behind locked shelves, wait in line for meds, and only to find out about pricing at the point of purchase. The largest mail order pharmacies offer delivery in five to 10 days. We think customers deserve better, which is a clear shot across the bow at the pharmacy industry. Amazon has doubled the number of cities that they do same-day pharmacy delivery to. But I actually think the big story here is not Amazon's prescription business. It's Amazon getting all this everyday essential traffic that used to go to the pharmacy in conjunction with the prescription business.

Jason: [21:52] That has other healthcare implications in the long run. a lot of people in America go to a pharmacist to get a vaccine. And if all these pharmacies close, you know, we got to figure out how we're going to get those vaccines and things like that. They, of course, do break out their physical stores. Physical stores for Amazon is almost exclusively Whole Foods at this point, and maybe a few Amazon Go stores left. And physical stores grew like 5% year over year, which again, on itself, that's better than the industry average. that's better than most other big grocery stores are growing. And that was also a beat versus the analysts that thought they were gonna be at 5.16 billion.

Jason: [22:32] Same story there. The mix is shifting to more essentials. And what's fascinating and interesting and controversial here is Whole Foods is a unique grocery concept. They have all of these food quality guidelines that dictate what products they will carry and what products they won't carry. And so they won't carry products that have artificial colors in them. They won't carry products that are sweetened with corn syrup, for example. And so the assortment in a Whole Foods is very different than the assortment in a Kroger or an Albertsons. And a lot of the Everyday Essentials volume is traditionally those products that Whole Foods chooses not to sell. So the fact that they're doing better at Everyday Essentials is interesting. But what's super interesting is in Chicago, where I live, Amazon opened yet another new grocery concept this month.

Scot: [23:25] Which is now like the fifth or sixth one.

Jason: [23:27] Yeah. So, yeah. So now called Amazon grocery. So they have, of course, Whole Foods, they have Amazon Go, they have Amazon Fresh. A few of these, they have multiple iterations of Amazon Fresh used to mean an online grocery store, and now it means a physical grocery store. And now they have this new concept, Amazon grocery. And the one and only Amazon grocery store is downstairs from a Whole Food in downtown Chicago, and it carries all the unhealthy stuff that Whole Foods isn't allowed to sell.

Scot: [23:59] So you go down for your Rice Krispie Treats.

Jason: [24:01] So it's literally, they carry like 3,500 SKUs and it's mostly Kraft and Hostess and Coke and Pepsi, right? And so it seems superficially, it seems very explicitly like go upstairs and get your organic produce and feel good about your purchases there, and then stop on your way out and get your guilty pleasures.

Jason: [24:25] From Amazon Grocery on the way out, right? And so, It's unclear. Did Amazon already own this real estate and it's a convenient place for them to test it? And Amazon believes that the world needs another, you know, small format grocery store with 3,500 SKUs. That strains credulity a little bit. Or is this an overt, you know, first step at eroding the Whole Foods quality promise that was, you know, part of the core mission when John Mackey started the company and the Amazon said they would respect when they took it over? Like don't know it's super interesting i would say you know i got back from grocery shop three weeks ago amazon was on stage at grocery shop and they talked about like you know how much they're leaning into grocery and they and how synergistic all these grocery offerings are and how they're unifying them all and then the week later the ceo of grocery resigned at amazon and they and this they revealed this new concept and it seems totally muddled to me so i'm not saying Amazon can't win at grocery, but it does not seem that there's a crystal clear hypothesis from Amazon as to what a winning grocery concept looks like at this point.

Scot: [25:39] Have you been in it?

Jason: [25:40] I have, I have. And in fact, I'll put a link in the show notes, but I uploaded a little video tour on LinkedIn, so you can, you can go check it out. It's, I would call it most similar to an Amazon Go store without the tech. So there's no just walk out. There is Amazon.

Scot: [25:55] It's like a convenience store kind of stuff.

Jason: [25:56] Yeah. It feels more like a 7-Eleven. There's a cafe, a small espresso bar in there. There's an Icy machine, so you can get your non-Swerpy branded Icy. And yeah, all the Twinkies and Apple Jacks you want.

Scot: [26:12] Nice. You have to hit that first before you go out to Whole Foods because by then you'll spend your whole paycheck. You don't have any money left for Rice Krispies.

Jason: [26:20] I would feel personal shame dragging that stuff around in my cart on my Whole Foods shop. So I feel like it's more likely to be on the way out to avoid the shame. But in fact, I took all these funny pictures because there's all these pictures about the ethical principles at Whole Foods. And it's like giant wall-size signs that say, eat good food. And then you go downstairs and it's like, buy more, get more Twinkies.

Scot: [26:49] Maybe it's a higher conversion rate for the people that are cheaters, Whole Foods cheaters.

Jason: [26:55] Yeah. Yeah. Again, there's probably a small cohort of people that Whole Foods is their own grocery store, but I feel like there's a lot more that are like my household where Whole Foods is definitely in our mix and there's a lot of products we only get from Whole Foods. But I have a nine-year-old son and like a lot of his preferences do not exist in the Whole Foods environment.

Scot: [27:13] He's not eating tofu potato chips.

Jason: [27:15] No, no. He wants the good Pringles.

Scot: [27:20] Cool on the aws side revenue rose 19 for 227.5 billion which kind of met expectations but they were just a little bit higher so it was like right in line so that wall street was thinking 20 to 21 but they came in at 19 so they didn't really get much heat over that because they did talk about the strong demand they've they've started talking about a backlog or kind of a bookings backlog so So that was interesting. I saw a wall sheet analyst kind of do this whole thing around it and felt like there's a lot of positivity in the number that they gave there.

Scot: [27:55] And yeah, so the margin there was very nice. So 38% operating margin. That's not even a gross margin. That's a net margin. And they saw their own benefits from cost efficiencies. They're getting more life out of their servers. Imagine what's going on here is those workloads that are not GPU bound. They're probably flat right now because everyone's obsessed with moving everything over to GPUs. So they're probably having to spend a lot less on traditional CPU type things and getting more life out of the machines than maybe they initially had thought they would. Let's see the they were also supply constrained they did call out they have their own chip that can do some inference and they're they're deploying those as quick as they can and they're also supply constrained on the nvidia chipsets they did say they're gonna spend you know they prepared wall street to buckle up for more capex that were on this one time in a lifetime demand curve so that was interesting and but no one really freaked out about it so that was good, what'd you see on the advertising business?

Jason: [28:58] Yeah. Well, I would just add that, that 38% margin that was up from 30% the quarter before. So that, that was a.

Scot: [29:05] Yeah, that's material. Yeah.

Jason: [29:06] Uh, very, very meaningful. And, and I think nobody freaked out over the CapEx because they're like, Hey, we, we thought like regular AWS was like a pretty good demand curve. And, and the AI AWS demand curve is ahead of where AWS was at this point. And so I think they think there's a lot of headroom. It was interesting. They used to talk a lot about how we really only have scratched the surface on cloud compute that like, you know, some ridiculously low percentage, like only like 5% of all the workloads are in the cloud at all. So, you know, traditional AWS has all this headroom. And I assume they still believe that's true, but they don't bother even talking about it because there's so much demand for all this AI compute at the moment. So advertising, I always love talking about right after AWS, because I feel like there's this common notion that AWS drives Amazon. And you said it earlier, like all the analysts think that Amazon's at AWS with some annoying side projects. So the advertising business also had a good run. Exact same growth rate, 19%. The difference is 19% is an acceleration of their advertising business, where it's a site deceleration of their historic AWS rate.

Jason: [30:26] So that 19% growth gets them $14.3 billion this quarter. So if you look at their last four quarters, they're now at a $58.7 billion run rate, or not even run rate, trailing 12 months. So nearly $60 billion in ads. To put that in perspective, the trailing 12 months at AWS is like $100 billion, $102 billion. So AWS is a bigger business in terms of revenue, no question. But the ads business is growing fast. They're adding a lot of advertising products, like almost all this advertising is still just in support of search. It's mostly sponsored search ads on the website. But of course, Amazon is winning more eyeballs with their media, right? And their NFL stuff is going really well. Their original programming is going really well. And they're increasingly putting ads in all that content. So like this really is like $60 billion of search ads. And there's still a lot more headroom in, you know, monetizing all of this other media that Amazon is increasingly succeeding in. And so that's interesting. Unlike AWS, which is highly CapEx intensive and, you know, constrained commodity because of these silicone chips, the ads are very low CapEx, right? And so they don't tell us what the gross margin is for the ads, but let's call it 70% gross margin. There's no cost of goods, right?

Scot: [31:55] Yeah.

Jason: [31:55] Let's call it 99%.

Scot: [31:57] Okay.

Jason: [31:58] Very popular. Yeah. They pay a lot of sales, guys, right? Like that's the one, that's, that's the one cost. And I think those are the only sale guys that don't get fired if they don't go to the office, by the way. But so 60 billion, 58 billion in revenue at 70% gross margin is 41 billion in earned income, operating income that they've made over the last 12 months for the advertising business. If we go back and apply the 38% gross margin, which is the highest gross margin they've ever achieved and not what they actually achieved over the last 12 months and apply that 38% growth margin to the last 12 months of revenue on AWS, it earned $39 billion worth of operating income. So like in the most conservative version of this, advertising is contributing more dollars of profit to Amazon than AWS's and growing faster.

Scot: [32:48] Yeah. I 100% believe that because the cost structure for AWS is pretty, pretty big.

Jason: [32:53] Yeah. Yeah.

Scot: [32:54] And it's going to get worse, which is amazing that they popped up to 38.

Jason: [32:59] Yeah, yeah. I mean, it's a testament. They do a lot of stuff really well. So that is the advertising story. Scott, I know the future of Alexa is very near and dear to your heart.

Scot: [33:12] It is. And I've had some interactions with Amazon in like the last year. I won't go into specifics. And I came away thinking, man, the company seems like different. Like they're just like not as engaged and the people you meet are very… Company kind of feeling, which is way different than, you know, when I was at Channelvisor dealing with Amazon, you would meet a VP and he or she would know exactly how everything at the company worked. And it was like freakishly, you know, freakishly informed about everything. So, you know, case in point, they're coming out. They've been working on this for a long time. At first, it was going to be kind of, you know, late summer, fall, and then they moved it to kind of late to catch holiday. And now they just announced that they're delaying till 2025, that they're not going to have any kind of LM type technology on Alexa. They started with having, saying they're going to do their own in-house kind of a model. Then they moved to Anthropic. But what they're doing is they're finding some problems with it that in the beta testing, I read an article that said it likes to show off. So instead of just answering a question, it will give you all this extra expository. It just kind of like basically has the Jason version of the LLM.

Jason: [34:26] All right. You were thinking it.

Scot: [34:31] Alexa, what time is it? Fascinating you asked. The nuclear standard for time began and then it like, it can't understand basic things. So it's gotten, it's better at answering questions Alexa currently can't ask, like, you know, certain facts and stuff but it it's not good at turning your lights on and off and those types of things so they're having a really hard time with it and they even got someone they weren't on the record but they i think this is in what's the one that's in seattle starts with a v i want to say vibe that's not it anyway they they got some amazon folks to say it's because because we have a management layer that's bloated and no one can make any decisions above us and they're constantly jerking around what they want the product to be.

Jason: [35:12] It's not a two pizza team.

Scot: [35:14] No, no. The two pizza team thing is not happening on the Alexa product. So that's pretty interesting that they seem. And then I think Jassy just basically nuked the leader and put a new leader in there. And they're doing all this return to office stuff, I think, as a way of kind of thinning out the employee base. I think next year, we're going to see them get pretty serious about reducing headcount in a lot of groups. So it's going to be a lot of companies have gone through that. And I don't think Amazon's done as much as they probably could based on how slow they're moving on some things.

Jason: [35:48] Yeah, yeah. It is going to be interesting. I'm a little disappointed that the devices haven't gotten better faster. I think you and I both expected, like with all the amazing things that are happening in the outside ecosystem of LLMs that like, we can't figure out a way to make these devices better. But, you know, I think we talked about it in the last earnings call that there's this kind of more advanced concept of what AI can do called agent-based AI or agentic AI.

Jason: [36:22] And there was a little bit of a hint in the earnings call when Andy was talking about this ecosystem. And he said, you know, all these LLMs out there are amazing. They're super good at processing information and summarizing information. But what we haven't seen yet and we think is going to be a huge part of the AI capability set is systems that can take action on that information. So actually do stuff for you, not just tell you stuff. And he optimistically said, and we think we're going to be pretty good at that. And so that, you know, my interpretation there is, hey, we at Amazon are going to lean way into agentic AI. They kind of have to because they've already been beaten in the first generation of LLM. So, you know, it kind of makes sense at this point to try to leapfrog. And of course, the guy that invented the concept of agentic AI, the super credible AI scientist, Andrew Ng, is on the board of Amazon now. So like none of this is particularly surprising.

Scot: [37:29] Yeah. Yeah. So you, you wanted to bring up something that a lot of clients are talking to you about, which, which is interesting.

Jason: [37:36] A lot of my clients have noticed this, this intersection of three very scary events that happened in the world of retail last week. So event number one is that Scott Wingo deleted the Google icon from his dock in his iPhone and replaced it with a perplexity icon.

Scot: [37:57] True.

Jason: [37:58] So, Scott is all in on perplexity as his primary search engine. Like, I'm less relevant, but I totally agree. Like, it's amazing. It's my daily driver for search.

Jason: [38:11] And I think a lot of other early adopters have all now found it to be far, far more useful than traditional Google search. So shortly after Scott announced to the world that perplexity had beaten Google, OpenAI launched their first true kind of search competitor called ChatGBT Search. For me, the jury is still out on if ChatGBT Search is better or even at parity with perplexity. It's way better than any other OpenAI at doing search type things. I still think at the moment I prefer perplexity, but if you do 10 searches, you're going to prefer the answer for both of them for different things. And so this was the second big announcement was OpenAI getting directly into the search. And then in response to that, perplexity unveiled a new feature. They unveiled a public feature, which is shopping links in the search. So now, you know, you do a perplexity search for best Thunderbolt monitor to add to my new MacBook M4, and it comes back and gives you a bunch of answers. And at the bottom of that page, it gives you links to go to product detail pages of various retailers that are selling those monitors.

Jason: [39:29] So that's interesting. But then in beta, they've added the ability to buy the product right in the perplexity interface without ever leaving. So what we would call native checkout. And I'm not in the beta, so I haven't gotten to do it hands-on yet. But I've been watching a lot of videos from people that are in the beta. And not all, but a disproportionate amount of those links are to buy now from Amazon. So they very clearly have some kind of partnership with Amazon. And, you know, if the world were to move to these kind of AI searches instead of Google, the two major things would happen. It would totally break SEO and keyword research and all the things that are a core part of marketing today. And number two, you know, it would be super important to win that buy box and that pull position in these new search engines, this new shopping surface that didn't exist for most of the world a month ago. So this is fascinating. I feel like this is just the first evolution of a battle we're going to see play out, at least for the next year.

Jason: [40:37] Couple of years, but if you're a retailer and you weren't thinking about, you know, what happens when all this, this search traffic moves off of Google and onto these new, new surfaces, you know, it's, it's, it's time to start putting some contingency plans in place and at least think about how you're going to participate. And if you're a product or a content provider, you need to start thinking about how, you know, what your monetization strategy is and how you're going to optimize, you know, so your products show up at, you know, for their fair share of voice or better and all those sorts of things so it's.

Scot: [41:08] Yeah it's called the aeo so the ceo of perplexity he's a fun interview i've watched a lot of his interviews now and he calls it an answer engine instead of searching in which is really appropriate that's why i like it because it just like gives you an answer and then so instead today google gives you like some things you have to figure out you go to 10 sites you open up 10 tabs three of them are garbage seven are okay then you kind of get to an answer after a lot of work this gives you the answer and then says well here's the supporting stuff if you want to dig in further so yeah so then to optimize it he calls it aeo and they're actually seeing people do this and they're they're really tweaking you know the sites to make sure that it's more llm friendly and and whatnot which is fascinating i wonder how the the pay on perplexity works because where are your payment credentials being stored is something i'd really want to understand so that's why i'm desperate to get.

Jason: [42:01] In the beta because those are all.

Scot: [42:02] That Like.

Jason: [42:03] Normally when companies that aren't in commerce space first launch a native search, There's a bunch of deficiencies.

Scot: [42:12] Yeah.

Jason: [42:13] When will I get it? And what are the return policies? And how do I bundle multiple products? And what about, can I use my digital wallet? And all these things. There are now people that have figured it out. TikTok Shops has a pretty decent experience for native checkout. And so, yeah, I'm super interested to dive in all that with perplexity. I have not.

Scot: [42:35] That's apples and oranges. They're like using it up at their lair, though. like you're actually selling on TikTok. Like it's the, it's like a marketplace. But this one, they're like sending the order down into Amazon or wherever. Like that's, they've got to be doing that. You know, how, is it Anthropic? Yeah, Claude can now take over your screen. I wonder if they're doing that. Like they're storing your credentials and then insert them, like crawling it in.

Jason: [42:55] I doubt it. Could be, I kind of doubt it.

Scot: [42:58] Super not PCI compliant.

Jason: [42:59] No, and to be honest, the Anthropic demo is cool because it can do it at all. Like it doesn't do it well enough to solve a real world problem yet. And so I'm kind of assuming all the examples of checkouts I've seen are retailers that I know syndicate APIs, right? And so I actually think this isn't using TikTok Shops native checkout, but TikTok has a native checkout in TikTok ads where they already have a Amazon API integration. And it seems most likely that that's what they're leveraging is that they're, they've gone out and said, what retailers are, you know, enabling checkout in, in native ad formats? And we'll, we'll, you know, position ourselves as another ad platform for those, those checkout engines. Yeah, I'm with you. It's to me, the analogy I like to use is perplexity gives you a meal, whereas Google gives you a recipe.

Scot: [44:00] Yep. True.

Jason: [44:01] And I feel like, you know, the world has expanded from 10,000 SKUs to 800 million SKUs, like the recipes are now too complicated.

Scot: [44:11] Yeah. Cool. I agree. It is. And there's even worse than that. There's bad ingredients, right? Like the, there's so much spam inside of Google now that it's just like really hard to find anything good a lot of times.

Jason: [44:22] Yeah. I will admit like you've just hit my, my greatest fear about all of this. I feel like the perplexity search experience is so awesome right now, but they're not monetizing it. I mean, I, I pay 20 bucks a month, but you really don't need to. And I think back to every other cool technology that you and I have adopted, and they all started before monetization and they were all cool. And over time, the owner of that technology has turned up the dial more and more on monetization to the point where it really arose the experience, right? So, search, social, all these things were great pre-monetization. And, you know, now, you know, there's no organic content on social. There's no organic product listings that you're going to see on the first page of Amazon. Like, they've all been overwhelmed by the monetization. And so my fear is, as great as perplexity is right now, that when they really land on their, you know, that it's kind of the first hit of crack for free. And that when they eventually land on their monetization model, it'll be inferior and more noisy, as has happened in the past.

Scot: [45:33] Yeah, we'll see.

Jason: [45:34] Yeah. And one last side note on that. I'll tell you who wins here is Jeff Bezos because he has a lot of Amazon stock. He has perplexity stock and Amazon has a big investment in Anthropic. So it kind of feels like, you know, whoever wins here, Jeff Bezos is going to do okay.

Scot: [45:53] Jeff would not cry to see Google taken down. A lot of people in tech would not be upset to keep Google taken down a peg.

Jason: [46:00] I know you know this. Like many of our listeners may not know that Jeff made billions of dollars on his initial investment in Google. He was one of the angel investors in Google.

Scot: [46:11] Yeah, he famously identified him as a threat early on and wouldn't let anyone at Amazon talk to them or share any kind of – they never installed the Pixel or anything. They wouldn't tell them what – they wouldn't buy ads on there for a long time.

Jason: [46:25] Yeah, now they're the largest advertiser, $18 billion.

Scot: [46:28] Yeah.

Jason: [46:29] It's a crazy world, Scott. But that seems like a great recap for this week. Hopefully you found value in it. And if you did so, there is still room for more reviews on our iTunes page. So Apple has called us. They've said, hey, you're an enormously popular podcast. You have so many great reviews that we're expanding the capacity so that more listeners can jump on iTunes and leave us a five-star review.

Scot: [46:55] Thanks for joining us, everyone. Hope you enjoyed the show.

Jason: [46:58] And until next time, happy commercing.

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EP320 - News, First Half Recap, Early Holiday Preview

http://jasonandscot.com

0:23 Welcome Back After Hiatus 2:51 Upcoming Events in Retail 7:28 GroceryShop 16:02 Retail Growth Trends 21:28 Concerns for Holiday 2024 30:27 The De Minimis Provision 40:27 TikTok's Impact on E-commerce

In this episode of The Jason and Scot Show, we discuss the current state of retail and e-commerce.

We analyze macroeconomic factors impacting the retail landscape, noting a 3.4% growth in core retail and a maturation of e-commerce, dominated by giants like Amazon and Walmart. We address consumer sentiment heading into the holiday season and the potential influences of the upcoming election and interest rate changes.

The episode also covers the role of AI in enhancing personalization experiences, challenges faced by dollar stores, and supply chain issues. We conclude with insights into Amazon’s recent earnings and their strategies to engage younger consumers through TikTok Shops.

Download the complete 54 page deck of all my insights from the US Dept of Commerce Retail Data for the first half of 2024 here https://rgeek.co/retail2024

Transcript [0:23] Welcome Back After Hiatus Jason [0:23]Welcome to the Json and Scott show this is episode 320 being recorded on Monday september 16th 2024 I'm your host Jason retail gee Goldberg and as usual I'm here with your co-host Scott Wingo. Scot [0:38]Hey Jason and welcome back after a very long time, Jason and Scott show listeners Jason our last show was an early May so it's been about a little over a 4-month hiatus and when people ask me I always blame you do you blame me. Jason [0:57]I do blame you and I'm bitter because in my mind. Nobody's really complaining to you but like I I've gone called out on stage by like I've I've been heckled by people that are like what are you going to do a new show. Scot [1:15]It's part of our it's it's a Nintendo like strategy where you you dribble you know if you could really constrain Supply scarcity that drives demand so yeah. Jason [1:25]Yeah it it we are we are playing 3 dimensional chess in a world of checkered players. Scot [1:31]Exactly the the real reason is as Chief digital Innovation retail and payments and grocery officer your title's gotten bigger and your your more famous your allies on a plane I can never record because I'm like how about now he's like Paris how about now Australia how about now India so you've been flying all over the world. Jason [1:52]I sadly I have been it does feel like travel is back there there have been more International trips this year than any year before coid so I I can I can only partially deny that accusation. Scot [2:08]Cool well we're glad that we have you here for for an hour give us an update what are you any uh show you know what's going on out in the world of retail as you've been expanding the globe for the Json and Scott show. Jason [2:20]Yeah it's been another Super interesting year for retail we'll we'll certainly get into some of what we think are the key topics that have been planned out this year but I have attended a bunch of events I I can't even remember which ones where since this this last show visited a bunch of customers out in the field which is always great learning new things from them [2:51] Upcoming Events in Retail Jason [2:40]but the upcoming show is in early October is grocery shopping in Las Vegas so I'll be moderating a panel on. AI enabling Next Generation personalization, at at that show which I always look forward to to grocery shop and then a week later they're they're shop talk is moving their show their other stuff to Chicago so they're going to have their first, fall shop talk that will be in my backyard in Chicago so I'll be curious to see how if the world wants another another iteration of shop talk every year. Scot [3:18]Yeah give us the behind-the-scenes did you like throw down the gauntlet and said shop talk must move to Chicago or I'm not going to attend or and run all the speaking stuff. Jason [3:28]I basically did that with everything I told every client that they had come to Chicago I told shop talk and I told you you had to come here to record the podcast and yeah you'll note we haven't had a lot of podcasts and you know I still have the same 3 customers here I've always had. Scot [3:44]But you got to show them to me for at least that's a 1 w. Jason [3:46]I did but they really just added a show they're just looking for more Revenue so like it seems like it's probably not. Not just me but I feel like your LinkedIn feed has been more active than me and mostly with accolades for for the the fund that you helped kick off. Scot [4:05]Yeah yeah so the just to update everybody I'm in a post spiffy world so started spiffy in 2014 and then, you know decided to to we got to kind of north of a 60-ish million run rate which is plenty big lots of employees lots of things going on and I had started this little side hustle well first of all I started this thing for our little local ecosystem here called the tweener list in 2015 which was just a little passion project and then started a little fund around that called the tweener fund which invests in early stage startups so I've I've really enjoyed that and decided to, move on from spiffy and make this my full-time gig so have been really enjoying doing that and actually have. I'm sure you do this where you have a list of things you're kind of like want to learn about and you can hardly ever get to it and I've been doing a lot of that the last 4 weeks and 1 of the big 1 is AI I've been going really deep on AI and it's been been a lot of fun to play around with all the cool new stuff going on there and I got a couple interesting ideas I'm not going to reveal anything but there's some interesting if you think from a AI native remember how we used to talk about mobile native well now thinking AI native I think there's some interesting things that could happen in the world of e-commerce so I'm going to I may go back to thinking more about e-commerce so we'll see. Jason [5:23]Come on back though we're we're waiting for you the water is fine man they're they're for your point there's a lot of super interesting stuff the grocery shop will be fun a a show after that that I'm looking forward to is NRF because you know they have this Innovation Pavilion and they've kind of upped the the, rigger around recruiting exhibitors at The Innovation Pavilion this year and I think it's going to it's a big year for Innovation so, probably be a cool time for all of us to meet in the New York in January with global warming it's not even cold anymore. Scot [5:58]Not been there not too long ago and it's still pretty darn cold for this North Carolina. Jason [6:04]Oh okay fair enough fair enough I'm just last year was the first time it snowed in like 2 years in New York at at in her uh and then. Scot [6:10]Okay yeah yeah last time I remember trudging through like 6 inches to get to your hotel which was painfully far away. Jason [6:17]I mean that's yeah that's been my normal life so it's been weird that you haven't had to take the heavy coat to New York so although I wouldn't recommend that if you go to New York in January I'd bring that vote uh. And, I feel like in addition to everything else I know we're going to jump into the retail but all the Apple software updates dropped today so cool new icons and emojis and and delayed chats so I can have, like Emoji based chats hit Scott Wingo at every hour of the day now it's amazing. Scot [6:48]Nice I look forward to that at 4:00 a.m. I'll have my do not disturb on to counteract your your attack. Jason [6:53]Yeah although I may need you talk about new things you want to learn 1 of the things I want to learn is how to make Do Not Disturb work right in the the modern app like the system because I feel like all the focus modes have made it complicated. Scot [7:05]Yeah I have to have you know that that kind of funny YouTube where the dad puts on 6 seat belts that's me putting on do not disturb I have to do the physical thing check the moon do my watch hit D and D in a profile and then that's that that combination of things I don't know which of them does it but that seems to stop everything. [7:28] AI in Grocery Shopping Jason [7:23]Yes I feel like I'm in a similar boat but it would be interesting to figure out how to do it for as intended. Scot [7:29]Yeah or just we know it works so just keep doing it do so just give us a preview of grocery shop can AI do better recommendations than kind of the old school way we used to do it. Jason [7:42]So 1 would hope certainly it can do it at greater scale than we used to do it there's some anecdotal evidence that it's. Better it you know part of it I'm I'm curious to talk to some of these folks So So Meta will be on my panel. They they have a strong POV you know what's going on in the digital ad space right now is all the the ad platforms are trying to talk you into going hands off the wheel and turning over. The bidding to their AI engines and I would say at the moment it's an uneven playing field there like if I if I talk to my. Performance media folks they'll tell you that the the AI robots from some of the platforms are very effective and tend to outperform a manual bidding and on other platforms that they they wildly do not so. Jason [8:33]That it'll be interesting to kind of hear their perspective 1 of the panelists is hungryroot, which to me is a super interesting example they they're truly doing AI based recommendation so they're essentially they're a ger. That is mainly filling out your whole cart for you proactively with AI based. Recommendations so you manicure a Char a cart that they recommend to you versus you hunting and pecking for each individual item and putting it in your cart and they they have some pretty interesting sales metrics using that methodology so they're all in, there you might almost think of them as like the Stitch fix of food and so they'll they'll be interesting to hear, and then my friend Ben from Endeavor and Endeavor may be familiar to some listeners not to others they're the largest adult beverage and hospitality company in Australia. And so they they have a nationwide chain of beer and wine stores that are doing some really interesting personalization hubs and kind of Shifting all of their customer touch points to to 1 to 1 so. I'll be curious to hear how effective they all claim to be. Scot [9:47]How do these it seems like you're going to need some training data like how do they Kickstart that do they look at like your email or credit card data to kind of get an idea for what you like or they just kind of start you at a demographic Baseline and build from there or do you know. Jason [10:01]Yeah well so in many cases you've been a customer of theirs for a long time right so they have you you have a significant amount of personal data I mean Walmart launched a predictive cart feature, in January that's in beta so I think it's only available to a select group of. Of Walmart Plus members but yeah it you it's trained on all of th those members pass purchases leading up to the launch of that product. Um so I yeah good question what signals do they use for a net new customer but I think the first crop where customers where they they already had a significant history. Scot [10:40]Got it cool well that's gonna be a good panel riveting it's also pretty wild they have them so close together now that's like 10 days you're gonna have to kind of like Zip back home rest for a couple days and jump in. Jason [10:50]I I do I was going to zip back home anyway so it's not an inconvenience for me but I my heart does go out to all the the shop talk folks that that have responsibilities of both shows because that I'm certain is not fun for them. Scot [11:02]Cool which of the shop talks is bigger now the. Jason [11:09]Shop talk is still the biggest show that's their March show um and it's it's north of 10,000 people so it might have been like 11,000 this year I'm not sure they, release an official number so hopefully I'm not disclosing something proprietary and grocery shop is only about half that size. So think closer to 5 500 attendees and then this fall shop talk this will be the first time so so. All all bets are off I I certainly wish them no ill will but part of me thinks it's a it's a big lift to get people. To add yet another event to their schedules. Scot [11:48]Yeah maybe the Fallen will be more Regional like you know folks in the midwest or east. Jason [11:53]Yeah I mean that that would be my initial assumption but you know they've they've been able to build up some really good shows in the past so so you know we'll see how they do with this 1 I certainly, would like to see a good show in Chicago they're in as you would remember in the old days you know there was like internet retailer here which still exists but I would argue it's it's probably well past its prime. Problem is when you did the orientation and used to teach everyone how to do e-commerce on the first day. Scot [12:20]Amazon yeah that was fun that was they were like well you do this and I was like well how many people come and they're like I usually 100 and I did it and there's like 700 people say dude you vastly underestimated your crowd size at this thing the um. Jason [12:32]I know I know you're a big draw. Scot [12:34]Yeah well of course the uh and what was always funny is people would want to meet I forget what hotel it was either Hyatt, or a Hilton and there was 4 of them around that convention center and like No 1 could ever find each other at that that Hotel chain because they know 1 realized they all had the same name I'm sure that's still a problem. Was always funny to watch the chaos ensue. Jason [12:54]Yeah. Scot [12:55]The only thing works is in Las Vegas when you're at the Mandalay Bay when the hotel is called the hotel and the bars called the bar it's like a whose first kind of scenario trying to get. Jason [13:04]Yeah I'm sure they thought that was really clever when they. Scot [13:07]Yeah that was the worst worst naming. Jason [13:08]When they first named it yeah. Scot [13:11]Cool well you guys have been waiting for it and we are recording this mid-september all of our friends and Retail and e-commerce are making their final changes to their sites they're implementing their new features they're putting new vendors in place and going through the final QA test, before the big October code freeze so. This is when the Pod turns to really thinking about a holiday of 24 it's a fun to believe that we're already here this fast and Jason to tee that up let's set the table a little bit you put out a really interesting kind of adjacent Mega deck on LinkedIn that was really good and I thought maybe we could go through a couple slides of that and kind of tee up, you know how the year has gone so far and then that'll take us into kind of a little bit of a prediction of how holiday 24 is going to shape up. Jason [13:58]Yeah yeah yeah happy to do it thanks man so maybe setting the table. I don't want to go back and get too deep we'll put a link to the deck so anyone that wants it's like 54 pages of data visualizations about about the Commerce industry so anyone's welcome to download it and check for themselves but the the highest level metric that I like to think about is this thing that NRF calls core retail so that's, all of retail sales from the US Department of Commerce US Census Data uh except restaurants Gas and Automobiles and. Jason [14:33]If you go back in time and you say how how much does core retail grow year-over-year for the last 20 years core retail grew about 3.9% a year. And then of course we had this this huge anomaly more recently which was Co. And you know I like to joke that like well you know some people feel like oh man those were really hard years for retail what they forget is we mailed 5 trillion dollars in extra cash to everyone and didn't let them spend any of that on flights or Taylor Swift tickets. And so those were actually the greatest growth years in the history of retail like we like the the peak year was like 14% growth for core retail. So we had that this like Giant mountain of unusual growth 3 years that were twice as big as the normal 3.9% growth, and then 2023 happened and 2023 was right back to the average 3.9% again, and so now we're halfway through 2024 and we're actually below that average a little bit so we're at 3.4% growth year to date. Which is you know meaningfully off from 3.9% like that you know these are these are big numbers so that's 2.9 trillion dollars worth of sales year to date. Jason [15:50]And the you know. [16:02] Retail Growth Trends Jason [15:53]When we look at holiday I I mean we'll we'll talk about it in a minute but you know that's kind of setting the the table for retail for holiday but of course. People on this podcast are probably particularly interested in e-commerce and will know that historically at least in the modern era e-commerce has grown much faster. So the problem with talking about the average growth rate of e-commerce is of course it only started about 24 years ago and so it's. You know the the rate of growth has has decreased over time if you look at the last 24 years e-commerce is growing 17% a year versus that 3.9% for retail. Over the last 10 years right before coid e-commerce was growing at 12.4% a year. Jason [16:37]So I kind of tell people think about you know e-commerce typically growing at 12% a year retail typically growing at 4% a year is kind of the. The the basic ratios so 4 times faster but this year 2024, retail is only growing at 3.4% and e-commerce is only growing at 7.5% so still twice as fast growth but a meaningful slowdown from the, historic average and you know at the risk of of giving away a spoiler. I I don't think that's like some bounce because of a spike during Co I actually think it's just an indication of the maturing of. Of e-commerce and e-commerce is a you know increasingly big chunk of of the whole retail pie it's. E-commerce is 21.8% of core retail so almost 22% so you know we'll spend over 7 trillion dollars this year and you know well over a trillion of it will be e-commerce. Scot [17:38]Interesting cool so that's the full year. Jason [17:41]Yeah well. Scot [17:43]Basically kind of an average year. Jason [17:45]So so last, yeah so so well so last year e-commerce had already started slow down it it grew again the average was about 12% it grew 10% last year and we're only growing 7.5% year to date this year. Scot [17:59]Okay got it okay. Jason [18:01]But. As I keep pointing out to people the story depending on who you are the story is either vastly better or worse than that those industry averages I just shared because the real story of of retail in 2024 is. This this concept of bifurcation right that there are 5 retailers that are vastly outperforming those industry averages. And they are eating up all of the growth in the industry so these 5 retailers represent 51% of all that growth so if you're 1 of those 5 retailers, you're having a great year if you are not 1 of those 5 retailers you're having a way worse than average year in in most cases so that's, Amazon which alone represents 16% of all retail growth it's Walmart which represents 15% of all retail growth, and it's it's Tik Tok which, you know was well under a billion dollars in sales last year and is trending towards twenty billion dollars in sales this year so they're the fastest growing retail, in the history of mankind and then rounding out these top 5 Growers are the the fastest growing return history of mankind from the last 2 years T-Mobile and shien so, it's kind of T-Mobile Sheen Tik Tok Walmart and Amazon's world and the rest of us are just living in it which is you know somewhat alarming for the rest of retail. Scot [19:26]Yeah yeah definitely is it seems like those the chinese-based guys seems like they're taking share from somebody but it's not Amazon is it dollar stores because it's kind of like this convenience-oriented lower price kind of stuff right. Jason [19:42]Yeah so it it it it's it's inexpensive variety Goods the, it it very likely is taking share from from the the dollar stores the dollar stores have not fared well which historically, you know there's there's some economic headwinds there's a thing going on in the United States that I I like to call A vibe session which means, some of the the economic fundamentals are actually pretty decent but people are really, consumer sentiment is down and people are really cutting back on their spending there's a lot of evidence that people are trading down and and trying to be more frugal, and that kind of climate normally has favored the dollar stores and yet you know they're they're definitely performing below these, these industry averages so certainly a chunk of of the Tik Tok team mushy and growth um is coming at their expense. Some of the sheen growth is coming at the expense of luxury which you know historically luxury has been been insulated from downturns in the market but you know we're starting to see. Some softness in their earnings and for sure softness in their guidance. So you know the you know people that would have bought more designer stuff maybe they're still buying some designer things but they're mixing it in with really affordable fashion from. From shien like I I am sure Amazon is losing some sales to Tik Tok shops that they would like to have but for your point. Jason [21:08]Amazon still you know growing much faster than the rest of the market and so yeah it's not it's not eroding Amazon's any share it's just eroding their Tam. [21:28] Concerns for Holiday 2024 Scot [21:19]Got it okay so that's the setup so e-commerce has slowed down a bit retails kind of doing its thing what what does that mean for holiday. Jason [21:29]Yeah so I I have become Debbie Downer I am concerned about holiday this year, so if we just kind of extrapolate out these Trends again 3.4% growth is below our historic average so if something dramatically didn't turn around if consumer sentiment didn't get a lot better. For this holiday you would expect this to be a slightly soft. Holiday and I I really think this trend of winners and losers is likely to continue through holidays so I think you're going to see a handful of retailers perform really well holiday at the expense of everyone else and I. I I think on average that's going to mean that revenue is kind of similar to traditional holiday growth. But I I suspect that that's that margins, will be even further eroded than usual so so usually for Holiday retail grows about 4.3% e-commerce grows at 12.9% I don't think we'll see either of those numbers for holiday this year and I think. Jason [22:34]You know if if retail grows at 3.7% and Ecom grows at 8% you know I still think you're going to see Amazon Walmart and Tik Tok grab, disproportionate share of that holiday spend which is going to be bad news, for a lot of other folks and those are just kind of the macro Trends you have to layer in that that there's a couple of reasons to to be worried about this holiday regardless of the trends going into this holiday so. We have a different calendar a number of days in the holiday season every year, and this is our worst year this is the year when we have the fewest days and holiday which actually you know historically does depress sales if there's fewer days to shop then then we sell less stuff and so this is the shortest holiday season that we ever get, and historically an election year is not favorable to Holiday spend right so traditionally there's some some anxiety and you know. Competition for attention, that plays into these November elections that impacts holiday and I I think you know this will be the most polarized election ever and so I think it's you know no matter what the outcome is half the country is going to be pretty depressed and that that likely you know translates into not an awesome holiday so so we got some things working against us. Scot [23:53]Yeah so if that's the headwinds I'll throw in a Tailwind so as a our celebrated CNBC junkie the all they talk about is the Fed meeting tomorrow where you know it's pretty clear the fed's going to lower interest rates and the big question is is it going to be a quarter point or half a point I think I I I'm not a prognost prognosticator on that I think whatever they do it's going to be wildly popular and relief a lot of this kind of interest rate pressure we've everything's been on so even if it's only a quarter point I think it'll be somewhat euphoric for the market and for for hopefully for consumers to feel like interest rates are coming down a little bit so maybe that'll like bump start some house buying and selling and they'll be a little bit more liquidity in the market so so I'm going to think of that as more of a Tailwind so there's some positivity going on there do you worry about the election because I think it's just going to take forever to figure out who won and, everyone's going to contest it and it's gonna be like this unknown thing for a very long time so we'll see how that goes. Jason [24:55]Yeah and you live in a swing state so I can only imagine what's happening to your media. Scot [24:59]Yeah we just kind of we can't even like the male is an inch thick full of like Gunk and you kind of have to sort through all the stupidity I'm not a political person to get to like you know the bill and make sure you pay it and that kind of stuff and then the you know, at the TV is just crazy but thank goodness I'm not in Pennsylvania I think they're getting just totally hammered right now. Jason [25:18]Yeah probably so and In fairness while we're covering Tailwind like this could be a headwind or a Tailwind but like I will say in general the macros are getting a little better right so inflation has been steadily coming down the 1 the most stubborn version of inflation had been. In in this core retail category is is food and even food you know they're all down below 3% which like pre-pandemic they were kind of in that, 2.1 2.3% and the FEDS sort of stated goal was to keep inflation between 2 and 3% so, you know we still had all the pain of the high prices over the last couple of years but like. Prices really have started to come down so on the 1 hand that helps consumer sentiment you know just like in announcement from the FED would and so that that's favorable you know most of the jobs reports have been you know pretty good there's there there's some decent news that in theory should make people feel better, the flip side is inflation going down actually hurts retail sales because the stuff they sell is cheaper and so when, comping with low inflation against a previous year of higher inflation it actually can make your comps more challenging. So yeah it's a a complicated mix of stuff going on. Scot [26:35]Yeah does that if you boil all that down do you end up with a like a semi prediction like if your clients were to say to you give me a number what what do you spit out. Jason [26:45]Yeah I I'm saying buckle up I normal retail holiday growth is 4.3% and I think we're retail growth is going to be below 4 this year. Margins vary wildly depending on the category but I think average margins are going to be down across the board like there there are going to be some some outliers like the the interest rates have really been brutal on the Home Improvement guys right like if you know people can't get loans they're trapped in their house uh they don't buy new houses they spend a lot less in Home Depot and Lowe's and I think it's pretty likely Buy holiday that there's some, some movement in the in the interest rates which like at the at the very least is going to Goose. That housing market which is going to have a trickle on effect to the the Home Improvement guys so I I suspect they'll have. Better holiday than they have the last last couple of years but overall I I'm not optimistic, you know with the caveat that some some really good operators or some people with a really clever model like the Amazon Walmart Tik toks are are likely gonna you know have a really good run this holiday. Scot [27:51]Okay cool I will I do not have a prediction so I'll stick with yours. Jason [27:58]Usually that doesn't work out well for you but thanks. Scot [28:01]I have to go review our it's been so long I have to go look at our New Year's predictions because there's always start to be coming to fruition here soon. Jason [28:09]Yeah yeah yeah I've kept half an eye on some of them and there's there's going to be some some are going to come down to the wire some I I would have thought were safer but like you know surprisingly Amazon's pretty slow getting their their AI stuff out the door so we'll see. Scot [28:23]Yeah yeah there's the so this is a sidebar that we didn't really prepare for but did you see they tried to build their own and they kind of couldn't and they had to punt and they're using and. Not anthropology the 1 that starts know they're using anthropic. Jason [28:41]Anthropic that's right yes I did see that um. Scot [28:44]Yeah so that's got to be embarrassing I mean they invested like some bazillions of dollars. Jason [28:47]To I mean Amazon is kind of a not invented here company so like when they have to give up on the internal initiative and and rent someone else's Tech that that probably doesn't feel very good. Scot [28:59]Yeah I made the mistake of changing my action button on my phone to the chat GPT voice and then I've been I switched from Google in my search to perplexity so I've gotten used to asking these pretty complex questions and then I chat with Alexa and I feel like I'm talking to a kindergarten I'm like I'll even like ask it something you know play this song from this album by that artist and it loses itself halfway through half the time I feel like it's brain is melting and it's just like getting Dumber even though I know it's at a Baseline. Jason [29:29]Yeah no absolutely and and I would say it's even more acute in my household because I live with a 9-year-old um and and his default is that, it should know all of this stuff right and it asks he asks these really complicated questions and I like can't tell you how many times a day I have to say to my son she's not going to know that. Scot [29:50]Why dad why. Jason [29:54]But but for your point hand him like, you know he basically lives to play Roblox and watch you to Awful YouTube videos um and I can hand him chat gbt 40 and like it's about as entertaining as Roblox to him which is amazing. [30:27] The De Minimis Provision Scot [30:13]Gotcha does uh so you mentioned Teemu and all that jazz you have been tracking this rule that allows China to use our postal system to send stuff free what's going on with that puppy. Jason [30:27]Yeah so that is famously called the Dominus provision and it's this rule that got. Put into the US Customs Enforcement in like 1938 and the idea was hey if people are going to ship stuff in the United States like we want to charge tax on it we want to charge duties and we want to have rules about what kinds of things from a safety standpoint and from a a human interest standpoint can be imported into our country right and so so normally you ship something from another country it has to go through inspections it has to go through duties but gosh there's this new kind of peer-to-peer marketplaces and there's eBay sellers selling stuff in London to people in the US and we don't have enough Customs agents to inspect all these little, packages that Scott Wingo is helping people sell on the internet right so we're going to pass a rule called the Dominus provision which is if you ship something that has less than 5 dollars of value, you don't have to declare it you don't have to pay taxes on it it's not getting inspected by anyone and it was really just a labor savings for for the the Customs agents in like you know originally in 1939 when like it was it was an e-commerce it was mail order back then. Jason [31:44]But in like 1996 that that. 5 Dollar limit got bumped to Dollars and then in 2016 the hundred dollars got bumped to $800 and that really opened the floodgates that's when companies like shien and tiemoue figured out that hey instead of filling up a container of stuff, and shipping that container to the US and having to pay C duties on that container and having that container come over in a boat and take a long time to get here I can put each. Sale in an individual envelope, and Air Freight it to the US and it'll be under the 800 hour minimum so I won't have to pay duties on it I won't have to get it inspected. And you know these these factories in China, and these these marketplaces of these factories in China you know quickly built a huge business shipping individual packages to Americans right and so that's. Jason [32:48]You know today they they quote unquote exploit what we call the Dominus provision. To to ship all those packages right and so there's been a lot of complaints by people that have to compete with the, the those those you know cheap Imports and there's been a lot of saber rattling in Congress about how you know this is exploitation and all these things, and so last week Biden proposed, that he was going to issue an executive order that goods from China no longer qualify for the de minimis exception and so what that would mean is regardless of the value. Every single package that comes from China would have to go through customs would have to be inspected would have to meet all of our import requirements and so, you know some people are looking at that and saying oh man that's going to put a huge dent that's going to make shien goods and Tik Tok goods and tiemoue goods more expensive. And that might rebalance you know all of these trends that that you and I have just been been talking about. I regrettably am a little more skeptical that it's going to have a huge impact. Jason [33:58]Couple of other sort of interesting facts to know about this Dominus thing so first of all. Not going to shock anyone there's a lot of american-based companies that are now taking full advantage of this de minimis Clause right so. Jason [34:12]Not going to name names on the podcast but there's a lot of big sellers that are us-based that import containers of goods to Mexico and then put those, unpack those containers in Mexico and ship, the goods in individual packages from Mexico to the US so they get relatively fast delivery and they get to bypass all the duties and tariffs and you know that's that that's being done by by a number of like big famous, uh retailers and brands in the US so this kind of Dominus rule if it if it affects goods from China. I guess the first thing I would expect to see is Tik Tok and team who are going to start shipping containers to Mexico and importing them from another country right and so we're going to get kind of a a wacko, situation and if you if you Google section 321 which is the the. Part of the the Customs law that that that amendments provision is in section 321 shipping you're going to find that there's dozens of 3pls that specialize in in doing this for you so. I think it's going to be harder to knock down than 1 executive order but the bigger problem is. Tik Tok to and shien together are by some estimates sending about 900,000 packages a day. Jason [35:33]2 of the United States and so if you could magically wave a wand and say all 900,000 of those packages have to be inspected before they can come in. Think what that would do to the rate of goods flowing into the United States right like all everybody's Imports all the containers would get slowed down because, we have the same number of Customs agents we've always had an executive order can't hire a bunch of new Customs agents that would require new budget from Congress and that seems a lot less likely. So just like the reason the Dominus was there is we didn't have enough people to look at all these packages and that was when they're way less packages than there are now so. If we could somehow like do away with Dominus like would it, reduce the number of shipments probably but it still would be way more shipments it would still overwhelm well customs and would likely suddenly mean all those goods that are I guess holiday Goods for the most part are already on the way are already here but like, it it would probably have a dramatic effect on on q1 availability of goods because it would just gum Up Customs so while I I like the ex the spirit of trying to, update the laws to have a More Level Playing Field I kind of doubt in practice that 1 Executive Order is is going to fix this super complicated problem. Scot [36:51]Yeah now that we're through earning season did you hear anything else interesting in earnings that we were not able to do an Amazon's earning podcast there wasn't really anything super exciting other than. You know kind of more of the same I think you know the AWS did better than a lot of people thought which was good, and that everyone's really focused on that because of the AI stuff everyone's worried Amazon's going to lose share but they seem to be holding their own and then e-commerce and, the retails were were kind of in line so they didn't really slow or speed up, if you have any there was a little color around Prime day but nothing Earth shattering any other interesting things from earnings Seasons you saw. Jason [37:31]Yeah so so again like what you've you've kind of had 3 kinds of retailers right you had those 5 retailers that I mentioned only only 2 of them have like earnings calls in the US which is, Amazon and Walmart. Tik Tok is owned by bike dance which has has earnings calls in China and team was owned by poor which has earnings calls in China she and is trying to go public they're trying to list in in London so we haven't really seen any, any earnings calls from them so they they've had interesting things you've actually had T-Mobile stock took a pretty big hit after their earnings because they, reported great sales but by dance like lowered his guidance and part of it is I believe. In in response to how much share Tik Tok shops has captured so this is 1 of I think 1 of the most interesting stories of the year is. Jason [38:23]For probably as long as I've known you Scott like we've always talked about social commerce and people are always talking about like. Hey there's all this attention on Facebook are people going to be able to sell Goods on Facebook and just not even need e-commerce sites anymore and the narrative we've always had is man it's been tried dozens and dozens of times and it so far hasn't worked it seems like. Us consumers don't want to shop on their social platforms they want to interact with their friends on their social platforms and they want to shop on their shop platforms, but the 1 place in the world where this does seem to be working is China where, pendo Duo on Alibaba had been you know pretty successful 10-cent had been pretty successful with with social commerce and, that narrative is kind of over right now because Tik Tok shops is selling twenty billion dollars worth of stuff direct to Consumer and Tik Tok is. Really winning with consumers attention and especially with younger consumer consumers attention so you know. Jason [39:21]Gen Z Shoppers are are gen Z consumers are spending like an hour a day, on Tik Tok like the Olympics didn't do very well because nobody watches long form video on television anymore like they're all watching all this this short form content on Tik Tok and Tik Tok has been able to turn that attention, into sales so much so that you know the most successful e-commerce site on the planet while Amazon has has kind of said like hey we can't beat him so we're joining him right so Amazon announced, a deal with Tik Tok where you can run an ad on Tik Tok have direct Commerce in that ad and check out with your Amazon credentials and have your order fulfilled by Amazon Prime, in an ad on the Tik Tok platform so that is super interesting and Amazon has said and we're going to start shipping Goods direct from China just like Tik Tok and T-Mobile and shien so they've announced that they're going to, [40:27] TikTok's Impact on E-commerce Jason [40:19]direct to Consumer from factory model you know presumably to take advantage of some of this these same de de minimis. Jason [40:27]Provisions that we we talked about earlier so it's kind of interesting to see Amazon have to kind of match some of the, the offerings and play with some of these Frenemies you know historically you know that's that's gone the other way right like it was it was the old Legacy retards that were having to begrudgingly or brands that had to begrudgingly, moved to Amazon so interesting to see Amazon moving to Tik Tok so that was a super interesting. Jason [40:56]Sort of evolution this year I'm going to be really interested to see whether the, the Tik Tok thing you know it's mostly inexpensive impulse Goods at the moment and, you know can that get traction with staples will people buy more premium Goods we're starting to see more and more Brands I just spent some time with, Keurig which owns you know a bunch of the coffee brands and they're now doing direct Commerce on Tik Tok shops so it kind of went from all unbranded stuff on Chinese factories to, you know we're starting to see branded merchandise in the Tik Tok shop so, that super fascinating and then on a much more scale 1 other thing that really jumped out of me in the investor call after the Amazon earnings is the Amazon CFO talked about. Jason [41:43]The softness that people have seen in the drug channel right and so Walgreens write a CVS haven't been having a very good run lately and and he called out that like Amazon probably got a boost in sales because the the Walgreens so helpfully locked all the products behind cages and that like uh. You know was an impediment to sales at Walgreens and caused a lot of those sales to happen on Amazon instead and so you know if you remember last year a lot of retailers were claimed you know crying about shrinking complaining a lot about shoplifting you're not hearing a lot of conversation and earnings calls about shrink this year. And now you know Amazon saying like man we're we're a beneficiary of all the the eroded customer experiences, that that have resulted from an overreaction to shrink. Scot [42:34]Hu yeah I saw there's a CVS has a thing where you can actually tap with your phone I guess it has an NFC chip in it and so I imagine you have to have the CVS app and be logged in and then you can tap to get into that cage so at least you don't have to wait an hour for someone to wander by and and get you your your pack of gum. Jason [42:55]Yeah which I have mixed feelings about on the 1 hand I really admire The Innovation and that's a clever way to reduce the friction if you are going to put all these products and product jail which is what I call those those cases the, the pro you know the the argument would be, in CVS's case you have to be a member of their Affinity program and have their app on your phone in order to unlock the cases and so like in practice essentially what that means is you know all of America used to be able to shop at CVS now it's a members-only store right like now it's it's it's essentially Costco like you you have to be a member and give them all your data or you're going to have really inconvenient access to the razor blades and so you know, I could see that going either way like if if you compare it to Walgreens or Raid where you don't get that option like it might be looked at favorably but if you kind of look at it in big picture and say wait a minute you're going to lock up all this stuff and then you're going to make me be a member of your Affinity program in order to, to just be able to do what I've always done or at least since the 1920s when Piggly Wiggly opened up all this stuff. Jason [44:01]I you know I could imagine consumers not not reacting super well to that, I don't actually know if the CVS is is like Bluetooth or NFC but you did bring up another point. IOS 18 launch today and 1 of the cool features in iOS 18 is they have apple is for the first time opened up the NFC chip to third-party apps so. Under iOS 18 it would be possible for CVS to use that NFC chip to unlock the, the uh their their smart locks that would not have been possible in the previous operating system so that's a fun Commerce innovation, that came to uh Apple today, and I haven't seen any announcements yet but I'll I'll be surprised if we don't see some some cool evolution of some of the digital wallets to take advantage of that new feature as well. Scot [44:50]Pretty cool yeah so anything else before we wrap up that that you want to prep listeners for as we go into holiday. Jason [44:58]No no I feel like we covered a lot of ground again I'm I'm super sorry on my behalf and and Scott's behalf that we've been a little sporadic with the shows we really appreciate all the kind words people have, been sending our way and for sure I take it as a compliment that people are mad at me that we haven't been putting out shows so hopefully we'll we'll be able to find some good Windows throughout the rest of the year to get some, some shows out there I you know certainly want to do a recap after grocery shop coming up and we'll certainly want to cover holiday and maybe we can do some. Go old school and do some live shows from interrupt this year if we can get you to come to to New York Scott. Scot [45:35]Yeah yeah the we'll look at the weather and see how it goes. Jason [45:39]Yeah yeah yeah if if you're an investor in his fund use use that leverage to pressure him to do it. Scot [45:45]Hey that hurts. Jason [45:46]And if you're not an investor nurse fund why the heck not. Scot [45:49]Heck yeah between your fund.com come on aboard. Jason [45:52]Exactly well Scott that's probably going to be a great place to leave it if you're super ecstatic that we are back on the air feel free to jump on iTunes and give us that 5-star review we want to refreshen those up and. Until next time happy commercing.

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EP319 - Amazon Q1 2024 Recap

http://jasonandscot.com 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 Summary: In this episode, Jason "Retailgeek" Goldberg and Scot Wingo dive deep into Amazon's first quarter results for 2024, analyzing the company's performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon's business and provide insights into the company's future guidance for Q2 2024.

Amazon Q1 2024 Earnings Release
Amazon Q1 2024 Earnings Call Transcript

In our latest episode, Jason and Scott cover a range of topics, starting with their reflections on recent events such as May the 4th and Cinco de Mayo. Jason shares intriguing stories from his extensive travels and interactions with listeners worldwide. Scott delves into the intersection of e-commerce and the auto industry, honing in on Carvana. The duo also delves into the U.S. Department of Commerce retail indicators data, shedding light on trends in retail sales and e-commerce growth. The conversation pivots towards Amazon's recent earnings report, contextualizing it within the realm of AI investments by tech giants like Meta and Alphabet, offering valuable industry insights and analysis.

The discussion continues with a focus on Amazon's earnings report, zooming in on concerns around AWS amid heightened competition from Alphabet and Azure. The rising trend of AI investments, particularly in data training applications, is explored, alongside the growing popularity of open source AI models due to cost and privacy considerations. Despite a conservative Q2 guidance, Amazon impresses with robust revenue that surpasses Wall Street expectations, particularly in operating income. The retail segment shows exceptional growth, exceeding operating income estimates for both domestic and international divisions. Notably, Amazon's performance in brick-and-mortar stores, spearheaded by Whole Foods, demonstrates resilience with a 6.3% growth rate. AWS stands out with a 17% growth, dispelling market share concerns and showcasing accelerated revenue growth, illustrating Amazon's continuous growth potential and innovation prowess.

Scott delves deeper into Amazon's positive quarterly earnings report, emphasizing the remarkable revenue performance, especially in operating income. Insights are shared on Amazon's successful agnostic approach to LLM models and the potential advancements in generative AI. The conversation shifts towards the burgeoning ads business at Amazon, underlining its profitability and future growth prospects. Scot also outlines Amazon's Q2 guidance and the potential impacts of consumer spending patterns on the retail sector, including concerns about changing consumer behaviors and economic pressures shaping market dynamics. Jason complements the discussion with additional perspectives on consumer behavior and economic influences reshaping the market landscape.

Furthermore, we embark on a detailed exploration of supply chain logistics, with a spotlight on Amazon's expansion into third-party logistics services, revolutionizing traditional retail strategies by sharing proprietary capabilities for wider adoption. Insights from Andy Jassy shed light on Amazon's logistics business approach. The conversation expands to include how companies like Spiffy are embracing a similar model of sharing proprietary products to drive innovation and revenue growth, showcasing an evolving landscape of retail innovation.

The podcast unpacks the complex world of grocery retail, highlighting Amazon's experimental forays like Just Walk Out technology and the Amazon Dash cart, while examining the challenges in delineating Amazon's grocery sector strategy. A comparison is drawn between Amazon's strategies and those of rivals like Walmart and Target, who are adapting their product offerings to match evolving consumer preferences, offering a comprehensive view of the dynamic retail and supply chain management sphere. Dive into our engaging discussion, explore retail dynamics, and keep a lookout for more insightful content.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 319 of the Jason & Scot show was recorded on Sunday, May 5th, 2024.

Chapters 0:23 The Jason and Scott Show Begins 2:56 World Travel Adventures 5:53 Commerce Tools Elevate Show 6:53 Jason's World Tour Plans 7:22 Where in the World is Retail Geek? 20:43 Amazon's First Quarter Earnings 23:23 Sandbagging Strategy 26:45 Amazon's Dominance in E-commerce 27:44 Online Segment Growth Analysis 28:53 Offline Store Segment Analysis 31:35 Spotlight on AWS Performance 34:32 Data at AWS 42:02 Gen AI Revenue Growth 46:24 Consumer Pressure 49:56 Supply Chain Evolution 53:46 Leveraging Technology 58:08 Disruption in E-commerce 1:01:54 Amazon's Grocery Strategy 1:05:01 Retail Industry News Transcript Jason: [0:23] Welcome to the Jason and Scott Show. This is episode 319 being recorded on Sunday, May 5th, 2024. I'm your host, Jason Retail Guy Goldberg, and as usual, I'm here with your co-host, Scott Wingo.

Scot: [0:37] Hey, Jason, and welcome back, Jason and Scott Show listeners. It's been a while, but first, happy Cinco de Mayo, and also a belated May the 4th, Jason. Did you have a good Star Wars day?

Jason: [0:49] I did. I did. I feel like Star Wars Day always makes me think of the podcast because I feel like we have spent many of them in my latter life together.

Scot: [1:01] Yeah, absolutely. Any exciting new Star Wars experiences or merch?

Jason: [1:08] No, I understand you got some vintage merch. merch.

Scot: [1:13] It's not, but they, back when I was a kid, you would go and if you went every week to, I think it was Burger King, you would for the, I think it was Empire. I have the Empire right here. So definitely Empire, but you would get a glass. Now it turns out these were full of lead paint, which would kill you, but that was the downside.

Jason: [1:32] Not recommended for drinking.

Scot: [1:33] You got a very, yes, I never, being a collector, I never drank out of them. So that's good.

Jason: [1:37] Saved your life right there.

Scot: [1:38] Yes, but I did drink out of the Tweety Bird. So that me, me. I'm sure I got some yellow lead paint from a twitty bird glass. Anyway, so they came out with a Mandalorian kind of homage to those glasses and they were at the Hallmark store of all places, not where I usually hang out, but I got to go to a Hallmark store and the little ladies that worked there were, I wish them all an awesome May the 4th. And they looked at me like I was from another planet and it was hilarious. My wife's like, stop, they don't know what you're doing.

Jason: [2:07] Wait, they didn't have a big May 4th section in the Hallmark store?

Scot: [2:11] They did. The little ladies didn't know.

Jason: [2:13] The overlap of people that still buy Papyrus cards and celebrate May 4th is probably not great.

Scot: [2:21] It was very humbling. It was a humble May the 4th, but I got my glasses and I was happy. I'm happy for you. And then tonight we had tacos for dinner, so I'm hitting all the holidays.

Jason: [2:30] I feel like we should have tacos for dinner every night, whether it's Cinco de Mayo or not, but I'm i am happy for that.

Scot: [2:35] We do have a lot of tacos but this was a special single denial edition.

Jason: [2:42] Well, very well done, my friend.

Scot: [2:44] Thanks. Well, listeners of the pod have been all over me. They're like, why aren't you recording? And I said, it's not me. It's Jason. It's Jason. Because you have been traveling

Scot: [2:55] the earth, spreading retail geek goodness. Tell us, we are way far behind on trip updates and all the different countries. It's like you're playing, do you have like a little travel bingo where you're just like punching, what is it, 93 countries?

Jason: [3:09] I do. They call it a passport. Oh, nice. Yes.

Scot: [3:13] That, uh, little book that you get to carry. Yeah.

Jason: [3:15] Yeah. Yeah. Yeah. I have been on a lot of trips and it sounds like you and I may be telling complimentary lies because I also, I've had an opportunity to meet a lot of listeners in the last, we'll call it seven weeks and which they're always super nice. And it's always super fun to talk to people. And obviously they're, you know, strangers recognize my voice in line at Starbucks at all these e-commerce shows. And then we strike up a conversation. And then the next question is always, where the heck is Scott? Because they're always disappointed to meet me and not you. And now the new thing is, and why aren't you producing more frequent shows? And my answer is always that you're dominating the world at Get Spiffy and that you're too busy.

Scot: [4:00] Uh-huh. I see. Okay.

Jason: [4:02] Well, we're both very busy.

Scot: [4:05] You're traveling more than I am. I'm busy washing cars.

Jason: [4:08] Yes. I think both are fairly true, but I did finish a grueling seven-week stint where I got to come home a couple of times on the weekends, but I basically had seven weeks of travel back to back. In my old life, that would not have been that atypical, but post-pandemic, The travel has been a little more moderate. And I have noticed that I have my travel muscles have atrophied and I don't really want to redevelop.

Jason: [4:35] So the seven weeks was a lot. Please don't ask me for trip reports for all the commerce events because I kind of can't remember some of them. They're all a little bit of a blur. But I was at Shop Talks, I think, since the last time we talked, which is, of course, probably the biggest show in our industry. And that was a very good show. I did get to see a lot of our mutual friends and a lot of fans of the show there. So that was certainly fun. And maybe in another podcast, we can do a little recap of some of the interesting things that came out of Shop Talk. I did produce a couple of recaps in other formats for work clients, so we could certainly pull something together. I also went to a vendor show. One of the e-commerce platforms out there is called Commerce Tools, and they had their annual customer show, which is called Elevate in Miami. So I got a chance to go visit there. They're one of the commerce platforms that I would say is winning at the moment in the kind of pivot away from the old school monoliths to these new sort of SaaS-based solutions. And commerce tools in particular are kind of pioneers in pushing this actual certification around a more modern earned stack that they they coined mock. And I think I think we've had Kelly from from commerce tools on the on the podcast

Jason: [5:51] in the past to talk about that. But that was a good show. I got to meet a lot of listeners there. And a funny one, several listeners were like.

Jason: [5:59] I would apologize for the, the, our publishing schedule lately. And they're like, I'm cool with it. I like that. Like you don't do a show if there's not something worthwhile. And then, you know, when I do get a show, it's like a treat. So I don't know if they're being honest or not, but that made me feel a little better about some of our, our, our Tardis shows lately. So those, those were good events. I also spent a week in India with some clients and that super interesting, a lot of commerce activity going on there, a lot of different market dynamics than here. So that's kind of intellectually pretty fun to learn about and see what's working there that might be working here or what, you know, why things tend to play out differently there. So that's interesting. And then I have a lot more international trips booked right now.

Jason: [6:48] So coming up, I'm going to Barcelona, London, Paris, and Sao Paulo. So if anyone either has any favorite retail experiences in any of of those cities, please send them my way. I'll be doing store visits in all those cities. And if you're based in any of those cities, also drop me a line. Hopefully we can do some meetups while I'm out there.

Scot: [7:07] Cool. It's Jason's world tour. You can do a little pod while you're there.

Jason: [7:12] We have done a bunch of international pods in the distant past. I remember hotel rooms in South Korea and all over the place,

Jason: [7:19] Japan that we've, we've cut shows from. So, so totally could.

Scot: [7:23] Yeah. We'll have to do it. Where in the world is retail geek? That could be the theme song. I just sampled that.

Jason: [7:30] Yeah. So besides cleaning the world's cars, what have you been up to, Scott?

Scot: [7:35] Well, it's kind of funny. My worlds are colliding. So a lot of the analysts that you and I know from the e-commerce world are creeping into the auto world and their gateway drug is Carvana. So in the world of retail, we have Amazon, obviously. Well, Carvana is kind of Amazonifying used cars. They had a bit of a drama kind of situation. They were the golden child of online cars. And then they totally pooped the bed. They did this acquisition. They loaded up with debt. And then after, I think it was 21. So they had a good COVID. They surged. And then the debt got in front of them. Used car prices bop around and they kind of like got in an open door situation where they had bought a lot of cars for more than they were worth suddenly. And then they plummeted and everyone thought they were going out of business, but they have had a resurgence. So it's causing a lot of the internet analysts to now pick up auto tech or mobility or whatever you want to call it. So it was fun. I got to do a live chat with Nick Jones. He's been a friend of the show. I don't think we've had him on due to some compliance stuff that his company has rules around, but he's at this firm JMP and it was kind of wild to talk about, with someone about both Amazon and what we're doing at Spiffy, which is basically a lot of Amazon principles applied to car care. So it was interesting to have someone reach out and say, hey, I think this is a thing. And everyone tells me I should talk to you about it. And I was like, oh, yeah, I would love to. So it's kind of fun.

Jason: [9:01] That's very cool. And isn't it also a thing, I think half the vehicles on the road are now owned by Amazon. So I assume that's an overlap too. too?

Scot: [9:09] Yeah, not half, but a lot are. The number of last mile delivery vehicles are very, very large. And we work with a lot of them, so it's kind of fun. I started spiffy somewhat to get away from Amazon and still all I can talk about. Nope. So embrace it. I love Amazon. Love me some Amazon, Jason.

Jason: [9:29] I'm glad you do. I love them too, but I feel like I spend most of my career You're unsuccessfully helping people compete with them.

Scot: [9:38] Hey, got to play one side of the coin. It's a gig. You're going to be more like them or how to fight them.

Jason: [9:43] It's a gig. It is indeed. Yeah.

Scot: [9:46] Cool. I thought we are going to talk about some Amazon news. But before we jump in, you have done your magic with your data analysis interns. And I'm sure there's an LLM and an AI thrown in there. Let's start with some of the things you're seeing in commerce trends from the data that's out there.

Jason: [10:07] Yeah. So as everyone knows, I have a little bit too much of an infatuation with the U.S. Department of Commerce retail indicators data. And these guys, you know, publish monthly estimates of retail sales in a bunch of categories. And, you know, we've talked about this many times on the show, but broadly over the last several years have been really interesting in retail. 2020, 2021, and 2022 were the greatest three years in the history of retail. Like we mailed like $6 trillion in economic stimulus. People didn't travel or go to restaurants as much. And so we sold way more goods than ever before. And so those three years, retail grew respectively at like 8%, 14%, and 9%. The 20 years prior, retail averaged about 4% a year in growth. So normally pre-pandemic, you'd expect 4% growth. We had these three, you know, wildly pandemic influence years where we grew really fast. And then last year we finished a little below 4%. So, so we were around, I want to say it was like 3.6%. So it was growth. It would, it would have been in line with pre-pandemic growth, but it certainly felt like a significant deceleration from those heady pandemic years. And so, you know, people are super interested to see how does 2024 play out? Does it?

Jason: [11:32] Kind of return to pre-pandemic levels, like what is the new normal?

Jason: [11:37] And we now have the first quarter's data from the U.S. Department of Commerce, and I would call it kind of a mixed bag. If you just look at the raw retail data that the U.S. Department of Commerce publishes, they're going to tell you that retail grew in the first quarter 2.8%. So that's a little anemic, right? Compared to historical averages, that's not a great growth rate. Most of the practitioners that follow this podcast care about a particular subset of retail that the National Retail Federation has dubbed core retail. And so the National Retail Federation pulls gas and automobiles sales out of that number. And gas is a decent size number and it's very volatile based on the commodity prices of gas. And auto is a huge number that has, as you're well familiar, its own idiosyncrasies. And so that's how they justify taking those two out. And if you take those two out and you get this core retail number, retail in the first quarter grew 3.9%. So kind of to align with how the NRF talks about retail, we'll say Q1 overall was 3.9%, which is very in line with the pre-pandemic historic average. So disappointing by pandemic standards, but kind of traditionally what we would expect.

Jason: [13:05] What is unique in that number is.

Jason: [13:09] That it's very bifurcated. There are clear winners and losers, both by categories and specific practitioners. So if you break down the categories, e-commerce is the fastest growing chunk of retail. I'm sure we'll talk more about that. Restaurants were the next fastest growing categories. And categories like mass merchants and healthcare providers outperform that industry average, every other segment of retail underperformed the industry average. So things like furniture stores did the worst, building materials did really poorly, gas stations did very poorly, electronics did poorly, and side note, electronics have been the worst performer since the pandemic, which is kind of interesting and challenging. So you've had this weird couple categories doing really well, a bunch of categories doing really poorly. And then within the categories even, if you look at the public company's individual earnings calls, what you tend to see is a couple of big players performing really well in overall retail, that's Amazon and Walmart. And then a lot of other retailers really struggling. So that even that's like in general merchandise, it's Amazon and Walmart that are lifting the boats. And it's folks like Target traditionally that have performed really well are actually struggling at the moment. So the average is kind of hard to follow at the moment.

Jason: [14:37] But that is kind of how things play out. And then we have some preliminary e-commerce data, but the actual Q1 e-commerce number that the U.S. Department of Commerce publishes will publish on May 17th. So that's 12 days from now.

Jason: [14:53] And crunching the numbers that we have available at the moment, that growth is likely to come in at somewhere between 8% and 10%. I'm guessing more like 8% or 9% growth. And so that also is twice as good as overall retail, and it's more than twice as good as brick-and-mortar retail. But that is noticeably slower than the historic e-commerce growth rates pre-pandemic. So kind of file those two numbers away. The overall retail industry is growing at 3.9%. The overall e-commerce industry is growing at about 9%. And then we have our friends at Amazon that dropped their earnings announcement just before May 4th so that they could celebrate May 4th, I think.

Scot: [15:39] Yeah, yes, that's a good setup. And without further ado, let's talk about Amazon's fourth quarter. It wouldn't be a Jason Scott show without a little bit of...

Scot: [16:01] That's right. On April 30th, Amazon announced their first quarter results. And the setup coming into these, so you had the data you talked about, but like to drill in a little bit. We had Meta, the artist formerly known as Facebook, and Alphabet, the artist previously known as Google. They announced and they both basically told Wall Street, AI is the cat's pajamas and we're going to spend anywhere between $10 and $40 billion of capital expenditures on it, meaning NVIDIA chips. So it turns out the way to play all this is basically buying NVIDIA. So hopefully you bought some NVIDIA stock. Maybe this is not a stock recommendation or when it's too late, so... And also don't take stock recommendations from podcasters. Anyway, so there was all this angst and people were a little freaked out coming into the Amazon results because Meta was down like pretty substantially, 20 to 30 percent. And Alphabet was also up substantially. You also had Microsoft come in there and they really crushed it. Their Azure is really lighting it up with AI. And they announced that they were going to invest a lot. And there's this rumor that a $100 billion project, it's got a name like Starship or something, but it's not Starship. Spaceship? Stardust? I don't know what it is. But it's going to be this mega data center, and they literally can't find a place to put it because it's going to consume so much power. So they're going to have to maybe build a nuclear plant next to it or some wacky thing.

Scot: [17:31] Anyway, that was the setup. up. So coming in, Wall Street was very, very concerned about Amazon's AWS division, which is their cloud computing. Because if Alphabet is building out their infrastructure, and so is Azure, that's the two biggest competitors for AWS. And is AWS getting its fair share? And is it going to announce that it's going to have to go build some $40 billion kind of a thing? Also, another Another thing, and I'm kind of curious on if you're seeing this with your clients, but in the, I follow this, you know, the AI, you can't do much without seeing AI everywhere. But the part I'm most interested in is what are big enterprises spending money on? This is like your Fortune 500s. They're all experimenting and really getting into it. And where they're finding a lot of good use cases is training on their data. So they'll say, you know, hey, I'm Publisys. How many documents do you think are inside of Publisys? I don't know, 8 trillion documents. Documents and you know wouldn't it be helpful just the ones I created and who is this retail geek and he's he's created uh you know 90 of those and you know so you know imagine you're starting new at publicists you're gonna be like where do I start going through some of these documents for us and if you had a chat bot that was like hey I've read all that you know I can navigate you through everything that's been published or you know whatever I'm certainly you.

Scot: [18:50] Providing a very big metaphor, certainly be more divisional and all this kind of stuff. But that's where big companies are spending the bulk is they're taking their data in whatever format it's in, be it a relational database, a PDF, whatever it is, they're trying to train it. They don't want it to go up into the, they don't want to train the LLM so that other people get the benefit of that and can see any confidential data. So that's really important. So it needs to be gated in these types of things. Because of that use case, open AI is not great because people are very worried. A, it's very expensive and it's only an API. So OpenAI hosts itself and you call it through an API.

Scot: [19:25] Those API calls are very expensive. They're getting, as OpenAI has gotten more popular, there's more latency. It's taking forever to get answers out of this thing. And a lot of people are very concerned that even though there's ways to call the API such that it's in a window and not being trained, that maybe it leaks in there. So because of all these elements, the open source models are becoming very popular. And right around the time Meta announced, they announced their Llama, which has become quite popular. And what's nice is you can host it wherever you want. And it's kind of like WordPress, where if you are a serious WordPresser, you can host it somewhere yourself, and you can kind of understand that. Otherwise, there's other people that will host it for you. But it has the nice feature of you're just getting the weights and whatnot, and it's it's pretty clear, it's pretty obvious, it's not training itself on your data. So a lot of people like it because it's quote unquote free. It's not an API usage based. It's a pay once to set it up, pay for some resources type thing and you're done. And it's also not going to train on the data. That's one of many. There's probably 10 or 20 pretty commercial grade open AIs out there.

Scot: [20:38] Okay. So that's kind of the setup to get to the earnings. things. So from a big picture, this was a really good quarter. Asterix, the guide made Wall Street a little bit nervous. So-

Scot: [20:53] And one of our research analysts just said it's Stargate, which is also a sci-fi series. They must have that on Prime Video or something. There's probably some callback there.

Scot: [21:01] So they beat for the quarter Q1, but then they also kind of tell you what's going on the next quarter. Amazon doesn't provide fully your guidance. They just kind of give you a snippet. So when they report one quarter, a quarter, they then tell you what they think the next quarter is going to do. So Wall Street got a little bit ahead of its skis, and the guide for Q2 was below what Wall Street wants. So it wasn't what we'd call a beat and a raise, which is the current quarter was a beat and the next one they increased. It was a beat and a guide down. So that probably tampered Wall Street. But ever since Jassy came in, Andy Jassy, this has been his MO is to be pretty conservative because Wall Street's very much an expectation engine. And the more, if you can beat and tamp down expectations, it makes it, it's a little bit rougher in the short term from a stock price, but it makes next quarter better and then so on and so forth. So it's a smart way to manage the long-term vibe of the stock, the mindset, the expectations around your stock. Okay. So revenue came in at $143 billion versus Wall Street at $142. So pretty much in line. But most importantly, where Amazon really threw people off was on operating income. Yes, Amazon is profitable. This is the proxy for operating income. True Amazonians would tell you, no, it's cashflow. We can go into that, but this is kind of the way they report to Wall Street. So this is kind of the standard operating system, if you will. So this is what we're going to use, but it's a proxy for cashflow.

Scot: [22:28] That was 15 billion for the quarter and Wall Street expected 11. Well, you know, 4 billion on a world of 143 doesn't sound like much, but between 11 and 15, that's a very material beat. What is that? Like 38%, something like that.

Scot: [22:44] So that was a really nice surprise. And, you know, Amazon goes through these invest and harvest periods and everyone's been feeling like they're going to be back in investing which would mean they're going to start lowering operating income as they invest but it's actually kind of beating expectations, also this is the fifth quarter amazon has come in at the high end of its guidance or above its guidance since basically you know on operating income and that corresponds with when jassy came in so this is his mo right now is to kind of like beat and lower beat and lower you know exceed expectations tamp them down not get not get ahead of his skis and it's working really well.

Jason: [23:24] Sandbagging for the win. I like it.

Scot: [23:26] Yes, it is. Having run a public company, this is a lesson I learned painfully. So that's something we can talk about over beer sometime.

Jason: [23:33] I will book that date. Yeah. And the retail business sort of followed in line with that. They had like some nice growth, but like the real standout number was the improvement in margins and the significant positive operating income from the retail segment. So I think the actual operating income from U.S. Retail was like $5 billion and the Wall Street expectations were 4.3. So again, that was another strong beat. Total revenue, which revenue is not the same thing as retail sales, as we've talked about on the show many times, that we would use GMV as a proxy for that. But revenue was $86.3 billion for the quarter, which I think was in line with the analyst expectations.

Jason: [24:27] And I think this was the largest operating income that Amazon has ever reported for the retail business. So that was super interesting on the domestic side. Traditionally, domestic has done pretty well and international has been a money loser because, you know, they've been less mature. they've been investing a lot in growing international and they haven't had the same kind of margins. This was the first quarter that they reported positive operating income for the international division. So that's another super encouraging sign for investors that maybe they've kind of passed that inflection point on a lot of their international investments that they've made in the EU and Japan and the UK, which reminds me is not part of the EU anymore.

Jason: [25:13] So so they kind of beat beat international expectations across the board on income. Revenues were lower. So revenues were like thirty one billion dollars, which was below expectation.

Jason: [25:25] But they they earned like nine hundred million in operating income. And I want to say the the the Wall Street expectation was like six hundred million. So so again, like a 30 percent beat, which is pretty, pretty darn good. Good. They also, a bunch of analysts have, you know, taken these revenue numbers and they try to back into a GMV number. And I would say the bummer at the moment is there's a fair amount of variance in the estimates, like different analysts have different models. So I have kind of been putting to a model of the models together and trying to kind of find a midpoint. And like Like based on that, the Amazon's GMV globally probably went up 11.5% for the quarter. So if you're comparing this to other retailers or the U.S. Department of Commerce number, overall GMV went up 11.5%. The U.S. was stronger. So the U.S. probably went up at 12.2%. So again, we talked about core retail was up 3.9%. Well, Amazon U.S. GMV was up 12.2%. So, you know, three times faster growth than the retail industry overall.

Jason: [26:39] And again, Amazon is mostly e-commerce, very little brick and mortar,

Jason: [26:44] which we'll talk about in just a minute. But even if you're comparing Amazon to that e-commerce number, if e-commerce comes in at 8% or 9% and Amazon's at 12%, they're by far the largest e-commerce player out there and they're still substantially outgrowing the average, which, you know, is very impressive and should be very scary to every other competitor out there.

Jason: [27:08] One analyst kind of put together an estimate of what they thought the earned income contribution from Amazon was for retail and ads together, pulling AWS out. And they had it at $27 billion in earned income if Amazon was just a retail with no AWS. And that puts them right in the ballpark of Walmart that spent off about $29 billion in earned income or operating income. I keep saying earned, but I mean operating income. So, so that is all pretty impressive and simultaneously super scary.

Jason: [27:45] Scott, did you drill down into the online segment at all?

Scot: [27:49] Yeah. And, you know, what I would tell listeners is picture a block diagram where you have this big, big rectangle, that's the whole Amazon entity. And, you know, so what we're going to do is talk about the segments. And the first segment is the biggest one, which is the retail business. And that, that's what you just.

Jason: [28:04] Biggest and best. Wouldn't you say?

Scot: [28:06] Coolest.

Jason: [28:07] Coolest. All right.

Scot: [28:08] Cool. Okay. Yeah. Yeah. Okay. I'll, you know, I don't know.

Jason: [28:11] It is for you.

Scot: [28:14] Um, I think the whole enchilada, I like the, the way they do this and I'm trying to replicate it. It's 50. We'll talk about that in a second. The, so then the, you know, so then another segment is AWS, another segment, I think marketplace should be in some segment, but they don't break it out. So it's just kind of in kind of hidden inside of the blob that is retail. So we tease some of that out here on the show. They purposely hide it in there. So no one knows how awesome it is, I think. And then they've got AWS ads and a couple other things, but we'll talk about this. So as you dig into the retail business, there's a couple of ways to look at it. You can look at it by domestic and international, which Jason just did,

Scot: [28:50] or you can look at it by online and physical store. So the online biz grew 7% year over year, which if I remember your stats, well, you don't have it until may 17th so on may 17th we'll be able to know how that compared but probably the one you can compare is the offline biz which is the the store comp that they have, And Jason, you saw on that one, what'd you see?

Jason: [29:16] Yeah, so physical stores grew 6.3%. So again, like, you know, when we say all of retail grew 3.9%, a big chunk of that's e-commerce. Brick and mortar probably grew at like two to 3%. So Amazon's brick and mortar growing at 6.3% is actually super impressive. And it's kind of interesting, you know, for several years, Amazon has had experiments in a bunch of retail formats. So they've had these Amazon Go stores, stores. They had Amazon five-star stores. They had bookstores. They had a fashion store. They're trying all these things. And of course, the biggest chunk of their stores is they own Whole Foods. And so offline stores for Amazon was kind of a mix of all these different concepts. In the last couple of years, they've kind of cleaned house and gotten rid of all those concepts. And so, you know, nominally there's a few of their own grocery stores called Amazon Amazon fresh open, but the vast majority of online offline retail for Amazon is, is Whole Foods. And for it to be growing at 6.3% in the current climate is, is a really good sign for Amazon. And, and I would say somewhat impressive, you know, on the earnings call, they, they announced that they're working up a new format for Whole Foods, which is a smaller format store that's It's going to open in Manhattan. So I have that on my ticker file to go visit when that's open.

Jason: [30:38] You know, the whole grocery space for Amazon is super interesting, but maybe we'll talk about that a little bit more later. But I will call out, they did launch a service that there's been some controversy over. They launched a $9.99 a month grocery delivery service, which essentially lets you have all you can eat free grocery delivery to your home for an incremental fee of $9.99. And they're spinning that as, you know, a cool new grocery service and enable more people to shop for groceries online. And there are a lot of articles about it, like.

Jason: [31:13] They used to have free grocery delivery included in your Prime membership, right? And so they've kind of like, I look at the big arc of all this and say, there used to be a lot more free services in Prime that they've kind of peeled out. Then they started charging for, and now they'll let you get it free again for another $120 a year.

Jason: [31:32] So interesting things happening with grocery that we could probably talk more about later. But I'm kind of eager to dive into some of these other businesses like AWS.

Scot: [31:42] Yeah. So that's the one that everyone was really waiting on the call to hear how it went. And good news, AWS exceeded expectations. Everyone thought it was going to grow 14% and it came in at 17%. And if Wall Street likes, they like a lot of things, they like beating expectations, that's important to them. But their favorite thing is ARG. And that is not a pirate day thing, ARG. It is Accelerating Revenue Growth. Wall Street loves that more than anything. And that's what they delivered for both the ads and the AWS part of the business. And what that means is that as the law of numbers kicks in, so back on the retail business, the only time we see that accelerate is in the fourth quarter and that seasonal acceleration, right? We've gotten used to that for decades now. It always happens in the fourth quarter and whatnot. So it's what you would expect. But this is quite unusual for a relatively mature business. This thing's $25 billion a quarter. So this is a $100 billion business that accelerated. And so that tells us that there is a lot more wood to chop here. It has not gotten near its addressable market. And it really allayed fears that they were losing massive market share because they're, quote unquote, behind on AI to Azure, which is Microsoft offering, and then the Google hosting solution as well.

Scot: [33:05] That does not seem to be the case. So they did very well. So they came in at $25 billion and Wall Street was expecting $24.6. So that was really, that accelerating is what really made everyone very happy. And then the operating income came in at $9.5, way ahead of Wall Street at $7.5. So another pretty material 20% beat on this component at the bottom line. And this is really interesting. There was some really good language around this. And this has been Jassy's statement all along, and it's coming true. His early Amazon's early play was we're going to be agnostic on models and it's kind of like bring your own model we'll work with anything now with open AI they're not going to ever host open AI but they'll they're not going to stop you from working with it and then they for these open source ones they've made it very easy for you to spin up an AWS instance throw a little llama in there and I would make a llama noise if I I knew what they said I guess they make like a sheep sound. So you throw a little alarm in there and it does its thing. And, you know, the benefit of them being agnostic on these LLMs is most likely they have some or all of your data, right? Because they've been at this so long that if you're doing cloud computing versus on-prem, most likely a lot of, if not all of your data is in AWS. Extracting that data, you know, imagine you had terabytes or or what's the biggest,

Scot: [34:31] bigger than terabytes? I always forget this one.

Jason: [34:33] Petabytes.

Scot: [34:34] Petabytes of data at AWS. They literally have a product that they can send a truckload of hard drives around and get your data. That's how much data there is that you could never push it across the internet, that there's so much data. So if they have that data and that's what you want to train on, you don't want to have the latency of the internet between your data and the training. So you'd really need the LLM to operate near your data. And this is what they predicted two or three years ago, kind of around the, the, the launch of chat gpt when all this stuff really started to accelerate and it's coming true so everyone feels a lot better about that then their body language this time a lot of times they were kind of like this is what we're doing and we're pretty sure it's going to work now they're like it's working and people really felt relief around this because everyone there was a set of people that believed it but then you know open ai's pitches nope our lm is going to be we're spending, billions of dollars we're going to be so far ahead none of these open source things are going to keep up. If you don't have us, you're going to be so far behind, you'll be like playing with crayons and everyone's going to be playing with quill pens.

Scot: [35:42] So it was really good to see that this is not what's happening, that people are embracing, enterprises are embracing these open source models. They are in the same zip code performance-wise from results and much cheaper than OpenAI's offerings. And what Amazon said specifically was very positive around what is It's kind of abbreviated Gen AI for generative AI. And it's kind of a way to encapsulate this. And they said that it already is a multi-billion dollar run rate business. And you always have to parse what they say. So multi-billion can be anywhere between 1 and 9.9, right? And you'll see why I drew 9.9 there.

Scot: [36:25] And inside, as part of that big AWS number, and they believe it can be rapidly tens of billions. Billions so they're basically saying it's not double digit billions so it's a single digit million which is where i get one to nine point nine but they basically hinted that that it is growing so rapidly inside of there that it's gonna be tens of billions and this is why they saw accelerating revenue growth which made everyone happy it wasn't just people you know moving some more you know loads on or something boring loads around relational databases or something it was the juicy ai stuff so this got everyone so lathered up that three analysts did price increases and they cited that this was one of the reasons the biggest price increase was from sig susquehanna and they put the price up to 220. At the time all this happened the stock was at 175 and today it's around 185 so it's been up nicely but 220 is a pretty big big you know even.

Scot: [37:20] From where they expect that's where they're thinking i think most these guys look at a year to two years as a time horizon on these prices so and that's the the high i have you know again there's a wide range some people think it's going to go down some people think it's over price so go do your research this is not a stock recommendation but i just thought it was interesting that people get really really excited by by this whole gen ai largely the body language that, and it's, Amazon doesn't pound their chest much. So the fact they were, was kind of a new, new way of managing Amazon and Jassy's pretty conservative. So he must've felt pretty good about it, but also that they needed to ally, allay, allay, allay, whatever the right word is, get rid of these competitive concerns everyone's been talking about.

Jason: [38:05] Yeah. It feels like a pretty big prize out there. Jassy and the whole team always talk, Just AWS, even before you get to Gen AI, they always remind everyone, hey, 85% of the workloads are still on-prem. So like this, as big as AWS looks, if the long-term future is 85% of the workloads are on the cloud and only 15% are on-prem, there's a lot of headroom still in AWS. And then, you know, you add this new huge demand for AI on top of all that. And like this, it's almost a limitless opportunity. And I want to tie the AI back to retail, though, for just a second, because there's another bit of news that I haven't seen covered very much, but is super interesting to me.

Jason: [38:51] There's a particular flavor of AI out there, a subset of generative AI that's now being called agentic AI. And that's sort of a clever amalgamation of agent-based AI. And there's a very famous AI researcher, this guy, Andrew Ng. He's the founder of Coursera. He's done a bunch of things. He was the head of Google Big Think, which was one of the first significant AI efforts. And I want to say he was like on People Magazine's 100 most interesting people list in like 2013 as an AI researcher. So the dude's been around for a long time. He is one of the biggest advocates for this agentic AI. And the premise is that if you just ask an LLM, you take the best LLM in the world, and you ask it to do something for you, that's called zero shot. You give it an assignment, and you take the first result you get. It's a zero shot. You get pretty good results. But if you...

Jason: [39:53] Turn that, that LLM into multiple agents and break the task up amongst those agents and potentially agents even running on different LLMs, you get wildly better results.

Jason: [40:05] And so his, his research kind of showed that, Hey, if, if Jason goes write a PowerPoint presentation for his client, explaining what's going on in commerce. And I just give that to the turbo version of ChatGBT 4, I'll get a pretty good deck. But if I say, hey, I want to create four agents. I want to create a consultant to write the deck and a copywriter to edit the deck and an editor to improve the deck and three people to pretend to be mock customers to poke holes in the deck and have all those agents work on this assignment. I could give that assignment to chat gbt 3.5 and it would actually output a better work product than the the newer more advanced model was by by breaking the job into these chunks and so in retail you think about like this is the idea of assigning higher level jobs to shopping right so instead of saying like going to amazon and saying oh now it's a ai-based search engine and i'm going to type a long form query into search and get a better result.

Jason: [41:09] The agentic AI approach is I'm just going to say to Amazon, never let me run out of ingredients for my kids' school lunches. And the agent's going to figure out what is in my school lunches and what my use rate is for those things and what weeks I have off from school and don't need a school lunch. And it's just going to do all those things and magically have the food show up. And this is a long diatribe, but the reason it's relevant is is this dude, Andrew Ng, was named the newest board member at Amazon three weeks ago.

Scot: [41:40] Very cool.

Jason: [41:40] I did not see that myself. Yeah. And so if you're wondering where Amazon thinks this is going, like this, in my mind, ties all this tremendous opportunity in generative AI and the financial opportunity in AWS directly to the huge and growing retail business that Amazon runs.

Scot: [42:02] Very cool. Oh yeah. I had not seen that. So maybe Wall Street picked up on that. I'm sure. And maybe that was another part of the excitement.

Jason: [42:09] Yeah. But all of that is just peanuts compared to the real good business in Amazon, which is the ads business. So again, you know, Amazon used to, to obfuscate their ads business. They've for a number of quarters now had to report it as earnings because it's in their earnings separately, because it's so material. And it was another good quarter for the ads business. It's hard to say whether it's actually accelerating growth or not, because the ads business is very seasonal. So the ad business grew 24.3% for the quarter versus Q1 of 2023. Q4 grew faster. So Q4 grew at 27%, but the 24% growth is much faster growth than other... Q1 year-over-year growth rate. So however you slice it, it's a good, robust growth rate. If you add the last four quarters together, you get $29 billion worth of ad sales. There's lots of estimates for how profitable ad sales are, but there's no cost of goods for an ad, right?

Jason: [43:13] And so it's very high margin. So if you just assume, I think 60% gross margins is a very conservative estimate. But if you assume 60% gross margins, that means the ad business spun off $29.5 billion of operating income over the last 12 months. And to put that in comparison, AWS is big and profitable as it is, twice as much revenue at over $100 billion now, but it spun off like $23 billion in operating income. So the ad business is a much more meaningful contributor to Amazon's profits than even AWS.

Jason: [43:51] And another way I've been starting to think about this is what percentage of the total GMV on the Amazon platform are the ads? And they are now 6.5%. So that's a very significant new tax. You know, as Amazon has hundreds of millions of SKUs available for sale, no one's ever going to find your SKU or buy it if you don't do some marketing on the platform for that SKU. And that's this 6.5% tax that Amazon's charging. And in the same way we said, hey, AWS is a really robust business. And then there's this thing called generative AI that can make it even huger. All of this ad revenue we're talking about is really coming from their sponsored product listings, which is like basic search advertising on the retail platform. Last quarter, Amazon said, by the way, we have this huge viewership streaming video service called Amazon Prime. And we're going to start putting ads in the lowest tier version of Amazon Prime. So unless you want to pay more, you're going to start seeing ads on Amazon Prime. And that's another huge advertising opportunity that hasn't been very heavily tapped yet. So the analysts are pretty excited about the upside of Amazon potentially tacking on another $6.5 billion in Prime video ads onto the $50 billion of search ads that they already have.

Jason: [45:11] And so ads are a pretty good business to be in, which is why every other retailer is trying to follow suit with their own sort of version of a retail media network.

Scot: [45:22] Cool. I imagine you get a lot of calls to talk about that.

Jason: [45:25] Oh, yeah. I actually, I'm sick of talking about it. So one nice thing about working at an ad agency is there are now thousands of other experts. You know, I was one of the early guys in retail media networks. Now there are thousands of other experts that are way more credible than me. So I don't have to talk about it quite as much, but it still, still comes up in every conversation.

Scot: [45:43] Very cool. All right. So then that was the basic gist of the corridor from a high level. And then it came to the what's going on in Q2. So that did come in lighter than folks expected, as I said, and they guided the top line to 144 versus 149. Let's call it 146 and change at the midpoint. They always do this range kind of thing when they're doing their guide. And Wall Street was at 150 consensus. So, you know, a tidge below two or three percent below where they wanted. But the operating income guide was above Wall Street. So they're kind of, we'll take it. Como si, como sa.

Scot: [46:21] So that was, you know, I think Amazon tapping things down. Yeah. Now they did talk a lot about consumers being under pressure. So they said in the, it wasn't in a Q and a, it was in the prepared remarks and Jassy said it, which is kind of like the more important stuff. And I will say it's really nice to have the CEO of Amazon back on these calls because Bezos basically ditched them after, I don't know if, I think he came the first two quarters back in 97 but i honestly can't remember but he has not gone to the calls and jassy's been to them all so it's really nice to hear from the ceo and he answers very candidly i feel you know he doesn't feel as kind of like robotic as many ceos when they get on here because it is a stressful thing that you're going to say something wrong, but there was this exchange well first of all he he in his prepared remarks he talked about.

Scot: [47:12] I forgot to put the exact language, but he said, we're seeing a lot of consumers trade down. So they're seeing, you know, we're seeing this in the auto industry. Tires is this huge thing where it's under a lot of pressure right now because people are just waiting. So there's a lot of this, you know, it's not showing up in the data that I've seen, but there's, you know, maybe the inflation data, but not the GDP and some of the other unemployment data. But it feels like the consumer is under a bit of pressure here, and they talk about that a lot in the prepared remarks. So I thought our listeners would find that interesting. Jason, before I go into this longish little thing that I wanted to just cover, what do you, did you pick up on any of that consumer stuff? Are you hearing that?

Jason: [47:55] Oh, yeah, that's very common. And remember, in the beginning, I mentioned that there's this weird bifurcation that some retailers, even in categories, are doing well and others aren't. And some categories are doing well and others aren't. That's super complicated to get to the why. But the most obvious why is that consumers feel like they're under a lot of economic pressure and are trading down and are deferring certain types of purchases. The easiest way to see this is own brands and private label sales going up and, you know, national brand sales stagnating, see things like chicken protein going up and beef protein going down. You know, there's lots of examples out there, but the retailers that are best able to follow the consumer as she trades down are tending to do well. And the retailers that only cater to the luxury consumer, the super luxury is still doing fine. They're somewhat insulated. But the folks that haven't been as able to cater to the value consumer as much have struggled more. And the non-mandatory categories have struggled more. So Andy's comments exactly mirror what we're seeing going on in market dynamics and what other retailers are saying in their earnings. It is slightly weird because if you just look at the macros.

Jason: [49:18] It's objectively, the consumer is doing pretty well. There's actually a lot of favorable things, but there's a ton of evidence that the consumer sentiment is that they're really worried about their household budget and are making, you know, hard, hard financial decisions.

Scot: [49:36] Yeah. Yeah. It's tough out there. Well, hopefully it'll get better. So one of the questions I want to just kind of pull out some tidbits, because this has been a theme on our pod for a long time and I thought it was really, really interesting. And this is going to get into the weeds of supply chain and this kind of thing. So sorry if that's not your jam. We like to talk about logistics.

Scot: [49:56] Side note to you, Jason, I saw that deep dive we did on Amazon logistics is still like our number one show and all the stats and stuff, which is kind of fun. So someone cares about it. Anyway, one of the friends of the podcast, Yusuf Squally asked a question. He's one of the analysts and he said, as it relates to logistics, so he's talking to andy on the call back in september you launched amazon supply chain can you help us understand the opportunity you see there where are you in the journey to build logistics as a service on a global basis and does that require a huge increase in capex a function increase in capex which means huge so jesse said this was a very long answer so i'm going to pull out two snippets you can go read the transcripts can you put a link to that in the show notes absolutely yep yeah so so i'm just gonna give you the the snippet the whole thing is worth reading but it would be like another 20 minutes to do that. But so Jassy starts out and says, I think that it's interesting what's happening with the business we're building in third party logistics. And it's really kind of in some ways mirror some of the other businesses we've gotten involved in AWS being an example. And even though they're very different businesses, and that we realized that we had our own internal need to build and launch these capabilities.

Scot: [51:01] We figured that there were probably others out there who had the same needs we did and decided to build the services out of them so this is this model that really blows the minds of traditional retailers where you know so walmart has this huge data you know capability there's this this urban legend that they know when people are pregnant before they do they can see changes in their habits or they know who all is on weight loss drugs they they see your buying habits so intricately that they can do that that's a neat capability but they view it as proprietary and And that's old school thinking.

Scot: [51:32] What Amazon does is says, well, that's a cool capability. Let's certainly someone else needs it. Let's open it up. This is one of my favorite things at Amazon. And it's so counterintuitive that in my current car world, I talk about this and everyone's like, why are you, we're doing it a lot at Spiffy. And they're like, well, why are you doing that? That's like your proprietary thing. And we're like, well, that's just how it should be. And like, this is a better way to do it. And it's really interesting that still today, Amazon's built what I say, $100 billion business out of AWS, which has used this and people are, are befuzzled by the whole thing. So I, I thought that was an interesting use case. And then he, he goes into some details there that are pretty obvious for our listeners, like how this is gonna work. But then he basically kind of brings it back around and then he says he wraps up and says, I would say that supply chain with Amazon is really an abstraction on top of each individual block services. And in those services, he talked about all the things that, that, you know, FBA and last mile delivery and buy with a prime. He talks about each of those kind of and how awesome they are. So he's basically saying Amazon supply chain wraps a bow around all that. And it gives this collective set of business services is growing significantly.

Scot: [52:43] It's already what I would consider a reasonable size business. I think it's early days. It's not something we anticipate being a giant capital expense driver. So it's because they've already invested in all this that doesn't require additional capex. And then he finishes and says, we have to build a lot of the capabilities anyway to handle our own business. And we think it will be a modest increase on top of that to accommodate third-party sellers.

Scot: [53:05] But our, there's a typo in the thing. Our third-party sellers find very high value in us being able to manage these components for them versus having to do it themselves. And they save money in the process. So I thought that was a really interesting, interesting. So they're really leaning into this supply chain. I think that ultimately they'll open this up to more consumers where you can send Aunt Gertrude in Detroit something from Chicago for three bucks a package and just throw it in an Amazon box, maybe a return box, and it kind of makes it way cheaper than you can FedEx it. I think that's coming, but it's really interesting to see. The way they think about things and his articulation of it was very crisp,

Scot: [53:45] and I really enjoyed that. I was geeking out on that when I was listening to the call.

Jason: [53:50] Yeah, for sure. That actually came up in some of the conferences I was at that he, you know, Jeff Bezos famously wrote this memo a long time ago about kind of being an object oriented, company and having all these building blocks that people could easily access and use internally and externally. And, and that this was kind of Andy Jassy doubling down on that. Yeah. It's Biffy is an example of that. Like you inventing some cool products that make it your jobs easier. And then you're selling those products to, to your potential competitors.

Scot: [54:20] Yeah. So two examples, we have some devices we've developed for ourselves. One is a tire tread scanner. So it does 2D and 3D tires, tire tread scans. It's called Easy Tread. And we developed it for ourselves because we touch 3,000 cars a day right now and we wanted to measure the tire treads. And the state of the art is a Bluetooth needle. And it's, you know, you have to lay on your back. The cars are on the ground for us most of the time. So you have to like get underneath there, measure three things, and then it Bluetooths to a phone. Then you have to take it, the data entry, it doesn't have an API. Then you have to like take what it measured and then now cut and paste it into something else. It's kind of, kind of redonkulous in our world. So we developed a solution for that and we're selling it externally. And then the big, the big one is from day one, this has been the plan is we've built a ton of software for Spiffy. So we're, you know, we've got 400 technicians, 250 vans doing all kinds of services across the US and there's no operating system for that. So we, there's no like Salesforce for that or Shopify. So we had to go build our own. And so we've built, you know, route optimization specific to this parts integration, fitment integration, VIN lookup, all these things that are required integration with tire suppliers, oil filter suppliers, oil suppliers, parts suppliers, all these things. So we have like 150 things we've integrated with and pulled in from all over the place.

Scot: [55:44] And then labor management, all the reporting that comes along with it, all that stuff. And we're starting to license that out as its own platform to anyone that wants to do auto services. And so these dealerships and large auto service companies are coming to us and finally saying, this seems kind of obvious now that we need to provide the ability to go to our customers. They call it at their curb. They use a different language than we do. But basically what you and I would call mobile, you know, last mile delivery of the service. And we're starting to license that out. And it's a lot like AWS, right? So we had to build this for our retail business, which is doing the services and now we're licensing it out a lot AWS and we have this device business. So it's been, I would not have, it comes intuitively to me now. Cause I've been, you know, basically living this lifestyle for 20 years and watching Amazon do it, But it's been fun to kind of build a company with this mindset of we're going to take these things we build and give them to other, not give them, but sell them to other people. And then that makes them better. And they help us pay for all the R&D that we've done on it.

Jason: [56:48] Yeah, that's very cool. And that gives listeners a very tangible example of why we haven't been able to podcast quite as frequently as we'd like.

Scot: [56:56] Yes.

Jason: [56:56] I do, at the risk of making this the world's longest episode of our show, I do have a geeky add-on to the supply chain conversation. Yeah. So a lot of these services that they're adding to specifically what they call supply chain with Amazon are around importing services, because an increasingly high percentage of all the stuff Amazon sells is.

Jason: [57:20] Amazon is taking care of importing it, right? And most often from China, but from all over the world and taking care of all that logistics and getting it ready to sell and deliver via the world's most impressive last mile to consumers in America. And there's tons of complicated, high friction touch points and processes to flow all those goods. Well, the big competitors out there to Amazon at the moment that we've talked about ad nauseum on the show, like Shein and Timu, had this kind of direct from China model where they're putting all the goods on 747s, flying them over, and they're taking advantage of this loophole in the postal treaty called the de minimis provision to not pay taxes or duties or have all these goods inspected that they ship into the U.S. and U.S.

Jason: [58:07] Businesses have been complaining it's unfair. There's like all kinds of talk about it. We've done shows on this and I'm sure we'll do others. So here's the new thing in supply chain.

Jason: [58:15] All the people that have been complaining about this are now doing it because guess what's happened? A bunch of these companies have been born that now help every other brand in the world take advantage of the de minimis provisions to near shore their goods. So you're a footwear manufacturer, you make your shoes in Vietnam, Instead of shipping them to the U.S. On a pallet and paying taxes and duties, you ship them on a pallet to Mexico, and then you send them individual parcels across the border from Mexico into the U.S. and never have to pay taxes or duties on the stuff. So I don't know if that will last in the long run, but that's a very disruptive, significant change happening in the whole world of e-commerce supply chains as we speak. That's pretty interesting. Interesting. Had you gotten wind of that yet?

Scot: [59:07] No, no. That's all new to me. Thanks for sharing.

Jason: [59:09] Yeah. That's probably how you're going to have to start getting your spiffy stuff into the country now too. I won't, I won't, we won't go there. But the one other piece that did not come up in the earnings call, but a controversy around Amazon since our last show is news articles came out that Amazon was de-installing its Just Walk Out technology from its grocery stores. So Amazon had built Just Walk Out into several of these Amazon Fresh stores and they built it into Whole Foods. And if you know the history of Just Walk Out, this was the original intention of Just Walk Out was was to do it for grocery stores, but it was too hard at first. So they, they started with these little convenience stores and now they had scaled it up and everyone thought that was the future. And, you know, in the last eight weeks they announced, yeah, we're, we're uninstalling it from the grocery stores. It's not a good fit. And the articles that came out both started out saying that, but then they pretty quickly extrapolated from that to say, Amazon's giving up on just walkout technology.

Jason: [1:00:09] And it was a scam anyway. It was a bunch of, it was thousands of people in India that were just watching the cameras and doing the work. It wasn't really AI or technology doing it. And then Amazon had to quickly go into a PR spin cycle and they sent reps out. They're like, you know, guys talking on a bunch of podcasts about, no, no, no, we're not abandoning Just Walk Out. We just learned that it's not a good use case for grocery and all the SKUs and all the weight-based SKUs in a grocery store. So we still think there'll be lots of good use cases for Just Walk Out, but that's not gonna be the grocery innovation that we actually think the grocery innovation is the Amazon Dash cart.

Jason: [1:00:51] And the India thing just turns out that like when you're training LLMs, you do have humans look at the LLMs results to improve them, right? Like it's a natural, you know, appropriate part of the, the LLMs and Amazon was probably doing that, but they do have a lot of technology around these just walk out. But so it became this whole thing is Amazon abandoning grocery is Amazon abandoning, just walk out.

Jason: [1:01:16] Andy has made it clear. They're still going after grocery. He said in the earnings call that we're, you know, we're doing really well in growing at the non-perishable side of grocery, which is all he, he, he even mentioned this antidote. He said when the general merchants first started trying to get into grocery, which is code for Walmart, that Walmart started trying to sell groceries in 1990, that at first what they sold was shelf stable, non-perishable stuff, paper towels. And they got pretty good at that. And Amazon's point is we're really good at that and do really well at that.

Jason: [1:01:49] We're not very good at fresh, frozen and perishable yet. And we still have to figure that out, but we do have this new model, Amazon Fresh concept in Chicago called V2 and we like the results so far. And we'll hope to refine that and scale that one day. And it'll be interesting whether the unique value prop is dash cards. When the technology guys from Amazon said, hey, we're de-installing Just Walk Out, they kind of hyped up these dash cards, which are these smart shopping carts.

Jason: [1:02:22] I'm by no means I'm writing Amazon off as a grocer, but I am very skeptical and cynical about these dash cards. I live in Chicago, so I've been able to visit the stores that have them. And, you know, a typical store has six of these dash cards and they have 50 to 100 shoppers in the store. So it just, it, it doesn't, they're not scaling it to try to be, you know, a good solution for all the shoppers. And one of the main things you try to use a shopping cart for in a store is to get your 60 grocery items to your, the trunk of your car. And two problems with the dash cart is it doesn't fit 60 grocery items and you're not allowed to take it out into the parking lot. So I still think, I think there's some work to do still on the dash carts, but all this sort of came new ahead leading up to the earnings call this year. So I did, I did want to mention that, I don't know. Are you optimistic about Amazon Grocery, Scott?

Scot: [1:03:17] They haven't quite figured it out yet. I think they're still kind of lost. Seems like they're leaning in. The $9.99 thing is really just Whole Foods, right?

Jason: [1:03:28] No, it's unclear. Amazon delivers groceries from two models, from what they call Amazon Fresh and Whole Foods, and they put too much work on the consumer. The consumer has to decide in advance which one they're ordering from, and you can only get part of the products from each thing. Yeah, I hate that.

Scot: [1:03:44] It's like whenever I find stuff, it's split in there and I just give it. And then it's kind of like, what are you doing? And I'm like, I'm just trying to find stuff I want. And I want this granola and this thing. And it's like, well, you can't do that. I'm like, well.

Jason: [1:03:57] Yeah, you can only get that Hook's cheddar cheese from Whole Foods, but you can only get the Doritos from Amazon Fresh. And you didn't opt in to either of those. So it's confusing. It's a mess at the moment. And again, grocery is a huge part of retail and it's the highest frequency retail. So, you know, if you care a lot about knowing the data about consumers, you want to win in grocery. But it's it's also very different. Like Andy Jassy has said in past calls, we understand we're the only way to win in fresh and imperishable is to have a lot more product, a lot closer to customers. And that's why, you know, we might need physical stores. And Amazon has proven they're really good at fulfillment and these hub and spoke delivery models. They have not won at brick and mortar retail. And, you know, we were looking before the show, Whole Foods is a little bit bigger than when Amazon bought them. But, you know, Amazon hasn't really like, you know, poured gas on Whole Foods in any meaningful way either.

Scot: [1:04:57] Yeah. So they need to figure it out. Not a very day one kind of experience. Yeah.

Jason: [1:05:02] We'll have to do another show, but across the parking lot from Amazon, there has been some other retail news. A big one was, you know, Walmart's invested billions of dollars in healthcare clinics. And they announced this month that they're closing the healthcare clinics, which is super interesting. At the same time, Amazon is actually ratcheting up their pharmacy business. So they're now offering same-day delivery of pharmacy goods in two cities and expanding to six more cities. So that's the healthcare industry is really following all that stuff. We could talk about that. And one that I think every listener should follow really closely, Walmart launched a new owned brand this year. The biggest brand launch Walmart's done in 20 years called Better Goods, which is elevated premium food products sold by Walmart. We talked earlier about the consumer climate's really favorable to these higher value store brands. And if you look at the companies that are performing the best in grocery, it's the companies that own their own brands. It's Trader Joe's, it's all the... Costco's the largest CPG in the United States of America. Costco's bigger globally.

Jason: [1:06:08] Kirkland is bigger globally than Unilever. And so super interesting that Walmart is kind of making its first significant entry in that in a long time. And then the retailer that historically has been doing the best of that is Target, who's been struggling as of late. And what they launched most recently last month is a new brand that's competing with dollar stores called Dealworthy that has the lowest price point products that Target's ever offered. So we talked about the consumer being stressed and Target not necessarily having a good answer for that. This Dealworthy brand seems like their big effort to try to catch that value consumer that they historically haven't captured. So lots of stuff in this world of own brands, which if you're a competitor to Amazon, the best way to compete with them is to sell stuff that they don't have. So that's a super interesting space as well. We'll have to do a show about that coming up.

Scot: [1:07:01] Yeah. Yeah. Thanks for sharing that. We'll keep an eye on it.

Jason: [1:07:04] Yeah. And with that, we've blown past our allotted time. So people complain we didn't podcast enough. So we gave you two podcasts in one show.

Scot: [1:07:12] Yeah. Careful what you wish for, folks. Boom.

Jason: [1:07:16] But hopefully you enjoyed this and we still would love that five-star review. Again, if you live or have familiarity with any of those global cities I'm visiting coming up, please drop me a line. And thanks everyone for sticking with us. And thanks everyone for all the kind words and comments that we've both heard this quarter. Until next time, happy commercing.

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EP318 - Temu Deep Dive with Earnest Analytics

Episode Summary: In this episode, Jason "Retailgeek" Goldberg and Scot Wingo dive deep Temu, the online marketplace operated by the Chinese e-commerce company PDD Holdings, that has become the fastest growing retailer in history.

Joining us on the episode is Michael Maloof is the Head of Marketing for Earnest Analytics. Earnest works with world-class data partners to acquires, anonymize, and productize insight about the entire U.S. Economy. They have posted numerous insights about Temu in the US this year:

Feb 28: Temu’s 2024 Super Bowl ad blitz failed to accelerate growth
March 5: Temu is growing fastest among high income earners
March 12: Almost half of Wish, AliExpress customers shop at Temu

In this episode we cover who Temu is, how big they have become, who their customers are and what retailers they are likely impacting, their go to market strategy (and especially their marketing spend), the controversy around their use of the Global Postal Treaty, and some of their potential risks. We also explore where they could go next. If you're in the commerce space, you'll want to make sure you are up to speed on Temu.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 318 of the Jason & Scot show was recorded on Wednesday, March 13th, 2024.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scott show. This is episode 318 being recorded on Wednesday, March 13th, 2024. 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 and Scott show listeners. Jason, one of the topics that is coming up a lot this year, we talked a lot at a lot in our recap and our preview is Temu. By many measures, people think they're one of the fastest growing e-commerce companies in history. If you watch the Super Bowl, I think they spent $8 trillion on ads there. So we want to do a deep dive into this and cover a number of topics. We want to talk about a little background around Temu. What's it mean for U.S. retailers? And, you know, it's a Chinese company. Does it even matter? If yes, why? Because Temu isn't public and they are a Chinese company, they don't really disclose any information. So we wanted to bring on a guest that is basically a Temu expert. So we looked around and we found Michael Maloof. He is the head of marketing at Ernest Analytics. Ernest works with world-class data partners to acquire, anonymize, and productize insights about the U.S. economy. They have posted lots of articles. This is how we found Michael. I think you know him as well from the trade show circuit. So he's going to help us do this deep dive into what's going on at Temu. Welcome to the show, Michael. Michael? Michael: [1:59] Yeah, thanks so much for having me on the show. Big fan of your annual predictions and the work you guys do. So I'm head of marketing at Earnest Analytics. We're the leading credit card retail pricing and healthcare claims data provider for investors and retailers. Before Earnest, I was actually a tech and telco analyst over at Goldman. The two credit card data sets we work with now, Orion and Vela, are probably the most pertinent to my conversations about the consumer economy and certainly this conversation today about TMU. They sourced respectively from a large account aggregator, like a budgeting app, and part of a POS system in the US. And Ernest essentially takes these massive and messy data sets, normalizes structures, and then puts them onto our platform so everyone from portfolio managers to marketers can see this third-party data. For example, you'd see market share, competitive benchmarking, customer behavior, revenue predictions, and macro trends for thousands of companies, including TMU. Scot: [3:03] Awesome. Thanks, Michael. And then, so which sector did you cover when you were an analyst at Goldman Sachs? Michael: [3:08] Tech and telco. So anything in the tech space, we had a few marketplaces in there, telecom companies. It's been a while though. Ernest has been my home now for seven years. Scot: [3:20] Okay. Was this in the Anthony Noto era you were there? Michael: [3:23] This was in the vera rossi era she was my my lead where we recovered uh latin american tech and telco. Scot: [3:30] Very cool awesome yeah they did goldman did the channelizer ipo so i get to know the team there pretty well awesome well before we jump into the data which we're excited to kind of hear what you have to share here jason i know this has become a very hot topic in your world you you You spoke on it at NRF. In your day job, you're getting tons of questions about this. I think you're booked out solid with Tmoo briefings. So those people pay big money for it, and our listeners don't pay. Give us the free version of your backgrounder on Tmoo. Jason: [4:05] Yeah, thanks, Scott. And I'm sure we'll spice in some other tidbits as we go, but I'll try to give a concise bullet. it. Temu is a subsidiary of a company that used to be called Pinduoduo in China. It's now called PDD Holdings, which is infinitely easier to spell, by the way. And PDD Holdings is one of the largest e-commerce companies in China. On a market cap basis, they keep flip-flopping with Alibaba. So they're super competitive. They're way north of like $400 billion in GMV in China and had a really interesting trajectory, but a couple of years ago, they launched Tmoo into first UK and then US, now 49 other markets as a new retail concept. And so a couple of things I'd want folks to know before we dive in with Michael, first of all, the name is a loose English acronym for team up price down. So I always pronounce Tmoo as in team. [5:08] There are multiple pronunciations out there, even from Tmoo employees. So I'm not sure there's an official pronunciation. In the United States, they launched in September of 2022. So they're about 18 months old now. And most folks were not familiar with them until, a surprise, three months after launching, they bought a Super Bowl ad. So they became familiar to millions of Americans with the Shop Like a Billionaire ad that ran in the Super Bowl in 2023. And then as Scott alluded to, they bought five ads in the Super Bowl this year. So they haven't disclosed what they paid. A normal 30-second spot in the Super Bowl costs about $7 million. They ran four ads during the Super Bowl and one during the postgame. So estimates are in the kind of $20 to $30 million that they spent just on that ad. There's a bunch of estimates for how big they are in the U.S. I'm eager to hear what Michael thinks, but his old rivals at Morgan Stanley have them at about $16 billion in GMV in the U.S. But more interesting, Morgan Stanley estimates they're going to be $32 billion by 2030. So you think about a retail company that launched in September of 2022, and then in the first year, business sold $16 billion worth of stuff. That's the fastest growing retailer of all times. We do know from other sources that they get more traffic every year than Target. [6:36] They've been the most downloaded shopping apps on the Android and Apple app stores since they were born. So they've kind of owned the top of that list. And a couple other little interesting things. They are a marketplace. They have invented a model they call next generation manufacturing. So they're a marketplace. It's all three-piece sellers that are selling goods on Temu. But unlike traditional Western-based marketplaces, Temu does a lot more of the work, of listing the products and fulfilling the products for the factory. So they may, if you're a factory, they say the only thing you need is a cellular internet connection, and they provide you all the infrastructure to become a successful seller on Temu. There's somewhere between 80 and 100,000 Chinese factories that are currently sellers on the marketplace. And then one big innovation is this week, they're turning on the ability for U.S. Marketplace sellers to sell and fulfill their goods from the U.S. as well. So one interesting question about a marketplace is, are they competing for sellers with Amazon and Walmart? And now they're bringing that fight to American soil. So that, I feel like, is enough to get us started. There's certainly an interesting company that's worth following. [7:52] The way I originally discovered Earnest is through this show. One of our most popular guests, Dan McCarthy, has been on a few times talking about his his CLV methodologies. And our listeners have really enjoyed his his commentary. He has partnered with Earnest Data several times to do some really interesting analytics. And you guys at Earnest have published a couple of those as thought leadership. And so that's how I first met you. And then, Michael, I noticed you published like three articles on Temu this year. Michael: [8:22] That's right. Right. Teamio has been one of the top client asked for themes. It's definitely something we're seeing a lot in the press. We work a lot with those thought leaders as well. And that's something that we're getting a lot of questions on from everyone from business to fashion to Dan McCarthy. So glad to answer any questions there. We are kind of in a unique spot, kind of have the dashboard on the consumer economy, if you will. Basically what's going on within the last few days we can see everything from customer acquisition they have to their gross market merchandise value. Scot: [8:56] Got it let's let's start at the basics and let's pretend you know so i see Temu and you know it looks like they've got and you know one of my theories is it feels a lot like wish.com so it's really kind of cheap stuff slower ship going to what i would call value-oriented and consumers, you know, in your data, what, what kind of customer are, is buying this and then how fast do you think they are really growing? Michael: [9:22] Yeah, let me answer the second one first. Timmy's growing very quickly. Like you said, from late 2022 onwards, our data is showing double digit month to month growth, which is just explosive, right as it became a household name. In the first three months, for context, it had roughly as many weekly active users in the US as the largest fast fashion brand, Shein, and within 10 months had surpassed Shein in sales. And it had taken Shein years to get to that point. So really, a much shorter timeline. For an idea of size, about 18% of US households have shopped at TeamView since its launch. And in terms of GMV, in February, we saw about 1% of Amazon's US GMV. If you look at that, if you just break that out over the whole year, I believe in 2023, their net sales were something like over $500 billion. You're looking at around $50 billion in gross merchandise value moving through the service. But nevertheless, it's kind of not made really meaningful inroads with the largest online brands. I mean, it's still 1% in a good month. And that's actually decelerated since 2023. In fact, February of 2023 had fewer sales than January, despite the really heavy advertising spend you mentioned. [10:47] So yeah, there's some signs that the growth is kind of changing there. Mainly that retention is increasing even while this like... [11:01] New customer acquisition-based sales growth model is slowing down. TeamU's average customer lifetime value tracks higher than Walmart. And we're seeing customers becoming much more loyal. So that's an interesting kind of plus for them while sales in total are kind of hitting a lull. But yeah, let's talk about who those customers are too. It's definitely been one of the more interesting finds from our data. Despite the really low price points and that kind of gamified discount system, TeamView's US customer base skews middle to high income, actually. Sales among customers earning that over $190K, which is obviously very high up there, they're the fastest growing income bracket. And that's from May to January, May of 23 to January 24. So those sales to customers earning under $55K, like less than the median U.S. household income, that's actually the slowest growing. So today, about 44% of TeamU sales come from earners making over $130K. Not only do high-income earners account for the largest share, they're outgrowing. We just think that TeamU resonates mostly with customers with more disposable income. income, people who can afford to take a gamble on an item that might not work out. [12:27] You buy a floor mat for $5, it doesn't work. A middle high income person might just say, hey, it was $5 wasted, but the poor people don't always look at that. They're looking for a little bit more bang for their buck, can't afford that type of gamble. Yeah, it's interesting. Scot: [12:46] Cool and then you've you know you mentioned that they're you know basically their ltv is going up do you have any insight into why are they getting better at like maybe predictive analytics or recommendation engine or you know they see jason bought some gadget and then they they know he's now a gadget geek and they kind of start targeting do you have any insight into what's driving that that bump in LTV? Michael: [13:09] That's a good question. So I don't really have much insight into that. I try not to get out over my skis in terms of the data that I have available to me. We're looking at retention. We're looking for what's called a smile. Dan McCarthy talks about it all the time, which is over time as a company starts to bring back more customers that stopped stopped spending with them. And that's been pretty rare to see in e-commerce history. That's something they've managed to do. How they're doing that, I'm not totally sure. So it's definitely going to be the key for them to continue growing as new customer growth slows down, though. Scot: [13:52] Yeah. Jason, do you know? Jason: [13:54] Yeah. Well, so I don't know. I just want to point out that while Michael is wisely trying to not get over his skis, I live over my skis. So I'll tumble down the ski slope once again. One of the things I maybe should have said up front or maybe apparent to a lot of people is T-Moves marketing spend isn't just that Super Bowl ad. They're spending a fortune on digital ads and almost certainly losing a lot of money on every sale. So there's a Wall Street Journal article that came out this week that said that Temu or PDD overall spent over $2 billion with Facebook and was Facebook's largest advertiser. They're also Google's largest advertiser in the U.S. And so they're buying a lot of customers. And the the Wall Street Journal estimates that they're losing $6 on every sale. They're spending so much on customer acquisition. And so in that first year, they're doing a ton of marketing. There's a ton of people that never heard of Temu. They're acquiring those customers. They're getting that first order. [14:54] And, you know, a mini version of this is what Wish did until they ran out of money. But though it doesn't seem like there was a lot of evidence that Wish ever got traction, right? Like they didn't get those repeat orders. And what I think we're seeing And what I've seen in some of the data that Michael shared with us is that Temu very much is growing that LTV, getting repeat orders, even as the flood of digital marketing they're spending is sort of losing some efficacy as the law of large numbers kick in. And then I would also say Pinduoduo in China and now Temu in the U.S. Is very well known for their gamification. So they have lots of clever gamification mechanics on their websites, group buying, contests, gifts, one-time deals that are all like very carefully crafted to entice you to make an incremental purchase and to make an unplanned purchase. So I think all of those things appear to be working and then they hit you on social media with, you know, a huge spend, you know, right when you're, you're doom scrolling and expressing some, some purchase intent through your clicks. Scot: [16:08] Very cool. How about you, Michael, you mentioned this, this, this slowdown, which is exactly opposite of what I would have thought given the Superbowl ads. What do you, does the data show you anything there? Is it? Normal or like what what's going on. Michael: [16:23] Yeah i mean i don't know i don't know what would be normal for this company that's still up hundreds of percent a year but when i'm looking at at month over month growth which is the kind of the best way i can think to to look at it it is pretty remarkable there was some sort of a step change in august of last year where it went from growing double double digits each month to growing just single digits or down. The holidays, December actually was smaller than November in terms of their sales. And January was smaller still, makes sense. But February, also very challenged in terms of sales. I'm wondering if they're in a sort of spiral in terms of the new customer's first time kind of buying frenzy is over, or if this is a shift towards very purposely trying to get people in the door and they're just actually tapping brakes a bit on advertising spending. I'm not totally sure what this signals just yet. Scot: [17:35] Got it. Okay. Jason: [17:36] Is it safe to say that there's no clear evidence that spending $30 million million dollars on the Super Bowl had a super observable impact on their sales. Michael: [17:46] Okay. Yeah. So the Super Bowl. Let's talk about that. The million dollar question or $30 million question, I guess. The answer is probably not. There are a lot of ways to measure advertising effectiveness, as you guys know better than most. Brand awareness and net promoter score. But yeah, for a young company like this facing slowing new customer growth, I'd imagine they're looking to move the needle with each of these like big marketing events and the data just suggests that their multiple ads on February 11th had no meaningful boost in sales actually TeamU saw a noticeable deceleration in sales growth following the event actually kind of, like sales were significantly slower in the next few days. So unless they're measuring this on a much longer timeline, I don't think this investment was worth it. I think they would be better just plowing dollars into digital, wherever that is. Jason: [18:42] Yeah, it's super interesting. You know, obviously for listeners that don't know, my salary gets paid by those Super Bowl ads. I work for a big ad agency for which I'm very grateful. But the lot of controversy around our water cooler the day after the show. That was a spin that you rarely see. And in one metric, it clearly had an impact. There was a lot more discussion about Temu than any other company on social media the day after the Super Bowl. So the Super Bowl ads triggered awareness and conversation. I think they were the second behind Verizon, which had Beyonce, right? And so there was a lot of talk on social media. It was not all positive. There was a lot of discussion on social media, but people that hated the team who had the first time they saw it because it was sort of by Super Bowl standards, not a very high production animated ad. I think they made it in-house and they, you know, ran it with much greater repetition than audiences are used to. So it generated a lot of conversation that didn't necessarily translate to sales, at least that we can measure in the short term. And so that that's going to be interesting long term case study about what what these kind of, you know, splashy big reach audiences can and can't can't do. Right. Michael: [20:00] You know, I don't, again, skis and getting over them. It just seems like the outcome for them at this point should be a little further down the funnel. And I don't see how advertising spend like that will marginally get someone, persuade someone to buy a team you that wasn't already going to. It seems, yeah, it was a lot and there was no really movement in our data, either in new signups or in sales. I think there's some other research out that downloads are trending downwards or slowing down as well. We don't have that data, but I was reading elsewhere. So I think, Scott, this is maybe more to your 2024 prediction that people are realizing this is wish and slowing. and becoming less enamored or falling out of it. Jason: [20:52] No, no, no, no. Scott's predictions cannot be right. Scot: [20:55] Wait, if I hear that, you're pre-anointing that I'm right. Is that you're here in March, you're saying I was right with my prediction. Man, I'm good. Michael: [21:04] I didn't want to pick a side here, but I think people might be falling out of love with it, although it's not because it's not wish, it's because they're out wishing wish. We can talk to it a little bit. But I think people just realize Teamio is managing to disrupt Wish. And we can talk to the brands that it's disrupting. That's just one of many. It's got higher retention, bigger scale than Wish. But it does have the same limits as Wish and that this deep discount model doesn't have the big household brands that people want when they're making those everyday purchases that are slightly bigger, like the Tides and Cloroxes or the recognizable alternatives. There are just some things you don't want to replace and you don't want to gamble on. I don't think anyone wants to spend a dollar on detergent and see what happens. It's just going to be tough for them to scale at some point. I think the question we should be asking is if they've reached that point yet. I'm not sure. The sales growth slowing suggests they could have. But in the meantime, they are actually taking a wrecking ball to several other brands. So just because total sales is slowing doesn't mean the disruptive effect is slowing. Scot: [22:22] Yeah, let's go, Jason. Jason: [22:51] Because Temu is buying so many ads and driving the price on all those auctions up. So don't know if it's moving the needle on consumer impact or not, but it for sure is having an impact on their competitors, at least in that regard. Michael: [23:04] So you're saying maybe their goal is to just suck all the oxygen out of the room? Jason: [23:08] I'm saying that's potentially an unintended positive benefit. Mm-hmm. Scot: [23:15] Yeah, and you've teed us up there. Who is, is it retailers or is it more brands? Who's getting impacted by this? And kind of embedded in this question is, do you have an idea of the categories? Like if we looked at that pie of the 50 billion GMV, is it largely electronics? Is it apparel? Like what are the big wedges inside of there? Michael: [23:35] Yeah, well, so the great part about transaction data, it's really good at looking at brand disruption, or I should say retail disruption by brand. Not great at looking at the categories. You know, I don't see what an individual breakout of a credit card receipt is. I'm just seeing where people are spending. So I think that's the question I'm more equipped to answer. In terms of impact, some of the folks you think of when you think of mass market and discount retailers like Five Below and Walmart, the ones that you immediately want to ask if they're being disrupted, they seem like they'd have the most overlap. They've been pretty untouched, actually. Part of its overlap, only 19% of Walmart and Amazon's customers have even tried TeamU. And that's about the same as the total percent of US households that have tried it. substantially the whole country has made a purchase at Walmart and Amazon. So they're just not as at risk, maybe on the margins. But what we're seeing, I guess, next step up with some risk is the dollar stores. Dollar General, they share about a quarter of their customers with TeamU. And if you look at Dollar General's customers spending at TeamU, it's up over 800% year to year from January 23 to 24. Obviously, a super small base and flat. at Dollar General itself. [24:54] And then those TeamU customers who aren't, or those Dollar General customers who aren't TeamU customers, they're spending slightly up at Dollar General. It suggests that there's some impact. Again, not the biggest that we've seen. So I'd say like dollar stores kind of marginally. [25:10] This is not as supported by data, but just putting the data point together that the TeamU customers are spending less and TeamU customers are richer, you could come to the conclusion that Dollar General role is losing out on richer customers looking for deals a little bit. Maybe they're popping in for something they really don't want to spend a lot of money on, like a party, something like that. That's where the sales that they're losing is. Which actually kind of takes us to the last and biggest impact. Wish and AliExpress, as well as all those hobby lobby party supplies, like Oriental Trading. So I'll start with Wish. Their customers are just fleeing. I think there's no better way to say it. 50% less spend on Wish in January 2024 than January 2023, and over 680% increase at TeamU. That's just astounding. The Wish customer, once they try I, TeamU, they're done. It's game over. It's similar for AliExpress. And I think that what TeamU has really done early on, we need to think of them less as like an Amazon killer, and more as a brand that just came in to consolidate the existing demand for this deep discount online spending that these two, AliExpress and Wish kind of got off the ground in the US. [26:35] In terms of the hobby space, Oriental Trading, Hobby Lobby, Party City, they all experienced double-digit declines year-on-year in February among the customers who also shopped at TMU. And these brands, they're catering to occasional and discount merchandise. I think they're really going to struggle adapting to TMU. It's like I said, the person who doesn't mind throwing away $5, $10, $15 on party supplies if they don't work out. But it's a one-time thing anyway. way you know it's it's things that they're somewhat disposable items to these customers and very interchangeable got. Scot: [27:12] It i noticed you didn't mention amazon on that list is there is it there been an amazon impact or has it been. Michael: [27:18] That's great good catch pretty negligible just just like walmart they're just brands on those platforms at this point that you can't find at at these places i think when i say on the margins that's what i mean there could be hey, I need this small thing for my kitchen that I could get for $1 or get for $3. And that might be the sale they lose out on, but they're doing a better job of being one-stop shops. And I think with what we've seen, it doesn't seem like the business model is set to take on Amazon yet. Scot: [27:57] Got it. Yeah. Jason: [28:00] You know, a couple of things that come to mind. A, I think the dollar store thing is super interesting because historically dollar stores haven't sold very much online. Like, and, and, you know, usually their excuse is that, that super low price point discounted items don't work online. Right. And I, I think like in some ways I look at Temu and I say, they're actually the digital dollar store that did figure it out. Now. [28:25] It remains to be seen whether they can make money doing it in the long run. But it doesn't surprise me that those are some of the categories that are being disproportionately impacted. And I think you really hit something interesting on some of these everyday essential retailers that sell the brands that consumers are looking for and trust. [28:46] That, to me, feels like a different shopping occasion than the shopping occasion I think Timo is winning. Branding there's this whole new trend on all the social media platforms called dupes and you know people think of like knockoffs and forgeries where you you try to pretend you're a brand that you're not but dupes is a something different dupes is this is a very similar product to a name brand product but it it overtly is not the name brand product and it's a way better value and they're now these big cohorts of consumers that talk about their dupes and brag about their dupe finds and, you know, proudly make these, these dupe decisions. And it feels like those are the kind of things where, where Teemu's playing really well, where, you know, you're into, you know, crafting and you've, you know, there's some expensive machine, a cricket machine for cutting vinyl. And you say, oh man, I found a dupe on Teemu for 20 bucks, right? Like those Those feel like the kinds of occasions they're winning when you're willing to trade down for that no-name product and take a gamble versus when you know you want the Tide dishwasher soap. Michael: [29:58] I think that's a great point. They're taking advantage of the trading down phenomenon in general right now that a lot of brands are seeing, a lot of retailers are seeing. This is the perfect spot. I'll just go ahead and see if Temu has it. Maybe they will, maybe they won't. Scot: [30:15] Cool. One topic, and this is kind of a jump ball for you guys, is the, you know, I read a lot about this shipping model, and this was always Wish's kind of secret sauce is there's this, there's this like loophole in the postal code where if you send this something small, you know, it doesn't have any tariffs, number one. And then number two, there's like this really cheap postal rate, or I can't remember if China subsidizes it or it's free or we subsidize it, but there's some, there's kind of like double loopholes. There's a tariff one and a shipping one. And I've seen some noise lately about people wanting to kind of shut this down. Do you guys, either of you more expert on that than I am and have an opinion on if it's going to be sustainable or not? Jason: [30:57] I could certainly jump in there. So what you're talking about is there's this thing called the Global Postal Treaty. And it's a prearranged agreement between like 95 countries, 94 countries for how they'll deliver each other's mail. When you try to ship a letter from the U.S. to Germany, the U.S. Post Office is going to hand it to the German Post, and they need to know in advance how much the German Post is going to charge the U.S. Post Office to deliver that so that the U.S. Post Office can charge a rate in advance to you to deliver those things. So this global postal treaty is super valuable, and it makes it possible to cost effectively and, you know, with predictable rates, mail stuff all across the world. [31:41] Unfortunately, there's a couple of problems with it. There was the developed nations agreed that for less economically developed nations, they would have a preferred rate. So they would charge even less to deliver. The U.S. post office would charge less to deliver mail from a developing economy than they would from an established economy. And until recently, China was characterized as a developing economy, which is probably not accurate. And then the Postal Treaty specifies a dollar limit that it only is in effect for packages under a certain value. And so this is called the de minimis clause of the Postal Treaty. In the United States, the threshold is $800. So when Temu ships something to a consumer in the U.S. that costs under $800, they get a predetermined rate from the U.S. Post office, which is often cheaper than the rate to mail something from one part of the U.S. to the other. And Scott, per your point, there is no tariffs charged on that item and there is no import inspection on that item. So, you know, normally when we, you know, if a U.S. Retailer imports a container of goods from China, there's all kinds of inspections to make sure that the factory in China met labor standards and, you know, met environmental standards, and then they pay tariffs on all that. [33:08] The team who hands one package to the U.S. post office, they they get to bypass all that, which, you know, is, of course, controversial. No one wants to get rid of the Global Postal Treaty or even de minimis. But what they're saying is that the U.S.'s 800 hour threshold is probably way too high. Like China's threshold for reciprocation is something like forty dollars or something. So you could you could put a big dent in Temu if you just lowered the the threshold. And so there's There's, you know, noise in Congress about trying to change that limit. I would say that, you know, it is an unfair advantage in many ways, and U.S. Companies are certainly right to complain about that. [33:51] I would say that Temu is different than Wish. Wish took advantage of this cause. Temu takes advantage of it way more effectively, right? So Wish sold, you know, was a marketplace, and they had a factory sell something to an American consumer. And then it was up to the factory to get it to the American consumer. So the factory had to have their own postal account. And then they, you know, had to trigger this postal treaty. And there was no shipping confirmation. And often Wish products took a very long time to ship and a very long time to arrive. As part of this next-gen manufacturing model that Temu has, they do all that for the seller. And it uses Temu's postal account. And they expedite all of these things. Most of these goods get air freighted to the U.S. and put into the U.S. postal system. So while Wish items would have averaged three or four weeks delivery time. [34:46] Temu normally averages like five to seven days, and they almost always outperform their shipping promises. And in fact, they even have a guarantee. They give you $5 back if the package arrives late. So, you know, part of the reason that I don't think they're just purely Wish 2.0 is they actually do have a better, more reliable shipping experience than Wish. And they actually more effectively take advantage of this postal loophole than Wish ever did. Scot: [35:18] Yeah. And Wish took the proceeds of their IPO and built out some fulfillment centers. And they almost did their own version of that Amazon dragon boat or whatever that was called. Has T-Mood signaled they're going to do something like that where they have, you know, even more? Jason: [35:32] Yeah, they already have in some. So they're in 49 countries now. So they do have D.C. fulfillment centers in some of those countries. They've actually talked about opening a fulfillment center in Mexico for delivering goods in the western U.S. And so so they are talking about that. But then this other big thing is starting this week that a U.S. Seller could list their goods that, you know, the goods are already in a warehouse in the U.S. that US seller could list their goods on Temu and then deliver those goods from a US fulfillment center. So that's a potential way to get much faster delivery times for Temu. And we've already seen some badging. Temu has items with a rapid ship badge that are guaranteed for two-day delivery. So it does seem like Temu recognizes that over time, their fulfillment model is going to have to be more nuanced than just the the individual parcels uh coming one at a time but but you know that still seems like the the sort of biggest foundation of how they're delivering all these goods got. Michael: [36:36] It um the minimus though i can't imagine that much they would change would really have an impact we're seeing average ticket prices at 38 last month for for timmy like are they thinking thinking of reducing it by that much or. Jason: [36:52] So, I mean, a just talking about way over our skis, like my, my political acumen is very poor, but yeah, I don't think Congress is gonna do anything. I think like at most they'll have a, a hearing and try to look like tough guys talking about how unfair it is and how they're gonna try to protect the American businessman and the American consumer. And then when push comes to shove, they won't, they won't do anything, which is my, my cynical nature. But you're right. Right. Nobody's talking about dropping the de minimis low enough to to, you know, really trigger the bulk of these these Temu shipments. So it's it's more likely if they made a change, it would be a gesture, not like, you know, some some game changing thing. Now, you know, there's another big Chinese company out there, ByteDance, which is TikTok. And like there there is a bill going through Congress right now to ban TikTok. And so, you know, if something like that were to happen with, with a PDD or Temu, you know, that, that would of course, you know, be a, a big threat of a disruption. Scot: [37:54] Yep. And then on that example you gave, Jason, of a U.S. seller in a fulfillment center, is that Temu's fulfillment center or the seller's fulfillment center? Jason: [38:04] The seller's fulfillment center. So potentially what would be one of the ironies of this is, of course, as Amazon has expanded their fulfillment services, you could be an Amazon seller, be using FBA, and sell something on Temu and have Amazon fulfill it for you. Scot: [38:20] Yeah, Wish did something like this. What we found was the U.S. Seller struggled to get things in the price point that consumer wanted, right? It's like it's such this low quality stuff that almost has to be offshore for even to the manufacturer. Jason: [38:36] Yeah, I think you are 100 percent right there. I don't think they're going to like we don't know what the uptake is going to be on these U.S. Sellers. It's an interesting talking point, but it doesn't seem like there's going to be a bunch of U.S. Sellers that are going to likely participate in this like low price dupes demand that they have today. Now, what would be interesting, Pinduoduo, I mentioned, which is a huge, huge entity in China. Pinduoduo started with this same stuff. They started with really inexpensive marketplace goods. And as Pinduoduo got bigger and more established and won the hearts and minds of Chinese consumers, they moved up market. They started selling brand name stuff. They started selling higher quality stuff. And today they're a hybrid seller. PennDuoDuo in China sells their own goods in addition to marketplace items, which I've never seen before. Usually it always goes the other way. And so there's at least a premise that like maybe the U.S. sellers don't like add to the current assortment, but maybe the U.S. Sellers help Temu round out their assortment with some higher price point, you know, more recognizable goods for the U.S. consumer that helps them win more wallet share. Scot: [39:49] Interesting. Cool. We're running up against time. Do you guys have any other topics you want to hit before we call it a show? Michael: [39:58] No, I think it's fair. You know, I already mentioned one of your predictions. I should talk about the other one. Just to pick on Jason for a second. I don't think we'll make it to the 75% of target USC comm this year for Temu, Jason. Sorry. It's like a stretch. Scot: [40:17] Man. How do we get Michael on the show more? Like, I'm really enjoying this. This was a really good guess. Jason: [40:24] I feel like you're calling the winner of the Super Bowl in the first quarter, man. Come on. Michael: [40:27] Okay, well, I'll just put it this way. At 18% of the US households, three months into the year, it seems unlikely at their current growth that they get there. My view basically though, writing this, is that they've done a great job in the first year of attracting folks with a lot of disposable income to buy things that they likely wouldn't have bought anywhere else, like party supplies, household goods. It's maybe a different model than they they have in China. The challenge for them now, you guys both definitely identified this, that it's basically to convince people to switch everyday spending from Amazon and Walmart on those bigger items. And they don't have the assortment right now for that. And that's what you're mentioning. They need to either move up market or figure out what that assortment looks like. But that's going to be a bigger hurdle. They're reaching critical mass. They just have some decisions to make internally at this point. Jason: [41:17] Yeah. Well, in general, I feel like that is going to be a great place to leave it for this show because we have run out of our allotted time. But Michael, we really appreciated your insight. We'll certainly have you back. I know your view of the U.S. economy is useful for a whole bunch of topics that come up frequently on the show. But as always, if listeners enjoyed this episode, I hope you will jump on iTunes and leave us that five-star review. Scot: [41:46] Thanks, Michael. And this has been really good for Jason's ego. So I feel like you've knocked him down a couple of pegs. I appreciate that. And then if folks want to read more about your writing or connect with you, is LinkedIn the best place or are you more active on TikTok? Where can people find you? Yeah. Michael: [42:04] Michael Maloof on LinkedIn. I'm always posting a lot of Ernest data on there. And then also on our company blog, ErnestAnalytics.com. Go to the Insights blog and subscribe. Jason: [42:17] Yep. And I will put links to both the team new articles you guys published and your LinkedIn in the show notes. Michael: [42:23] Thank you. Jason: [42:24] Until next time, happy commercing!

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EP317 - Amazon Q4 Results

Episode Summary: In this episode, Jason Goldberg and Scot Wingo dive deep into Amazon's fourth-quarter results for 2023, analyzing the company's performance in various segments such as retail, offline and online sales, marketplace, AWS, and advertising. They also explore the impact of AI on Amazon's business and provide insights into the company's future guidance for Q1 2024.

Amazon had a strong Q4 earnings report, beating analyst expectations for revenue and income. In fact, it was Amazon's most profitable quarter ever.

Retail sales were up 6%, which imputes a 2023 GMV of $515B - $660B in the US for all of 2023. The bottom end of that estimate would be a 9% growth over 2023, versus all of Core Retail in the US (x Gas and Auto) which grew 3.6% in 2023. This impressive growth was achieved while Amazon improved delivery times (6B packages delivered next day, and 1B delivered same day, same day offered in 110 metros) and reduced cost to serve by $0.45/package in the US (the first reduction in cost to serve since 2018).

AWS accelerated growth but slowly declined margins.

Ad revenue was again the brightest spot, growing 27% to $14.7B, resulting in $47B in revenue the last 12 months, and a $58B run rate. The income generated from that ad revenue was likely more than $27B, far in excess of the $21B Amazon earned from AWS. Once again demonstrating that Ads are Amazons biggest income generator.

Amazons total GMV in the US likely falls in-between Walmart's expected 2023 GMV of $442B and Walmart plus Sam's Club total US GMV of $519B. Walmart reports it's Q4 on Feb 20.

Amazon probably represented 24% of ALL retail growth in the US in 2023. Amazon, Walmart, Temu, and Shein alone likely represented 49% of all 2023 Us retail growth (leaving mostly crumbs for the rest of retail).

Amazon also announced Rufus, a new Gen AI based search amenity for the e-commerce site.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 317 of the Jason & Scot show was recorded on Wednesday, February 7th, 2024.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scott Show. This is episode 317 being recorded on Wednesday, February 7th, 2024. I'm your host, Jason Retail Geek Goldberg, and as usual, I'm here with your co-host, Scott Wingo. Scot: [0:38] Hey, Jason, and welcome back, Jason and Scott Show listeners. Jason, we've been talking about ARVR since before shop.org changed its name. And did you get a vision pro and how is it i. Jason: [0:57] Did not i feel like i've let you and our listeners down i desperately wanted to lie and say that we were recording this episode through our joint vision pros i did i did go do a demo and it it seems super cool i am sorting through my my highly poor vision to see what sort of corrective lenses i'll need to put into the thing, to pull the trigger. I heard yours has arrived though. Scot: [1:24] Yes, mine actually just came hours ago here to Jason and Scott, North Carolina headquarters. And it is sitting in a box staring at me. And I figured I would not get the show notes done if I started playing with that. So that's gonna be my weekend fun that I'm gonna work on. So I'll report back on that. Jason: [1:42] All of us that love you are slightly sad because we've seen your real eyes for probably the last time in a long while. Scot: [1:48] That is true yep yep these baby blues are going behind the goggles and i'm gonna drive the first thing i do is get in my car and drive that seems to be what everyone does on twitter so that'll be fun yeah. Jason: [1:59] That sounds wildly safe. Scot: [2:01] Yeah well you can see right through them so it's totally fun yeah. Jason: [2:05] No you can't. Scot: [2:09] Just kidding everyone do not do that at home and if you do blame jason Yeah. Jason: [2:13] But again, the Tesla is perfect self-driving anyway. So what, what would it even matter? It's like, I feel like you have multiple layers of AI overlords protecting you, Apple and Tesla. What could go wrong? Scot: [2:25] Yeah, it is not perfect by any means. Jason: [2:29] Yeah i'm glad we caught you i feel like there there's been a lot of travel and it's i know you you have kind of stepped away from the hustle bustle but i'm right in the middle of uh retail trade quarter trade yeah yeah. Scot: [2:41] How's that going you did so we haven't been able to catch up since you've done nrf i saw you were like posting like a wild man seems like you had a very active big show how was that. Jason: [2:51] Yeah it was pretty good i would big show is definitely back it was the largest attendance ever. There were over 40,000 people. So it was very robust. A lot of good, good conversations. I do have a lot of content out there. If anyone wants a deep dive recap, you can go find my recap on YouTube, but maybe we'll talk more about it later because we have such a meaty episode just talking about Amazon. But last week I got back from like, frankly, a more fun event then big show. Our friends at Commerce Next have a new show that they call their Digital Leader Conference. And it's kind of a small little gathering of like 50 digital leaders at a resort in Del Mar, California, exactly where I grew up. So I went and drank wine and talk shop with a bunch of folks and the Commerce Next team in San Diego and had a great time nice. Scot: [3:49] Did you have some say in where it was hosted you're okay i. Jason: [3:52] Did not um i think people were tired of hearing me say this but this is like a fairmont resort it's gorgeous but it was built on like what used to be like these trails behind my high school and i kept you know regaling everyone with how i probably thrown up all over this this facility from all the the runs our soccer coaches used to make us do there. Scot: [4:14] Nice that's a good pitch yeah. Jason: [4:16] Nice visual for all our good uh good podcast listeners uh and then i have two shows coming up so the end of this month is etail west which is usually a pretty good show in palm springs we'll probably be uh corralling a couple interesting podcast guests uh from that show and there's kind of a shop.org board reunion There was an actual shop.org board reunion that you and I missed that was last month, but there's like six former board members will be at ETL West. So we're going to get together and have a little catch up there. And then less than a month after that is our Shop Talk in Las Vegas. Scot: [4:59] Fun. Yeah. Have you had an opportunity to see the Sphere? Yeah, I have. Jason: [5:04] I have. I have not been in the Sphere, but I have gone by it. Hopefully, I'll be prominently featured on it for Shop Talk. Seems like that would be appropriate. Scot: [5:14] Yeah, yeah. That would be fun. Get a picture of you on this here and then go inside. Everyone says it's an amazing show inside of there. Jason: [5:20] Yeah, yeah, yeah. I definitely want to check it out when time permits. Scot: [5:23] Cool. Are you speaking at either of those or just all of you? Oh, wow. Are you seems like a part of your your 2024 New Year's resolution is to talk about Sheehan and Timu. Are you going to be doing that that whole dog and pony over there? Jason: [5:39] Neither of my sessions are specifically on that. I'm sure I'm talking about it a lot in the hallways. It's coming up a lot. It's probably spoiler alert going to come up again in this Amazon earnings call. Scot: [5:52] Yeah and we've got the super bowl this is like we're annualizing the big timu reveal and so it'll be interesting to see if they i guess they've actually said i think it's an article that said they're coming back in a big way so yeah. Jason: [6:03] They bought a second ad so. Scot: [6:04] They will they will be back on a few have you seen like a super secret version, uh i cannot say oh okay oh okay oh all right exciting well it would not be a jason scott show without some Amazon news. And this whole episode is essentially Amazon news. We are going to do a Amazon fourth quarter earnings deep dive. That's right. On February 1st, Amazon announced their fourth quarter 2023 results. The setup coming into this one was we had Microsoft announce really solid cloud results that was largely driven by AI. People are moving their workloads to Azure and they are doing that to get their data over. And due to Microsoft's partnership with OpenAI, that has been a really nice big draw for their cloud offering. Then we had Meta announced, the artist previously known as Facebook, and they had tremendous ad performance, largely driven by AI. Long-term listeners will remember Jason and I, I'm pretty sure we're some of the first to call the impact of this thing called ATT and IDFA, Am I remembering that? You nailed them. Jason: [7:24] Yeah. Scot: [7:25] Yep. And that just really, that was like, what, four years ago, three years ago? That walloped Facebook, Snap, and all these companies that their ad system relied on cookies and third-party data. data. Facebook slash Meta has kind of come back from that and they credit it to AI systems they've used that have really driven the optimization of their advertising products and made the targeting basically nearly as good as it was when they had more precise targeting. Then Google was kind of like had a bit of a rough patch there. I think it's hurting them. They don't really disclose much about youtube and it probably did okay but their ads were kind of flat and their cloud computing did not see the benefit that that microsoft did and there's a growing concern there's more and more folks and some data coming out that shows that people are starting to use ais for interesting searches versus google i do find we were talking about it before we got got on here, I am using it more and more. For example, I was telling Jason, I found OpenAI slash ChatGPT announced this little, it's not a store, but a... [8:39] Add-ons or like almost like an app store but it's called gpts and i found one that enables me to load a bunch of pdfs on a common topic and then just like ask chat gpt about it and yeah so so i found i'm using it more and more for informational queries just generally and then also for things like that like research for work and and for the pod and so i think i think there's a growing concern that google is watching this ai thing kind of like run away from them and there's There's growing talk that they're stuck in an innovator's dilemma. So that was the setup. And the market was kind of nervous coming into Amazon earnings because a big chunk of Amazon is the cloud, which is their AWS segment. And then folks, we really didn't have any great idea how their holiday sales were. And then last, that Google piece made people a little nervous about the ad business, which has become almost a third leg to the Amazon stool. tool. So, and then as you keep kind of pointing out, Timu and Sheehan are just like really on the rise and could they, you know, you also have said, I don't want to put words in your mouth, but you've said, you know, you don't think they're being impacted by it too much. That is some other folks. But, you know, there's definitely overlap there. So people worried, are those up and rising stars going to be the Grinch? So we're going to walk you through that and peel the onion. [10:01] We're then we're going to go into how the retail offline and online did and then marketplaces cloud AWS. And that's where we'll talk about AI. You can't talk about anything now without talking about AI. So we'll hit that and then Amazon ads and then kind of finish up with how Amazon guided to next quarter, which will be Q2 Q1 of 2024. Anything you want to add in that setup before we jump in? Jason: [10:28] No, I think you've queued it up well. I'm eager to hear how Amazon did. Scot: [10:32] Yeah, well, it is what in the Wall Street world we would call a beat. So they, you know, back in Q3, they set some guidance and they beat that on the top and bottom line very handily. And then I would call it a raise. It was kind of a slight raise. They raised the range. Amazon has gotten very good, especially in the Jassy era of not getting too ahead of their skis on expectations. Expectations so but now that we're you know a fair amount into the Jassy area Wall Street's starting to get his number so now Wall Street's not really believing the guidance it's kind of interesting phenomena that we'll talk about when we get to that part but that's you know if we're going to characterize it it was a win and a win so it was a win on the pass quarter which is Q4 and it was a win going into Q1 and you know Amazon historically if you've been following it as long as jason i have they go through these periods of what i call invest and harvest so they'll invest and invest and invest everyone's like gosh and then people think all right there's no way this thing's going to be either profitable at all or as profitable as it once was or whatever it is they start to lose faith and then amazon goes into a harvest phase and then they just print money and it always surprises people and they're able to do that and that's what what But this quarter really is kind of the –. [11:49] Output of focusing on that a lot in 2023 where they kind of had this post-coveted hangover they had overbuilt a bunch of stuff and now it feels like they have righted that they've stopped a lot of the things that since jesse came in that maybe were investment areas that they shouldn't have been investing in and and they've got a lot of discipline on expenses and that has turned out really well so those numbers work is revenue came in at 170 billion and wall street had 166 billion So that's a beat of a mere $4 billion, which is very good. That represents 14% year-over-year growth. Operating income came in at 6.1%, which is the highest since 2019. So they're kind of back in pre-COVID shape, if you will, and doing better than pre-COVID. So that's good to see. Operating income came in at $13.2 billion, and Wall Street had $10.4. So this was a pretty big beat. it's only three billion ish but you know that's a 30 percent beat so that's a that's a nice win when you can deliver 30 more profit than wall street's looking for so all that was really good so jason how did you think that the retail and offline online parts of the business did. Jason: [13:03] Yeah well it was certainly a good part you know reminder amazon reports their online sales which which is a global number, and Amazon's in a different set of countries than anyone else. So you almost can't compare it to any other retailer because there's no retailer that does business in the same geographies as Amazon. And that online stores has their first party sales in it, and it has just the profit from their third party sales in it. So it's not a real GMV number, but that number was over 70 billion, like 70.5 billion versus 68.6 billion. So that was up 6%. That was a beat for Wall Street. Physical stores were 5.1 billion, which is slightly down. So that was one of the few misses in there. [13:52] What I suspect most of our listeners are more interested in is if you convert all those sales into a GMV number and you strip out just the U.S. So you can kind of compare it to other U.S. retailers. What does that look like? And there's a number of different estimates out there. One that we pulled was Citibank's. So the Citibank estimate for total GMV for the year was $904 billion. billion, the US portion of that would be like $659 billion. And that implies that the third party sales were particularly profitable. So I'll call that a optimistic estimate. And then Marketplace Pulse did an estimate using a much more conservative figure for how profitable third party sales that was largely based on the one year Amazon really really told us what the numbers were, which was 2018, right? And so based on those kind of 2018 ratios, Marketplace polls estimated that global GMV is about 700 billion, US GMV would be 510 billion. So that's up, if we take that conservative number, the 510 billion, that would be up 9% from the previous year. All of retail in the United States grew 3.6%. So 9% growth for one of the largest retailers in the market is terrific. [15:20] We'll talk a little bit more about what that might mean, but they also, they had some other interesting successes in the retail business. They talked about the, it was their fastest speed of service ever. So you know, we've talked in previous quarters about how they really shifted from a national fulfillment network to these regional fulfillment models so that packages would be staged closer to the consumers that bought them. And they said this quarter that 7 billion packages, or I'm sorry, for the whole year, 7 billion packages were delivered next day or same day. A billion packages were delivered same day. And there are now 110 metro areas in the United States that get same day delivery. So I still talk to other retailers all the time that talk about competing with Amazon's offer. And they always talk about two day delivery. And the reality is that's not the Amazon offer anymore. They're same day in 110 metros, and they delivered $7 billion packages in zero to one days. So speed of service, super impressive. And while they got faster, they also got more efficient. So for the first time since 2018, they actually reduced their cost to serve, the total cost to get a package to a customer. And so in the US, they said the cost to serve went down by 45 cents a package. package. So that's a pretty meaningful cost reduction. [16:45] Volume went up, which sometimes makes it easier to be cost efficient, but, you know, to actually get better service and lower your costs at the same time is an impressive feat and a big win for Amazon, which, you know, probably contributed a lot to that particularly high operating income, which I'm not sure if you mentioned, but I think that's the highest operating income they've ever announced. Scot: [17:06] Yeah. Yep. It's pretty good. They're actually profitable now. Just saying they've been profitable a long time. Jason: [17:12] Yeah. Yeah. So for all of our, our friends that don't think Amazon's profitable, the, so overall you have to call that, that a really good quarter on the retail sales side. Scott, did you kind of do a deeper dive in how much of that was the marketplace versus 1P? Scot: [17:30] Yeah. It was interesting. You read your GMV data and Scott Devitt, he's at Wedbush now. He's a longtime friend of the pod. He also put out his number and he came in around that market pulse side. So more like the 700 billion combined. Those numbers are 1P plus 3P? Yeah. Is that right? Yeah. Okay. And global. Yeah. So he was in the same zone. And what I found was interesting is because we're heading into 24, he pushed his forecast for GMV. He's the only one I've seen that forecast GMV. And it's obviously driven from like the revenue. So he kind of takes the revenue growth rate and uses that to kind of like get to the growth rate of GMV. [18:08] But he pushed it out to 2025. And then if I push it out one more year, just kind of using the same, what I think he's doing, it crosses a trillion dollars. If you could wrap your head around that. I remember you and I, one of the first discussions we ever had was about this frustration that people didn't understand this GMV thing and they were underestimating. You know, you'd see these charts that showed maybe Amazon never catches up to Walmart. And at that point, you know, Amazon was at a hundred billion and Walmart was at 400 loosely. Maybe that's the ex-grocery. I can't remember the specifics. This is going back like seven, eight years. And now we're at a point where not only have they crossed them from GMV perspective, but even revenue is crossing Walmart or very close to it. And there's a shot at a trillion dollars of transactional flow going through Amazon between 1P and 3P. That's pretty, that's crazy. Like, and it makes sense. You drive around anywhere. All you see is Amazon last mile delivery and long haul, you know, trucks. There's just like the economic impact of what they're doing is monumental. Jason: [19:13] Yeah, it's crazy. I remember when the first e-commerce sites sort of passed the billion dollar mark and how amazing that felt. Yeah, yeah. This thing could work. Scot: [19:22] Work this thing has legs exactly they thought we were crazy yeah. Jason: [19:29] Um so you know normally the narrative is all this retail stuff loses money but that's okay because aws is so profitable and if if there was like any sort of cautionary tale in this earnings call at all i would say it was aws the growth was decent right like what the i think the the estimates were 11 to 15 and they came in right in the middle of that like 13 but the operating income actually went down slightly. So like that, that is a mild concern for some folks. If you, if you kind of convert AWS to it, the last, the trailing 12 months of revenue at, at there, I want to say it's like 24% or 24.1% gross margins. You generate about 40, $21 billion in, in operating income from AWS. So that, you know, 20 billion here, 20 billion there, it starts to add up. But as, as I quickly checked that that's significantly less income than for example, the ads business probably generated for them. So it's a good business. They are growing slower because they are the biggest player. They are growing slower than their competitor, certainly than Microsoft. And it, And their profitability did slightly tick down. [20:51] But on the exciting side, they talked about a lot of the AI workloads that were moving to AWS and what a headwind that is. And one of the workloads they announced is Rufus, which is an e-commerce search engine that runs on Amazon. So, so that, that giant text box that we're all used to for finding our products and that's helping you find what, what SKU to buy amongst the 800 million SKUs available on Amazon is now rolling out a much smarter generative AI amenity that can help, help you find products with much more sophisticated searches. Scot: [21:33] Yeah. Yeah. I have not seen any screenshots of it or anything. Have you? Jason: [21:37] I saw a demo. though. I have not seen it in the wild yet. You know, they're not the first mover here, right? Like Instacart adopted a version of OpenAI pretty early. Walmart rolled it out in their iOS app at CES a few weeks before Amazon. And so it's funny, like, you know, Amazon, there are some rumors that some of the AI tools in Amazon aren't performing as well in internal tests as people would like. So there's some concerns about that. [22:11] What we'll probably have to do a deeper dive on another show is this whole interesting thing as all the text boxes that you can enter text in and e-commerce are moving from keyword searches to these ai engines customers have to re-learn how to use them and right now they're not right and so you know you go to the walmart app and you know it's a generative ai search engine but you still type the same same you know basic keywords in that you always have and so i'm kind of interested in the long run, is that really where the AI is going to live in these e-commerce sites? Or will we have, you know, sort of a different amenity for doing these more intent based searches than we do for the keyword searches? Or will people just learn how to use them different? I don't know. It's a TBD thing as the world evolves right now. [23:02] But you also alluded to the ads business. That was definitely another bright spot. They sold 14.7 billion dollars of ads which was above the wall street estimate it's a 27 growth year over year and so if you look at the trailing 12 months that's like 30 billion dollars 27 billion in ad sales if you look at a run rate if that fourth fourth quarter number were to go four consecutive quarters it's a 58 billion dollar run rate so they are they're like a clear third largest digital ad platform in the United States and rapidly gaining ground on the other two. And the most conservative estimate I've ever seen for this business is that it's 60% gross margin. At 60% gross margin over the trailing 12 months, the ads business contributed $28 billion billion in operating income to Amazon versus the 21 billion for AWS. So ads was $7 billion more profitable than AWS over the last 12 months. Scot: [24:08] Yeah. That would be net margin, I think you meant to say. Jason: [24:11] Yeah. Sorry. And in fun fact, they also announced this little thing called Prime Video Ads, which which, you know, is a huge new source of revenue for them. And that is expected to tack on another like six and a half billion over the next 12 months or 24 months. So like there's a lot of upside still in the ad business for Amazon. Scot: [24:37] Yeah it's gonna be crazy back on marketplaces i skipped a couple data points because i was so excited about the trillion dollars the as far as the quarter they they kind of have a couple of things that they report on you know the gmv we we we talked about analysts have to kind of back into and they use this one data point to kind of triangulate the things they do tell us is there's this piece called third-party seller services and that's basically you know where they make money from prime and other things of that nature and that grew 20 percent year-over-year beat estimates it was everyone was thinking 42 billion and it came in at 43 and change and then the other thing they tell us is units and that's tricky because you don't know the relevant price of a third-party unit in a first party so you can't just assume it's 61 of revenue that that's a little trick in there that that's that's why the analysts have to do some different math to get in there but third Third party was 61% of units in the fourth quarter. Last year, you have to look at year over year because of the seasonality. It was 59. So that's up 2%. So more and more products that they're selling are third party, which is, you know, just juices their margins that much more. Jason: [25:46] Yeah. Just looking at the Citibank model for that, Scott, it would be seven globally. It would be like 71% of total GMV is third party. Scot: [25:55] Yeah. Jason: [25:55] By revenue. Scot: [25:56] Yeah. Jason: [25:57] Yeah. Scot: [25:57] Yeah, because first party, back when I was modeling this, I've since abandoned that because the Wall Street guys do a better job than I ever could. Jason: [26:04] Their spreadsheets are a lot prettier, for sure. Scot: [26:07] Yes, it was similar. It would add about 10 points because the AOV on first party is relatively low compared to third party because of all the books and digital little things that they have that are a dollar here, a dollar there kind of things. Things okay so then we go into next year with the guidance and they guided the top line 138 to 143. This was Wall Street's consensus is in the middle but they really raised the top end of this and it gives it a growth band of eight to thirteen percent and what's happened in the jassy era is it either comes in right at the top or a notch or two above so Wall Street thinks that you know While the midpoint was aligned with what they're thinking, many of them have bumped up their, models to the 143. [26:58] And then also the similar kind of situation on operating income, Amazon raised it a fair amount more. And then what that did is it increased the price targets. And the stock has been on a really nice tear since earnings, thanks to this. And I think AWS wasn't what everyone wanted to see, but. [27:16] It reaccelerated growth, which folks want to see, and it doesn't feel like they're losing AI. I do think Microsoft's got more buzz, but at least they're in the game. Whereas I think people are starting to worry Google's not really. Google's talking a good game with Bard, but they're really slow to put stuff out. Like, you know, they announced this. What is it? Ultra version. Bard has three flavors, and, you know, they're way behind on each one they've announced. They're behind weeks or months on. And then the last one is, like, really taking a long time. So everyone's like really starting to worry about Google's ability to execute quickly. And, you know, so I would say the winners of this earnings season were definitely Meta, Amazon, Microsoft up in kind of a league of their own, and then Google and some of the others. I think Snapchat, I don't follow them this close, but I think they had a really rough quarter. So there's definitely an interesting AI has thrown a whole new mix into how these big, you know, either trillion dollar mega super mega caps are doing or meta is not in that discussion. It's a little bit smaller, but these big some people call them the significant seven. And they when they say that on CNBC, they're throwing NVIDIA in there and a couple others. But, you know, AI has just changed the game in the last year. It's been amazing. Jason: [28:30] Yeah, for sure. Sure. And they, you know, along those lines, they also announced a bunch of sort of AI-driven new inventions at Amazon. So we talked a little bit about Rufus. They, they have part of that reducing that cost of service. They have a lot of smarter robots in the fulfillment centers that are like interfacing with humans more and doing more stuff like that. And I saw they had one, one AI innovation right in your space, right? Like they're using AI to inspect respect all the Amazon vans and identify any service needs before the vans break down. Scot: [29:02] Yeah yeah yeah these these last mile vans are they get pretty beat up as you can imagine sure you know being in Chicago you see how they can that can be pretty bunged up and all kinds of things happen so, you know they it's interesting I've been to tour several of these because we work on them at my day job spiffy and it's pretty wild we don't have time to go into it maybe we can do a whole pot on on it. But anyway, they, they line them up and drive them through a single area. And they have this like arch of cameras that they put them through. And I imagine that's what that system is. It's, it's using this kind of 300, almost like a ring of cameras that the vans drive through, and they must be using the AI to detect what's going on there. Jason: [29:45] Yeah it's crazy um so anything else jump out at you on specific on the amazon earnings because i wanted to take a last minute to kind of put these amazon earnings in context for the rest of us retail but i want to make sure i didn't miss anything you wanted to. Scot: [30:00] Yeah one last thing in my little auto world that i live in now they kind of made a almost you know i haven't seen a lot of buzz about it i know you work a lot with the auto company so you're you're probably getting some feedback on it which is why i'm kind of curious but they announced hyundai is going going to start selling cars on Amazon. And for a long time, everyone's thought Amazon would maybe compete with Carvana or buy Carvana, some of Carvana's used cars. So it's like e-commerce for used cars. And a lot of Carvana's competitors, Vroom and Shift, have kind of hit the skids and actually are out of business now. And some people thought Amazon would buy them, but it looks like Like they're actually going to be maybe an ad unit or a showroom and then send, you could transact on Amazon or start your transaction on Amazon and then go to the dealer. So that has been, there's a lot of buzz in my world around that. And we keep hearing many more OEMs are coming and the dealers are, the Hyundai dealers I've talked to are very excited about this and expecting kind of a different customer than they're used to. And there's some prime tie-in there too, which is kind of interesting. So it's going to be interesting to see Amazon has their eyesight on this auto category and they're doing more and more in there. And it's going to be interesting to see what they do. Jason: [31:14] Oh, for sure. I have this giant deck of industries where the leaders in the industry would say like, oh man, e-commerce is amazing in these other industries, but here's why it will never be relevant in ours. And I think the car industry is the one that this is playing out in right now that, you know, they used to all say like, oh, there's never going to be e-commerce. People want to go to the dealers and drive it. And there's three tier distribution and all these things and it'll never happen. And you know, now it's certainly happening. Scot: [31:44] Yeah. Yeah. It's going to be interesting to see that. Jason: [31:46] Fun times. So I just want to put all this in a little bit of context. So before the pandemic, retail in the United States of America grew very consistently. 4.1% a year with some very minor deviations, but that's kind of what you expected just from normal inflation and the growth in the population, 4.1% a year. So then the pandemic happens. We mail out a couple trillion dollars in economic stimulus. We lock everyone in the house so they can't spend as much money on services. And we had the three greatest years in the history of retail. We grew 7.7% in 2020. We grew 13.6% in 2021, that's the best year of all times, and we grew another 8% in 2022. So those were those three crazy outlier years. So the end of 2022 comes and everyone's like, what's 2023 going to look like? [32:37] We just had these three years that were more than double the industry average. The NREF came out early in the year and said, hey, we're forecasting 4% to 6% growth. So bottom end of their range would be average, 6% would be sort of halfway to those last three years. So we now know what actually happened and we came in at 3.6% growth. So missed the NREF estimate, missed the traditional average, it's a down year. And this is $5 trillion is the total sales. So missing by half a percent is pretty meaningful. So all of retail grew 3.6%. If you convert that into a number, that's $180 billion more stuff we sold in 2023 than we did in 2022. [33:25] And the numbers I'm using for all this are retail without auto or gas in it, just because that's what the nrf calls core retail and it's kind of amazon doesn't sell a lot of cars or gas yet right so so amazon grew nine percent if we use that conservative gmv number for the us. [33:42] That means amazon alone grew 43 percent last year 43 billion dollars last year so amazon alone was 24 of all retail growth in the united states of america and they're the first or second largest retailer in the country and they grew a quarter of all growth which is pretty phenomenal Walmart also wildly outperform the industry they grew and there they won't announce their q4 till for a couple more weeks but assuming they they have like hit the low side of all the estimates so only 4% growth in q4 though that that'll bring them in at 6% growth for the year that means they They grew by $29 billion, which is 16% of that total growth last year. Then I keep talking about Timu and Shein. Timu only grew 3,100% last year, which is a pretty good growth rate. So they contributed $9.3 billion in growth, 5% of the total. And Shein grew 30%. So they contributed another $7 billion in growth, 4% of the total. So you just take those four retailers, Amazon, Walmart, Timu, and Shein. That's half of all U.S. retail growth last year. So those four companies had a terrific year, but they essentially left crumbs, for the rest of the retail industry in what without those four companies is pretty much a Debbie Downer year. Scot: [35:09] Yeah yeah it's amazing share there it's kind of crazy. Jason: [35:13] Yeah and it's it's just so weird to see the biggest two retailers in the market amazon and walmart growing faster than like almost anyone else that that to me is a a very anomalous circumstance that you you don't normally see, there is this super interesting horse race who is the biggest retailer in the u.s and the the sort of unfortunate answer is it depends a little bit on how you count because you you've got Walmart's total US GMV which we also don't know by the way because the there now is a meaningful marketplace at Walmart not as meaningful as as Amazon but like you know Walmart doesn't disclose its actual GMV. [35:59] But Walmart also has Sam's Club. And so if you take just Walmart's GMV and shoot, I thought I had the number in front of me, but now that I'm talking about it, I of course don't. But from memory, it was about $442 billion last year would be my estimate for their GMV after they announced that's their Q4. And so that would be lower than even the conservative estimate for Amazon's US GMV. If you add Sam's GMV in the US to Walmart's GMV in the US, Walmart gets to about $520 billion. So that would be above Marketplace Pulse's estimate for Amazon and below Citibank's estimate for Amazon. So no matter how you count, these two companies are very close. A few years ago, you and I were talking about Amazon being close to Walmart if you take grocery out, which grocery is 60% of Walmart sales. But now we're in a year where Amazon may have passed Walmart, but however you count, it's very close. And they're obviously continuing to grow faster than Walmart. So if it wasn't 2023, it likely will be 2024. That's the year that Amazon actually takes the title as the largest retailer in the US. Scot: [37:18] Yeah, it's crazy. We knew the day would come and here we are. Jason: [37:22] Exactly. So Scott, I feel like we nailed it. We targeted to have a slightly shorter show to just keep the meat in there and we have succeeded. Scot: [37:33] Yeah. Yeah. Thanks everyone for joining us. Don't forget, if you have a second, leave us a review. We'd really appreciate that. And. Jason: [37:41] Until next time, happy commercing!

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EP316 - Annual Predictions 2024

Jason visited the Walmart Neighborhood Market in Pea Ridge, Arkansas featuring drone delivery. Here is a video for those interested.

2023 Predictions Recap Jason:

At least 2 retail bankruptcies (besides Party City) Yes
BNPL Consolidation (Klarna, Affirm, Afterpay. Sezzle) – at least one merges/exits US or BNPL. No
Shopify launches an ad product such as a retail media network Yes
Meta/Google/TikTok lose ad share to new social media platforms and retail media networks. No
Live Streaming Commerce Still not meaningful in US in 2023 (less than 5% of social commerce in US) Yes

Jason Total Score: 3 of 5

Scot:

Amazon uses this 2022 setback/slowdown/reversion to the mean for a public resetting of expectations, but behind the scenes they take share and raise the bar on shipping. Yes
Shopify is acquired No
An innovation in e-commerce powered by ai (gpt4) surprises us by how fast it’s adopted and how cool it is. Yes
E-commerce accelerates back to the mean in 2H after a mean regression in 1H. E-com returns 10-15% growth rates. Yes
Sephora and/or Ulta move to a subscription model for new product discovery. Yes

Scot Total Score: 4 of 5

Trends revert to the mean, and Scot is back on Top!

2024 Predictions Jason:

Retail Media Networks go In-store. At least 1 top 20 retailer launches a digital in-store ad network
AI is even hotter at end of 2024 than now. Most text boxes in E-Com are GenAI powered. A least one retailer has an AI based auto-replenishment solution with significant adoption.
Bifurcation drives at least two more retail bankruptcies, including 1 national specialty retailer, and one general merchandise/dept store. (two top 50 retailers)
China companies focus more on West and get more traction. Shein successful IPO. Temu US gets to at least 75% of target US E-Com.
Grocery E-Commerce goes from $95B to $125B in 2024 (after being down in 2023 per Bricks meets clicks).

Bonus: Live-steaming, MetaVerse, Crypto still not a major thing in e-commerce; Management stops blaming performance on retail crime; and Smaller RMN’s fail.

Scot:

Amazon relaunches Alexa on a native LLM
Temu falters as people realize it’s wish 2.0
RMN is currently $52b, growing 20% y/y, accelerates in 24 to 30% and $67b (coresight has the 52 datapoint)
Instacart who’s stock IPO’d at $33 and now is $23, solves ads and pops to 40
While everyone thinks Shein/Temu takes share from Amazon, they end up hurting Nordstrom, Macys and Target instead – materially (10%+) focus on apparel, maybe take target out?

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Episode 316 of the Jason & Scot show was recorded on Thursday, January 11th, 2024.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scott show. This is episode 316 being recorded on Thursday, January 11th. I’m your host, Jason Retail Geek Goldberg. And as usual, I’m here with your co-host, Scott Wingo. go. Scot: [0:39] Hey, Jason, and welcome back. Jason and Scott show listeners. Well, folks, this is one of our most popular shows of the year. This is our Jason and Scott annual prediction show. This is where being an audio podcast really works against us. You can’t see us, but Jason, I normally wear leisure wear when we record the podcast, but tonight we’re wearing tuxedos. Jason, I really like that cummerbund. It looks really good on you. Jason: [1:04] Thanks. Scot: [1:04] I feel like you’ve really elevated elevated your game this year the the suede tuxedo really suits you thanks thanks and the extra glitter on the bow tie was my daughter’s influence smart the the 17 year old touch as you can never have enough glitter that is literally what she says half the time so yeah this is the show where we make we kind of self-score last year’s predictions which would have been the predictions we made this time last year early January for 2023 and then we make new ones for this year the 2024 2024 predictions but before we jump into that Jason we’re recording this on the Eve of nrf big show and I know that’s a huge show for you it’s now I think it’s expanded it’s always a fun weekend show which I’ve always appreciated that that was sarcasm and then I think they’ve extended it you know I think it was like what was it Saturday Sunday Monday and now there’s like a Tuesday and then there’s pre-days and post days so it’s like a whole it’s like a whole month of nrf big show are Are you teed up and energized and ready to go? Jason: [2:06] Yeah, and I feel like if all those things weren’t exciting enough, you know, it’s like 113 years old, and it’s always over a holiday, Martin Luther King Day, and it always draws a blizzard, like either on the first day or the last day. And so this year, maybe we’ll get both. Scot: [2:22] Yeah, yeah, and it’s always fun. And it used to be there was nothing down in that part of New York, and now at least they have, what’s that thing called? Hudson Yard or whatever. Jason: [2:29] Yeah, yeah, yeah. Yeah, I feel like Manhattan has grown up around Javits a little bit. So you are definitely right. I have clients and partners with offices that are now walking distance from the show. And Hudson Yard is pretty cool. Scot: [2:42] Yeah, very cool. Now, are you speaking and also on behalf of the listeners, what are you going there to learn more about? Jason: [2:51] Yeah, so in the highly unlikely event, there’s anyone that listens to this show that doesn’t already know what the show is. National Retail Federation’s big trade organization represents retail in the United States. It’s their big event. 30,000-ish people come to New York City. Tons of exhibitors in a wide variety of fields. The area that’s always fun for me is one area of the show is dedicated to innovation. So they give like inexpensive booths to small companies that, you know, aren’t ready to invest in a big booth. And many of these are startups or startups from other countries. And, you know, so it’s always, there’s always a lot of wacky dubious stuff there. But in between that, there’s usually some, you know, kind of cool ideas. And it’s often the first place you’ll see something that a few years down the road becomes, becomes one of the innovative new parts of retail. So I love walking the innovation center. Last year, retail media networks were the big thing at this show, and I’m sure they’re going to be a big thing again this year. People were starting to talk about AI last year, but this year, I think it’s just going to be off the hook. I think in order to get a booth, you had to say you were an AI company. I’m pretty sure the trash is getting emptied by AI sanitation engineers. [4:09] I feel like it’s simultaneously going to be wildly overhyped and super important and transformative to the industry. So that’ll be interesting to see how that all plays out. I like to talk about food and grocery a lot and InterF has done a lot to expand their coverage of the food industry. So there’s a whole separate portion of the trade show dedicated to grocery retail vendors and a whole content track. So that stuff is all interesting. John Furner, the president of Walmart, will have a keynote. A bunch of other retailers will have keynotes. Magic Johnson is kind of the outside speaker that they’re hyping this year, which is, I mean, fine, but I don’t go for those paid, not retail speakers that much. And then I am speaking, I am doing a session on one of the featured stages that is entitled, Coming to America, which is all about what Western brands can and should be learning from the Chinese brands that are now successfully doing business in the US. And so most notably, Timu, Shein, and probably a little bit of TikTok. [5:26] Yeah very cool i also saw on linkedin that you had what i would call a close encounter with a. [5:32] Drone experience what tell us more about that i did so i mean scott i’m sure you remember this but it was like i looked it up it was like 2013 that jeff bezos was on 60 minutes and was like oh and we’re going to deliver all the packages via drone wasn’t it the eve before cyber monday was like that sunday night before yeah cyber money yeah and so he made that announcement and you know that sounded incredibly far-fetched and i don’t know if you remember but i had a session that i was doing an internet big show that year and i dressed up a drone with the amazon air logo and landed it on stage at the javits center or i had someone that was better than me landed on stage at the javits center in the middle of my presentation as a joke and i got in huge trouble for that that’s wildly illegal that’s why they call you retail geek yeah sometimes it’s better to ask forgiveness than permission is my philosophy on that one. But back then, it was like this kind of silly science fiction. And since then, we’ve on this show and in the press and media talked about various kind of edge use cases where drone delivery might actually make sense or be economical. And we’ve talked a lot about some of these pilots that both Amazon Amazon and Walmart are running. And so I know it’s a real thing and you can really do it. And maybe in some use cases, it’s even practical at this point. [6:57] This December, last December, so last month, I did my last trip of the year to Walmart, which is in Bentonville, Arkansas, which side note, downtown Bentonville is beautiful for Christmas. They have a super cool light show. So if you’ve never visited Walmart, that’s the time to do it. But there is a small Walmart neighborhood market, which is their grocery store concept, which is in a small community of 5,000 people about about 30 miles away from Bentonville called Pea Ridge. And so I drove out to Pea Ridge to visit the Walmart neighborhood market. And behind the neighborhood market is a drone center. And they are actually delivering packages via drone on an ongoing basis for all the residents of this 5,000 person community. And so standing in a parking lot and having a bunch of these planes, and the Walmart ones are fixed wing aircraft, launch and like zoom over your head and all the signs in the parking lot, you know, say low flying aircraft beware. [8:00] And like seeing all these planes like launch, it was more fun and cool than I expected it to be. And what’s particularly cool is this particular model, the way they recover the planes is the planes all have a hook on the tail and they literally have a a retractable zip line that like two robot arms raise up and it puts the zip line across the drone center, which is elevated. And the plane flies into the zip line and gets hung up and it just swings like a swing until it loses momentum. And so, you know, I just sat there for like probably 45 minutes and watched like 10 planes launch and get caught by the zip lines. And I I made a video and put it on LinkedIn. So I edited it down to like a minute, but I know this is not new news to most people on this show that there’s drone deliveries, but I’m telling you like when you actually see one in person, it’s still kind of cool. Scot: [8:58] Neat. Are they, obviously they’re not going to carry like a gallon of milk or something super heavy like that. What’s their payload max on this? Jason: [9:06] Yeah, so I am not super well-versed on exactly what, like the one part of the experience I couldn’t see, unfortunately, Unfortunately, you’d have to be pretty lucky to be out of residence when a delivery was happening. I think it’s like a four-pound payload, and it’s dropped via parachute. And I know the way it works is you register in advance to be a drone delivery site, and then you’re given a little foldable circle target that you put in your backyard, and the drone drops the packages right on this target. And so, you know, Walmart neighborhood market is… Scot: [9:42] It’s a grocery store with like you know dry goods and pharmacy and stuff like that so i i think it’s a lot of like bottles of advil and things like that that are likely getting delivered there, very cool so head over to linkedin and look up jason and it’s it’s the post that starts you know x years ago on 60 minutes and it’s in there yeah i’ll put a link in the show notes if you if you want to find it quick cool one last topic we wanted to cover before we get into the meat of of the prediction show, Jason and I have been getting a lot of questions from listeners and it concerns a slowdown in our frequency. Well, no one can pull the wool over our listeners’ eyes. You guys caught us. We have slowed down our frequency. And that’s because starting with the next episode, 317, we’re going to rebrand and it’s going to be the Jason Bott and Scott Bott show. And nothing’s going to really change. We are going to increase the frequency. It’s going going to be daily. You guys wanted more shows. So next year, we’re not going to do 365. That would be too much, but like 355, something like that. And you probably guessed by the rebranding that it’s going to be Jason and I writing the outline of the show. But Jason, being the geek he is, has created a Gen AI version of himself that’s been trained on 800 hours of Jason content. and he produces a lot more content than I do. So about 300 hours a month. So congrats, Jason, on this technological breakthrough. Jason: [11:09] Yeah. I’m super excited about that. You’ve disclosed one of the secrets to our success is that every episode is about a three to one ratio of Jason and Scott. Scot: [11:22] Since you do the audio editing, I try to go easy on you and you’re self-inflicting your own pain. Yeah. Jason: [11:27] The truth, and that may be the norm, but the truth is we have two kinds of shows. There are shows where you are much more dominant than I am. And then there’s shows where I I contribute more than you. It’s kind of funny to see the flip-flop. If you get an interesting entrepreneur or you get a deep dive in a really arcane portion of Amazon’s business, you get a lot of Scott. Scot: [11:48] Yeah. Yeah, that’s where I thrive in the darkest corners of the interwebs. Yeah. Seriously, though. Jason: [11:55] I was just going to say one side note on that. That LLM we trained, you can now buy on the OpenAI GPT store that went live tonight. Scot: [12:03] Yeah, and you can have your own personalized. We get a lot of requests for personalized shows, so you can just write your own. Jason: [12:09] There you go. Scot: [12:09] Yeah. We’ll talk to you in a three-to-one ratio of Jason to Scott. But seriously, though, we do not have an LLM. We wouldn’t do that to you, but our frequency has decreased. We looked this up, and our first show was on November 14, 2015, if you believe it or not. So that’s over eight years ago we started. This will be our ninth year. And yeah, so that’s a lot of content. And when we started, I had just, I was one year into my current company Spiffy, and now we’ll be celebrating our 10 years this year at Spiffy. And we had five employees and now we have about 500. Jason worked for Razorfish and he only had two words in his title. And now he works for the biggest or one of the biggest ad agencies with a fancy French name called Publicis. [12:59] And he has 16 words in his title. So there in his world, you measure your success by the size of your title. And he has done awesome. So both of those endeavors have kept us a little bit busier than we were nine to 10 years ago. So that is the root cause of our slowdown. We did the math and we actually did 15 shows last year. So it was like monthly plus a couple extras, plus three, if you will. We used to do around 50 a year. So you’re all right. We have reduced the frequency. Apologies for that. this is a passion project for us so our revenue good news our revenue has not gone down which is which is good because we don’t make any revenue we just love talking about this stuff and hanging out together and that was the whole genesis of this show and still is true even though we have less time to do it anything you want to add there jason yeah no i i think i mean obviously i feel like we’ve both gone a tremendous amount out of the show and we we love it and want to want to keep it going we want to make sure when we do shows that that they’re interesting and valuable for folks. Jason: [13:57] And so one of the things that I’ve gotten a lot of feedback on is we, you know, every year we’ve always done a handful of these deep dives on particular topics. And I feel like the shows we get the most compliments on are when we do these deep dives or when we do really detailed breakdowns on the Amazon earning shows. And so, you know, certainly we’ll still keep the Amazon earning shows on the schedule, but like, I’d like to lean into if, you know, if we are going to, you know do sort of one to two shows a month uh lean into some of those like more prep higher production deep dives as well so that is one of my new year’s resolutions is to drink a lot more ice coffee and the other one is going to be to make sure we get get some relevant deep dives into the show schedule every year yeah there’s got to be on the topic of ice coffee there has to be some limit to what the human body can endure there so it’s going to be interesting too you’re kind of a tim Tim Ferriss body experiment mode with the level of coffee you’re reaching. Scot: [14:58] So I look forward to seeing how this goes. Jason: [15:00] Hack myself. Scot: [15:03] Okay. With that housekeeping out of the way, let’s jump into the meat and potatoes of the show. As mentioned, this is our annual prediction show. Way back in episode 301, recorded on January 20th, 2023, we made five predictions each about what would happen in the upcoming year, which was 2023. 23. Let’s go through and review our performance because jason is first in our title he always gets to go first decision i greatly regret from eight years ago just kidding my memory from eight years ago is you did name the show yeah scott and jason just doesn’t it doesn’t sound right obviously so here we are so jason go ahead i’ll read your prediction and then you self-score All right, Jason, prediction number one, insert drum roll sound effect. You predicted, prediction number one, at least two retail bankruptcies besides Party City would occur. How’d you do on that one, Jason? Jason: [16:03] Yeah, well, Mr. Debbie Downer was right. The Party City reference was because Party City had already declared bankruptcy by mid-January of that year. But unfortunately, there were a number of other bankruptcies last year. So the marquee one was probably Bed Bath & Beyond, although they have a new life as the brand for Overstock. Talk david’s bridal right aid but the one that i’m personally maybe the most sad about and i know you were a customer if not a fan was boxy yeah yeah very sad yeah so i’m giving myself credit for that that first one although i feel like a bad person for making negative predictions, it’s kind of part of your personality i used to be the malageddon guy and now you flipped lived through the bankruptcy guy. Scot: [16:49] So I appreciate you carrying the banner on that one. Jason: [16:52] I’m here for you, man. Scot: [16:53] Okay. So that’s so far one out of five is what we’re scoring you. So one right, zero wrong. And number two, buy now, pay later consolidation. Klarna, Affirm, Afterpay, excuse me, Afterbuy is another one, et cetera. At least one of these will emerge or exit the US or BNPL altogether. Jason: [17:15] Yeah, and I failed. Those companies, for the most part, continued to gain traction. I want to say Sezzle had some valuation problems, although it started to recover in Q4 this year, but they’re all viable, independent entities still going. So that is a miss. Scot: [17:34] Okay, cool. So we’re now tied one and one, one right, one wrong out of the first two. So batting 50, which is pretty good for a batting average. Above my my career average i’m pretty sure yeah yeah we we i have i will self-admit we’ve done a terrible job of track tracking this over the years because you know it’s really fun and it’s just trying to it’s good exercise and i recommend you do it too listeners because it makes you think, in a little bit longer term way and when you make a prediction and you don’t have to put yours out there but when you put it out there it makes you think a little bit a little bit deeper about it Your third prediction, prediction number three, was in 2023, Shopify will launch an ad product such as a retail media network. You were banging the RMN drum back then. Jason: [18:22] Oh, for sure. So this is a complicated one. I feel like I kind of got it right, but full disclosure, not in the way I expected. So when I wrote that, I really thought, gosh, Shopify’s got, you know, all these independent stores that are probably too small to have retail media networks. That, you know, one of the interesting products Shopify could launch is a sort of a confederate network where, you know, all these individual sellers opt into a shared advertising product that Shopify could administer and help all these sites to monetize their traffic. And that did not happen. But what I wrote was launch an ad product such as a retail media network. And last year, Shopify did launch, they already had a product called Shopify Audiences, which is buy data on anonymous data on people that use ShopPay to help target ads. And last year, they added automated integrations with Snap, Criteo, which Criteo is a multi-platform advertising platform, and TikTok. So as a Shopify seller, you could now say, hey, I want to go buy an ad using Shopify customer data to define your market it and have it automatically placed on all these different digital media platforms. So I don’t know. I feel like I kind of lucked into it because it didn’t happen the way I thought, but it kind of did happen. Yeah. Scot: [19:49] Okay. We will give you, so at this point we’re on number three and you’ve got two right, one wrong. Heading into the fourth prediction. And this one was in 2023, Meta, Google, TikTok are going to lose ad share to new social media platforms and retail media networks. How did you do on that one? Jason: [20:10] The real answer is I don’t know. So I expected it to be much more prominent. And the tail of the tape is kind of mixed. Using eMarketer data, Google lost share across all their properties. So they went from 28% to 26%. Meta was kind of flat at 20%. They They lost share in Facebook but gained a little share in Instagram. And then TikTok actually grew a little share, so from 2% to 2.4%. And then the retail media networks obviously did gain share, but they’re smaller. So Amazon went from like 11% to 13%. Walmart went from like less than 1% to 1.2%. So it kind of happened, but it happened. Scot: [20:56] To a tenth of a percent instead of what i i sort of felt would happen which was multiple percentages so i’m gonna not give myself credit for that one okay that’s very generous of you, we uh this is the trick of writing these in hindsight you’re always you wish you’d put like a clear number there so you’d be easier to score 100 100 they’re kind of being squishy all right so here on number four you’re at you’re back to 50 50 so two right and two wrong and then one One quick clarification was this share of digital ads, like not all ads, right? Like not TV and stuff in the DOM denominator. All right. Number five prediction for Jason Retail Geek. For 2023, live streaming commerce, still not meaningful in the US. It will be less than 5% of social commerce in the United States of America. How’d you do on that one? Jason: [21:50] Also, the real answer is don’t know because it turns out there’s no good data source for truly measuring live streaming commerce. The estimates, which are based on these kind of thousand person surveys, are that all video commerce in the US is like 32 billion to 50 billion. And so how much of that like really happened live? Even if all of that was live, it’s still not 5% of total e-commerce, but like what what percentage of e-commerce is social commerce. I just, I ended up feeling like I wrote a bad, squishy forecast, but there is part of me that wants to say, hey, the spirit of this was people aren’t gonna be shopping for products live on video and it’s not gonna be very meaningful. And I think that that is absolutely the case, that it’s not meaningful. Scot: [22:39] Yeah, one thing that’s interesting about, kind of like thinking back on 2023 with streaming, There’s a couple of things I’m kind of just pontificating here. I don’t I don’t have an I’m not scoring you. Yeah, I kind of want to use this opportunity to pick your brain. So, you know, we have TikTok shops. I’m going to guess you don’t think that’s live streaming, right? Because it’s like a recorded video and you’re selling an ad next to it. Is that exactly? Jason: [23:04] And when you say I don’t think it’s live streaming, it’s because it’s it’s not. Scot: [23:07] It’s not. You’re not putting it in your definition of live streaming. Yeah. Jason: [23:11] And that’s something different to you. Scot: [23:13] But it’s like a static streaming revenue or something. I don’t know. Jason: [23:17] Yeah, I think there is video commerce, right? And even video commerce is not a very big thing. But most of TikTok shops and YouTube native checkout and these other experiences are what we would call video commerce. And there are now a couple vendors that have decent size revenue helping enable video commerce. So I think of someone like a fireworks, for example, that, that adds, adds video commerce to a lot of e-commerce sites and ad platforms. Scot: [23:45] And then how about, so there was a really interesting experiment and I don’t think we talked about it because we were deep into the holiday data stream, but you know, Amazon had Thursday night prime video football. And then on Thanksgiving, the Friday after Thanksgiving, they bumped the game and did it on Friday. And part of that was if you watched the thing that’s fascinating about the Amazon live stream is there’s like three or four sub streams in there. And one of them had basically QR codes and you could buy right from the ad. Yeah. Is that live streaming or it was like an ad next to a football live stream in your view? Yeah. Jason: [24:23] So I do think that would meet the definition of live streaming because most people watch that game live. live, and they didn’t disclose any data on how those were done. I could tell you in talking to several people that bought those ads, there was not meaningful engagement with the QR codes. [24:43] And so, yeah, you know, I think there’s still lots of experiments. I think there’s use cases where native checkout in video makes a lot of sense. There’s even a few use cases where live video make sense, but they’re edge cases. They’re not, it’s not the main thing. And again, there’s a big difference between China and the US. There is a ton of content that is streamed only live and allows you to buy stuff in China, but it’s mostly deals stuff. It’s kind of like the next generation of guilt.com, if you will. And it’s mostly like very scarce items. So it’s farmers in tier three cities in China selling their produce for the week. And when they’re out, they’re out. And so they don’t store the video and have people watch it later in order because they sell all their apples during the live stream. And that’s a meaningful way people sell stuff in China. It’s just it’s just not I mean like the vast majority of video can be time shifted in the US and then it’s not live streaming and you know we still for the most part don’t have people buying a lot of stuff even you know through through video that’s not live so I feel like because of the success in China it gets a little overhyped in the US and I feel like it hasn’t lived up to the hype a. [26:02] Year ago though I would argue there are a bunch of vendors telling us that this is the next thing and we’re all going to be out of business if we don’t jump on the bandwagon and i can assure you if you did not jump on that bandwagon you you potentially are still in business. [26:14] Got it i know how amazon’s going to solve this so hear me out this is this is an unofficial prediction and i know andy jassy listens to this show so andy here’s how to solve this i’m going to share my entrepreneurial insights number one you have to keep travis and taylor together number Number two, you’ve got to get the Kansas City game next Friday after 2024 is Thanksgiving. Scot: [26:36] And then you have to sell exclusive Taylor merchandise on that game. So that’s how you’re going to get the engagement you want. You got to tap into the Swifties. Jason: [26:45] Yeah, I feel like the Swifty economy is a way to solve any business problem. I’ll totally agree with that. I will throw out Amazon, you know, did lean into live streaming and they had a product called Talk Shop Live. And you know by all accounts it wasn’t very successful the people they they bribed influencers with extra bonuses to produce content and as soon as they stopped offering those bonuses all those influencers moved off the platform and now it there’s a a version of it that still exists but once again it’s not live yeah yeah uh okay so what does that give me three out of three uh Uh, three out of five. Scot: [27:25] Yeah. So you, so three, correct. Two wrong. So that’s good. You have a winning average. That’s very similar to my college career. Jason: [27:32] Yeah. Scot: [27:32] There you go. Yeah. Gentleman’s a D minus. Yeah. Jason: [27:40] So now let’s get to Mr. Sparty Pants, who I suspect and fear did much better than me. So Scott, you’ll remember your first prediction. It’ll come as a shock to no one involves Amazon, right? Amazon uses this 2022 setback slash slowdown slash reversion to the mean for a public resetting of expectations. But behind the scenes, they take share and raise the bar on shipping. Scot: [28:09] Yeah. I, um, the shipping part was surprisingly clairvoyant there because, you know, what they did in 2023 is one of the things Jassy dug into this and they did these, what do they call it? Nodes regional. Yeah. These regional nodes. And they, they started zoning out at a tight level. They were moving too much product too far unnecessarily. And they, they really tightened that up and it allowed them to cut costs pretty dramatically on shipping and get a lot of leverage that that everyone was surprised about but also and this is nice they similarly you know have really cranked up to delivery speed and delighted customers so so you know very rarely in a business do you find something that that both saves money and delight usually you’re having to make a choice you’re like well i could save money but customers are going to hate this this was what very aligned with their, you know, their corporate goals of being like wildly efficient and automated, but at the same time, getting products to customers faster. So I think they had a pretty good year. So they’ve, you know, everyone was in the doldrums about Amazon. Everyone was like, oh, this Jassy guy is really messing things up. And I think he went kind of back to basics and said, let’s squeeze some nickels and dimes out of this shipping thing and get it a little faster. And the customers have reacted to it. So I would score that one correct. Jason: [29:32] Yeah, 100%. I feel like Tim cooked it, and it was a good call on your part. Scot: [29:36] Yeah, absolutely. Jason: [29:38] So your second prediction, and I’d like to harp on this one a while if possible, is that Shopify would get acquired. Remind me, did that happen? Scot: [29:49] It did not, but you have to put this in context. Shopify dropped, what was it, like from $60 billion to $10 billion? They had a precipitous fall, and they had a lot of missteps. So they, you know, when this happened, you and I, I think jointly predicted that them getting into fulfillment was not only a bad idea, but a terrible idea. So this is the year they had to unwind all that, which I thought it would be. [30:18] I didn’t think they would do that, but kudos to them. You know, so I 100% give them this is very hard to make a mistake and fix it out in the public world. It is a very humbling thing, but they sure did. So they got rid of the shipping part. They turned that into a little bit of lemonade where they ended up having a good partnership with a company that acquired Flexport, I believe it is. And then they have made a series of moves that have rebounded not all the way back to where they were, but they have done very well and they are not going to be acquired or they’re not in any kind of existential problems. I do still think there’s a world where meta, I think the natural require for them is meta. And at some point, those companies kind of have to go together. I also, if I recall my thesis on this, it was around the first party, the third party data going away. And I felt like they’d have to go on to a first party network. I still think that’s true. I think they can survive independently. independently but i think to unlock a lot of value they need to be married into a first party entity more tightly so yeah yeah and of course the stock has rebounded a bit so it’s it’s it’s a bigger swing now yeah i don’t you know i you will spoil alert i did not repeat this. [31:42] This prediction i was gonna say you technically only missed that prediction by one word had you had you written shopify with fulfillment is acquired you you kind of would have been right, yeah long time listeners will know i have a long history of repeating predictions and then it never works out for me so i’ve learned my lesson the hard way my my big one was like for what have we we’ve been doing this for like eight times i guess or maybe this is the ninth and you know literally for like five years i predicted amazon would compete with them with fedex and i gave up and then like two years later they announced they’re gonna compete as soon as you stop repeating it that’s when you know it’s gonna happen yeah so maybe i am predicting shopping there you go Oh, head explode emoji. Jason: [32:21] Yeah. So one out of two. So then let’s move on to number three. And innovation in e-commerce powered by AI, such as GPT-4, surprises us by how fast it’s adopted and how cool it is. Scot: [32:36] Yeah, I would say there’s no one innovation that you can kind of say, wow, everyone added X to their site and it was amazing. But I would say it’s pretty amazing how many retailers are using and getting a lot of value out of AGI. So, you know, the one you read a lot about is the helping of writing product description pages and tightening those up. A lot of people are using it for customer service and really improving that. A lot of people are using it for, you know, one of the things that’s a total pain in the e-commerce world is many times you want to take a product image and it’s, you know, it’s in a scene and you want to isolate it. And then you want to spin it around and do a video and inject that thing in another templated video. you know, that was always very hard. And you would send these images to, you know, a, you know, another country where someone would, you know, for $5 an hour, sit there and meticulously isolate the item out of the background and pixel by pixel do that. Now they have, you know, pretty awesome AI systems for doing all those things. And, you know, retailers are using those pretty heavily. So I would say. [33:48] It’s a little hard to score this one. I’ll defer to you. I feel like I’ve been surprised by how much of it was useful. I think a lot of people were kind of saying this is going to be another blockchain, another live stream, another social chat commerce kind of a thing. AI is going to be a flash in the pan. And I would say, you know, companies are really using this. It’s real. It’s impacting the customer experience and improving retailers margins because they can be wildly more efficient. Jason: [34:15] Yeah, no. So I’m for sure giving it to you. I feel like part of the art here is you have to go back in time to last January and put yourself in the context that this was made. And I think there’s a lot of things that are being routinely done today and are pretty darn cool that we would not have believed happened last January. And I think all that text on product detail page is one. The images is for sure one. there used to be whole sections of these trade shows dedicated to companies that were doing image manipulation and image masking and all that stuff. And they’re all gone because the AI is so good. And I would also say they’re now like it’s starting to be pretty meaningful in search. Like Instacart has had generative AI search engine for a while. Walmart just launched generative AI in their search engine. So, you know, there is a lot of flavors of AI that are overhyped and it, But, you know, it is like, I mean, there are a lot of AI snow jobs out there, but also there’s a lot of legitimate stuff. And so I think I definitely have to give you that one. So I think you’re two out of three at the moment. Scot: [35:22] Awesome. Jason: [35:23] And so then we move on to number four. E-commerce accelerates back to the mean in the second half after a mean regression in the first half. E-commerce returns to 10 to 15 percent growth rate. Scot: [35:36] Yeah, I will. The bulk of my e-commerce data comes from Amazon. And I would say Amazon kind of checked this box. But you, the ultimate consumer and gesture and recool charter of all the data, do you agree that I got this one? Jason: [35:53] I do, especially because you were prescient enough to list the growth rate as a range from 10 to 15. So I’d say there was this weird regression where there was even a stage where retail was growing faster than e-commerce. And for sure, by the second half of last year, we were back to sort of normal trends with retail growing at 3% to 4%. And kind of pre-pandemic, e-commerce might have been growing at like 14% or 15%. And it returned to sort of 10% growth. So I think you definitely hit the spirit of this that we’re kind of back to normal. And I think you also hit the technical letter of your prediction because I think we surpassed 10% growth for e-commerce. Scot: [36:40] Cool. So that puts us at three right now. Jason: [36:44] Three for four, which basically means you have to miss this last one for us to tie. Um, and I, I think I’m in trouble because your last one was Sephora and or Ulta moved to a subscription model for new product discovery. Scot: [37:02] Yeah, I, you know, I have to tip my hat to my daughter who previously mentioned is now 17 and was 16. Thanks to her. I spend an inordinate amount of time and money in both Sephora and Ulta. So this one was inspired by her. And yeah, I do have to admit before the show, I didn’t know how I did on this one, but I was looking and I see Sephora has this thing called play exclamation mark. And it’s the beauty inside community community announcing our new monthly beauty subscription box. Play on players. I don’t know if you subscribe to that, Jason, but it sounds like your kind of thing. Jason: [37:39] You said oh yeah i was i was a pilot user you can’t get this kind of camera ready look for the podcast without being totally totally plugged into all those products yeah no i think i think you definitely get this one if i was smarter i should have objected at the time because there’s a debatable way in which this was already happening back then but they had subscribe and save but that doesn’t count that’s like auto that’s like yeah with some sampling and stuff So, but I think it’s much more customer facing and prominent now. So I, I’m giving it to you. So I’m giving you four out of five, which any year would be good performance. And in this particular year, it’s both good performance and enough to declare you the winner. Ding, ding, ding, ding, ding. We have a winner. And I will be sending the Claret Jug to your home to live for the next year. Scot: [38:30] Awesome. Thanks. Thanks everybody. Jason: [38:31] Everybody I would like to I am a little salty to the folks at Shopify Toby if you’re listening if you had only said yes to whatever acquisition came your way I would have been 100 so thanks dude thanks for everything so now for the three listeners that have hung out for our 15 minute of pre-ramble and our and our 20 minutes of scoring you finally get to the meat what the heck is going to happen in the world of e-commerce in the next year Nostradamus Thomas? Scot: [39:00] Yeah, let’s continue. I just went, so why don’t you give us the Jason Retail Geek Goldberg 2024 predictions for retail. Go. Jason: [39:12] Yeah. So last year, retail media networks were super hot. I think this year is going to be the year that the big retail media networks really start focusing on their in-store audiences. So I’m calling it Retail Media Networks Go In-Store, and I’m predicting that at least one top 20 retailer will launch a digital in-store ad network. So some kind of screens or interactive displays in a store that you can buy ads on through the retail media network. Scot: [39:41] So I’m in Sephora or whatever retailer. There’s a cool screen telling me about this exciting new Kardashian lip color. And I go and interact with it and suddenly an ad comes up for something else. Jason: [39:53] Exactly. Scot: [39:55] Okay. Jason: [39:56] Switching you to the Taylor Swift cosmetics from the Kim Kardashian ones. Scot: [39:59] Whoa. Swifties make another appearance in the predictions. All right. Jason: [40:03] Exactly. My second one, I know what the spirit is. I struggled to make it specific enough that we can measure it, but I tried. So we’ve been talking a lot about AI. You had an AI prediction last year. [40:16] I think while a lot of these trends kind of get really buzzy and then die down, I think AI is the real deal. I think despite all the hype, AI is going to be even hotter in in December of 2024 than it is right now. And so the way I’m gonna try to quantify that is, I think by December of 2024, it will be more common than not that if there’s a text box in an e-commerce experience, it’s gonna be powered by generative AI. So we’re gonna start typing sentences into all of these search engines instead of keywords. I think it is gonna take consumers a little while to learn to do that after it’s possible, but I think that’ll be really common. And then I think at least one retailer is going to have an AI-based auto replenishment solution that has significant adoption. And I need to clarify that because one retailer, Walmart, announced it at CES yesterday. So I don’t think it exists yet, but they’ve announced that they’re going to do it. And my prediction is not that they’re going to try it. My prediction is that it will work or someone else will do one that works. and it’s very different than like a subscription-based thing where you automatically get a fixed amount of something. This is going to be, you know, handing the keys to the computer and letting the computer decide how much peanut butter you’re going through and making sure that I send you new peanut butter whenever you need it. Scot: [41:38] Hmm. Cool. Jason: [41:40] So that’s number two. Number three, I really think this is going to be a bifurcated year in terms of retail prospects. I think we’re going to have a handful of retailers that are really going to do well, that are poised for some growth rebounds from the last couple of years. Yeah, I kind of think Amazon and Walmart are both going to be in that bucket. I think we’re going to disagree about this, but I think some of the Chinese companies like Timu and Shein might might be in that bucket. And I think there’s going to be some other traditional retailers that really struggle. And so you’re either going to do well or do poorly. I don’t think there’s going to be very many retailers kind of treading water in the middle of the road. And as a result, I think we’re going to have a couple more significant bankruptcies in 2024. So the Grim Reaper is at it again. I’m once again predicting that at least two well-known retailers will close their doors and this year i’ll be slightly more specific at least one of them is going to be a specialty retailer so in a category and another is going to be a general merchant or department store so i hope to be wrong on that one but it is what it is that’s prediction number three how about a little size this can be like a two unit kind of a thing or no no no these uh yeah like these have to be a little more two two top 50 retailers like oh okay oh let’s write Write that in because I won’t remember that next time. Okay. [43:02] I will add it and then delete it in about six months when you’ve forgotten. No, I’ll remember. Yeah. So number four, and this is where I think it’s going to start getting fun. [43:12] I actually think that we’re going to see more Chinese companies focusing on Western consumers. So I actually think that for a variety of reasons, the Chinese economy is not as hot as it once was. And I think it’s going to take a little while to recover. So I think there’s going to be more entrepreneurs in China trying to export their solutions to other parts of the world. And, you know, Timu and Xi’an are certainly the two most noted examples of companies that don’t sell in China, but do sell in the U.S. I think Xi’an is going to successfully execute a Western IPO next year. And I think Timu is going to continue to grow. And very specifically, I think by 20, by the end of 2024, Timu is going to have at least 75% of the e-commerce revenue that we see from a very well-established U S retailer like target for e-commerce. Scot: [44:06] Okay. Now, are you implying it comes out of targets hide or that just like that? Jason: [44:10] I do think it’s partially is going to come out of targets hide, but I’m not specifically saying that I feel like target could come down a little bit and that would help me make this. but I actually think e-commerce will not be the sore spot at Target next year. Scot: [44:25] Got it. Jason: [44:27] So that’s number four. I’m bullish on the Chinese companies coming to America. And my fifth one is going to go to grocery e-commerce. So, you know, grocery e-commerce grew a lot during the pandemic, but fun fact, grocery e-commerce actually shrunk a little bit in 2023 relative to the big growth they had in 2022, like partly because groceries got more expensive, people, it was safer to go back to grocery stores. And so people kind of regressed a little bit in their e-commerce shopping. So the best source we have for e-commerce data for grocery is BricksMeetClicks, which is a big, it’s a survey, but it’s a big survey. So the BricksMeetClicks folks said that grocery e-commerce shrunk by about 2%. And I’m saying they’re going to grow by like 25% in 2024. So very meaningful acceleration and growth. Scot: [45:18] Cool. Jason: [45:20] So those are my five. Some years we did bonuses. is. I’m just going to throw out some other things that I guarantee are going to happen, but I don’t want to bother making them predictions because they’re too hard to measure. But as I did this year, again, I’m going to say live streaming is not a major thing next year either. And I’ll throw the metaverse and crypto in there as well. If you’re an innovative startup that’s going to solve retail with live streaming the metaverse and crypto, please don’t send me an email. Scot: [45:46] But it’s on blockchain. Jason: [45:48] Yeah, exactly. If you’re doing anything on blockchain, the first thing i need to know is why i can’t just do it with a database and why i need a distributed ledger so if you can’t answer that question don’t call me um because blockchain yeah, i i think another one that really annoys me i couldn’t figure out how to measure this so i didn’t make it a forecast but i think you’re going to hear a lot less retail ceos blaming their poor performance on retail crime next year if you don’t know or haven’t been following it That’s mostly a scam. Shrink in retail is down. There is this new kind of crime called organized retail crime, which is awful, and people get hurt, and people should stop doing it. But it’s not economically meaningful, and it’s not the reason that any of these retailers miss their guidance. And I think we’re going to see. [46:34] And CEOs stop leaning on it as much because it’s becoming obvious that it’s a false excuse. And lastly, I was bullish on some of the big retail media networks in my predictions. I said one would go in-store. But a corollary to that, there’s a lot of really small retailers that are seeing the success of the big retailers and trying to launch retail media networks. And yeah, that’s not going to work. So if you’re, you know, a relatively unsuccessful e-commerce, a specialty retailer with small e-commerce or you’re a regional retailer, you’re just not going to have enough traffic and a big enough audience to make it work. So I think, you know, I’m starting to see some retailers that are probably on the wrong side of the scale equation, trying retail media networks and I’m mostly not optimistic for them. So, so you heard it here first. Scot: [47:24] So the world where they patch together in like a little alliance and like a a Battlestar Galactica kind of thing and get some heft. Jason: [47:32] There is. There absolutely is. And the most notable place that’s happening is in Europe. And kind of interestingly, the biggest retailer in Europe, Carrefour, like sort of embrace that. Like Carrefour is the Battlestar Galactica in this, this like, you know, convoy of ragtag, this fleet of ragtag ships. And so, so you’re exactly right. And I heard the giant French advertising company that is helping them do it is decent too. Scot: [47:59] Yeah. Soccer blue. One clarification on your grocery e-commerce thing. You know, that’s a big number, right? That’s like 30% off a big base, 25%. Are you counting like curb pickup on that? Jason: [48:15] Yeah. So I’m specifically using the Bricksmeet Clicks metric, which does include three categories of grocery. It’s curbside pickup, which is over 50% of grocery in most U.S. cities. It’s home delivery of groceries. And it is actually shipping of some grocery items, but that’s a relatively small one. Yeah. Scot: [48:37] So Instacart would be kind of captured in there as well. Jason: [48:39] They would. Yeah. Yeah. Side note, I actually, I think I’m not as bullish on Instacart as I think you’re going to be, but they will certainly be part of it that helps me make this prediction. Scot: [48:51] Cool. And we should have said this before we got into the predictions, but what we do is we do these independently and then we splat them into our shared show notes that we have here that Jason and I use. Jason: [48:59] Yeah. So it would have been possible for us to have the same predictions, but we did not. Scot: [49:03] We never see each other’s beforehand. So that’s a part of the fun. So there’s no, no, no planning or, or, you know, kind of swapping and prediction. Jason: [49:12] No cross-contamination. Scot: [49:14] But because we’re, we don’t have any revenue, we don’t have Pricewaterhouse verifying that. You’re just going to have to trust us. Okay. Jason: [49:23] What do you have, Scott? Scot: [49:24] Well, I want to point out that I see you snuck in three bonuses. So you took, so yet again, you’re hogging the stage, but that’s okay. You’re first in the, in the title there. Jason: [49:34] And I have many more words in my title in case you didn’t notice. Scot: [49:38] Being a rule follower, I have five predictions, not eight. And my first one is Amazon’s going to relaunch Alexa on a native LLM. So, yeah, Alexa and the whole Siri and what’s the Xbox one, Katana, you know, Cortana, they they once you interact with the chat GPT voice, which is a little slow, but it’s a little slower than those. But the responses are so much better. You really want to just throw your Alexa in the garbage can. So, you know, this is tricky because Amazon doesn’t have an LLM. The things they’ve done on AWS are kind of like geared towards being neutral, and I think they’re not going to stay neutral. So they have to be neutral, and then they have to rewrite Alexa on that. Maybe it’s tricky because what do you do? Do you call it like new Alexa, or do you change their name, or you’ve got some brand equity built there? So it’s going to be interesting to see how they navigate that. that. [50:40] And then number two is I don’t understand how Timu isn’t just wish dot 2.0. So in the early days of wish, everyone got all excited and they’re like, oh my God, this is amazing. I can buy all this cheap stuff and it comes and it’s amazing. And it’s like a dollar drone and it’s awesome. And then it showed up six months later and then it broke in five minutes. So I think there’s a lot of buzz around these things. I think a lot of this stuff gets supported by China and free shipping and these kinds of things that the Chinese government does to help give their Chinese-born companies an edge. And none of that is infinite, right? So we saw that with Alibaba and Alipay. That whole thing kind of has had a whole situation in China where it got too big and they didn’t like the success there. And Jack Ma, and Lord knows what’s happened to him. I think these, I think Timu is kind of, there’s gonna be some kind of an episode like that. And this was my, I kind of use the word falters. So that kind of thing. I don’t think they’re gonna do an IPO. That would really shock me. Jason: [51:48] Yeah, I think we’re going to, I mean. Scot: [51:50] Yeah. So we’re misaligned on that one, which makes it fun. Yeah, either could happen. Jason: [51:53] There are smart people that think on both sides of that one, but that’s a fun one. We’ll agree to disagree. Scot: [51:58] But both can’t happen. So this is a zero-sum game one for sure. Jason: [52:01] Exactly. Scot: [52:02] And then, you know, this one I guess we’re aligned on, but I kind of got more specific because you always do super generic ones that make it easier to get them. [52:13] Retail media networks are currently and i found a there’s a research firm called core site so like you i wanted to kind of pick a measurement stick here and they say the whole world that that whole thing in 2023 did 52 billion and it’s growing 20 so that’s their data and i said my prediction thus is it’s going to accelerate this year to 30 growth and that brings it to to about 67 billion. So, you know, clever listeners that listen to our Amazon recaps, you’ll know, you’ll notice that, well, okay, if that’s at 52 billion, Amazon ads are at like, what are they? Like 49, 45 billion? So, but that’s a run rate. So for that Amazon number, you take the quarter, and the last one we talked about was Q3, Q4 will be coming out soon. So we took the Q3 number, multiply it by four, and that’s how you get the 45-ish. So, so really doing 15 a quarter, but the prior quarter was like, like 10 ish. And the prior quarter that was like eight ish. So, so Amazon didn’t do 45 in a year. They probably did more like 35 to 30 in the year. But the trajectory is such that when you do the run rate, it comes out to be a big number. So, so they are a large part of that 52 billion, but they’re not like 90% of it. They’re, you know, 65% of it or so. So there’s that one. Jason: [53:34] Okay. Scot: [53:35] Number four, and this one we’re kind of aligned on, surprisingly, even though the specifics you disagree with. Here, I’ve been watching the Instacart. That was an important IPO because a lot of people thought it was going to open the IPO window. And then, you know, wah, wah, it did not. So that company IPO’d at $33. We did a deep dive on that, and that was a lot of fun. And now it is down to $23, kind of low $20s, and it’s kind of hovered there since the IPO. I think they’re going to really be able to solve their, they have a real rudimentary ad system. I think they’re going to really be able to turn the crank on that. And that’s going to make money rain out of the sky for them. And Wall Street’s going to wake up and say, this is pretty interesting. And then the stock’s going to respond and pop to over $40. So I wanted to do something that felt like a bit of a double from here and certainly above the IPO price. So, so I think, I think they’re going to decode that in 24. Now you, you kind of put it into your bricksy bricks and clicks thingy. It’s kind of in that bucket, but I was talking about stock price. Yeah. Jason: [54:42] I mean, they’re somewhat independent. Both could happen or both could not happen. Like I personally am going to take the under on Instacart. I actually think grocery e-commerce is going to grow, but it’s predominantly going to be the, the native providers of the goods. Like Instacart doesn’t have any groceries. They’re an intermediary and there’s pros and cons to that model, but I, I, I think they’re going to grow less than some of these other guys. So we’ll, we’ll see what that does to their stock. Like you kind of made it a stock prediction. So obviously that, that comes with its own dynamics. Scot: [55:16] Yeah. And there, there is a world where this one horribly falls apart. Like my Shopify prediction where, you know, they Instacart relies on this network of grocery stores kind of staying in the network and a big one like a Kroger which also owns a bunch of sub brands like Harris Teeter and whatnot if a big one leaves then the whole thing could kind of crumble and I this could be the worst prediction I ever made so who knows that’s part of the fun if it does you get to mock me endlessly for at least a year and then this last one is I kind of came back to the the the timu sheen uh well and I said well While everyone thinks, I actually had a typo there, so let me fix that. While everyone thinks Xi’an and Timu are going to take share from Amazon, this is every article that I read is Wall Street’s fighting a wall of worry about these these, you know, Eastern intruders and all this kind of jazz, these Chinese upstarts. I think that’s wrong. I think Amazon’s fine. [56:16] And, you know, Xi’an is really largely focused on apparel. So that’s really the kind of one that got me here. I think Shein is actually taking share from the fast fashion. I think Amazon has a fair amount of this type of product and will do fine with the underlying trend. They’re actually riding it themselves. And I think the ones that are getting hurt are the non-fast fashion, the slow, the glacierly slow fashion. So this is going to be your Nordstroms on the high end, your Macy’s, your Kohl’s, your Target, the apparel part of Target. I think those are going to really suffer. And as these Chinese upstarts really start scaling, that’s who’s going to get hurt. And I tried to put a number in there and I said, there’s going to be material share and I’d call it 10%. Jason: [57:03] Okay, so just clarifying, are you saying like Nordstrom, Macy’s, and Target e-commerce go down by 10% because she and Timu go up? Scot: [57:14] Yeah, it’s really the apparel. So I think it’s probably going to be hard to measure Target because I don’t think they break it out, do they? Jason: [57:19] I don’t think they break out e-commerce apparel. They do break out total apparel, but yeah. Scot: [57:25] Yeah, so I’m going to say Nordstrom and Macy’s just as companies. I think it’s going to hurt both offline and online. Jason: [57:31] Line it’s gonna like chew away at the apparel space and the traditional apparel space harder than you know those have already been under a fair amount of stress and it is gonna be yeah stress now I kind of agree with the spirit of this one again I think it’s hard to measure but I I would tend to concur like Amazon would like to be in the fast fashion and apparel space but they really haven’t won it yet so you can’t take something from someone that they They don’t already have. And Timu is a little different animal than Sheen at the moment. I’m sure Amazon is losing some share to Timu, but I have a feeling Amazon grows so much that it’s not going to be measurable in any way. So yeah, those are fun. It’s going to be interesting to see if you can hold on to the trophy. Obviously, 20 minutes after we made our predictions, I suspect we’re both feeling okay about them, but it’s going to be fun to watch the year play out and see what we got right and what we missed. Scot: [58:33] Yeah, yeah. This was an extra long one because we had a lot to cover. We appreciate you sticking with us to the end. And until next time. Jason: [58:43] Happy commercing.

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EP315 - 2023 Turkey5 Recap with Salesforces Rob Garf

Episode 315 is a recap of Turkey5 (The five days from Thanksgiving through Cyber Monday) 2023 with Rob Garf, Vice President and General Manager, Retail at Salesforce. This is Robs' Six time on the show, having previously been on episodes 110, 248, 282, 299, and 313.

Jason and Scot discuss the "Turkey 5" with their guest Rob Garf, VP and GM for retail at Salesforce. They analyze data from various sources to provide insights into the holiday shopping season. According to the U.S. Department of Commerce, e-commerce grew 7.75% in Q3, while total retail only grew 2%. Jason emphasizes the need for e-commerce to grow at least 7.7% in Q4 to stay on track. Adobe's data shows that Black Friday sales were up 7.5% and Cyber Monday sales were up 12.4% from the previous year. The speakers also discuss data from BigCommerce, MasterCard, and Salesforce, highlighting growth in online sales on Cyber Monday and Black Friday.

Rob Garf adds his observations on retail industry trends, noting an increase in demand and robust pricing. He mentions a rebound in demand in Europe, excluding the UK, and highlights retailers' focus on profitability and inventory levels. The discussion then turns to Amazon's innovative advertising approach during a Friday NFL game, where shoppable ads were displayed via QR codes. Jason believes this strategy will benefit Amazon, as it monetizes viewership and reinforces the brand.

Discounting played a significant role in driving demand during Cyber Week, with retailers offering an average of 30% off. Consumers were patient, waiting for attractive deals, while retailers managed their inventory and discounting strategies well. The luxury category, however, did not perform as strongly, with only a slight increase or even a decrease in sales. The hosts touch on the resale market and the growing popularity of Buy Now, Pay Later (BNPL) options and mobile wallets. They discuss the potential impact of mobile wallets on shopping behavior and note that BNPL resonates with new consumers and has replaced layaway.

Finally, the hosts mention the passing of Charlie Munger and the filing of an IPO by Xi'an, encouraging listeners to support the show and announcing more holiday shopping data and reports on Salesforce.com.

0:00:46 Introduction to the Jason and Scot Show 0:05:04 Black Friday: First Sales for Vendors 0:14:06 Softness in Consumer Electronics and Toys Market 0:14:55 Black Friday and Cyber Monday Impact on Holiday Season Shape 0:16:32 Retailers' Inventory Management and Positive Growth Forecast 0:17:47 Retailers analyzing profitability and customer profitability. 0:18:29 Increase in Demand and Robust Pricing 0:22:34 Amazon's Innovative Advertising and Potential Profitability for Holiday 0:26:27 Discount rates over Cyber Week in comparison to previous years 0:29:04 Retailers' management of inventory and transparency in discounting strategy 0:31:52 Consumer behavior and the rise of Buy Now, Pay Later (BNPL) 0:33:32 Mobile wallets and the impact on checkout process and shopping experiences 0:35:26 Buy Now, Pay Later Growing and Replacing Layaway 0:37:22 Charlie Munger's Passing and Xi'an's IPO Announcement

Throughout this episode make liberal use of real-time data from Salesforce Shopping Insights HQ, which tracks how 1.5+ billion consumers are shaping shopping trends. You can see a real-time holiday dashboard, powered by Tableau so you can interact with the data yourself on the Salesforce Holiday Insights page.

Episode 313 of the Jason & Scot show was recorded on Tuesday November 28th, 2023.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scot Show. This is episode 315 being recorded on Tuesday, November 28th. I'm your host, Jason Retail Geek 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. Vigilant listeners will remember that we promised you a delicious turkey five

Introduction to the Jason and Scot Show [0:47] sandwich starring none other than Rob Garf, VP and GM for retail at Salesforce. And that's what we're delivering today. Rob was here way back on episode 313 on November 8th. And he is back here today to tell us what happened during the Turkey 5. Welcome back, Rob. Rob: [1:05] Thanks for having me, Jason, Scot. Always a pleasure and look forward to getting into some of this really fun data. Scot: [1:12] Yeah, this is your record sixth time. So your old hat here. Before we jump in, we do want to just kind of set the table, keeping with the post-Thanksgiving, theme with some leftovers. I saw what you did there. Yeah. And we, meaning Jason and his army of interns, have gathered a bunch of data from other sources. So we just want to give listeners that, and we know you have your own data, and we want to paint a complete picture. So, Jason, give us the quick and dirty rundown of other data that we've seen out there covering the holiday period so far. Jason: [1:46] Yeah, yeah, yeah. Let's do it. And side note, Rob, we're going to keep making you come back till you get it right. Rob: [1:50] I appreciate it. I'm here. Jason: [1:52] I'll do what you need. Awesome. So, super quick reminder, Q3 data from the U.S. Department of Commerce, e-commerce for the quarter grew 7.75%, over, the previous year. year, total retail only grew 2% from the previous year. And so if you take e-commerce out of total retail, brick and mortar in Q3 2023 only grew 1.08%, so lower than traditional. So when you come into the beginning of Q4 and holiday in particular, in my mind, e-commerce has to grow at 7.7% just to stay at par. And brick-and-mortar has to grow more than that one percent. [2:37] So, and I like to start with the lesser data and work our way up to the gold standard, very best data we have, which is, of course, the Rob Garth. So our friends at adobe which have a different data set but similar methodology and slightly different definition so you can't perfectly compare apples to apples, they said black friday sales were nine point eight billion in the us which is up seven point five percent from the year before so that would basically be right at that par i was just talking about, they said cyber monday was up to twelve point four percent and that was hot off the press so i wasn't able to do the math on what growth rate that was. They said for the whole month of November year to date, that they see November up 4.6% from last year. So kind of below that par. These are all numbers Adobe is giving for e-commerce. [3:26] And of particular note, and I know we'll talk about this more, they've seen a significant uptick in use of Buy Now, Pay Later services, and they've seen deeper discounting than we saw last year. Now, Shopify is really out there with a big news cycle. And I don't want to say they won up Salesforce, but they bought the sphere in Las Vegas and broadcast their data on the outside of the sphere, which visually is, is super cool. But their data isn't so useful because they don't report same store sales. They had a, you know, some unknown basket of merchants that sold a bunch of stuff last year, and they had some unknown basket of merchants that sold more stuff this year, and we don't know if the same merchants were here this year and last year or if they added a bunch of merchants or, or if this is true growth. So, so while the Shopify numbers are interesting, if you're investing in Shopify, they don't tell us a lot about what's happening in the e-commerce world. I did see a super interesting quote from Harley Finkelstein, who's the president of Shopify, and it's possibly, possibly that he just misworded this, but he was excited after Black Friday and he said 17.5, thousand. So $17,500. [4:41] Vendors made their first sale this Black Friday weekend. So I took that to mean, not that they launched on Friday just in time for Black Friday, but that this was their first Black Friday where they sold anything. So that's 17.5 thousand new merchants. [4:58] And then he said, in total, 55 thousand merchants set their all-time daily record on Black Friday.

Black Friday: First Sales for Vendors [5:05] And while those two numbers sound impressive, if you kind of think about it for a second, you go, wait, the vast majority of merchants on Shopify that are B2C are going to sell their record. Cyber Monday hasn't happened yet, so take that out of the equation, are going to set their all-time record on Black Friday. So not surprised, you would expect the vast majority of all merchants to set their Black Friday record. And 17.5 thousand of them are new. So what that says is there's only 37 thousand merchants that are a year old on Shopify that sold more this Friday than last year on Black Friday. And that's, I guess, less than I would expect based on the usual reports we get from Shopify. So that, I'll just record that as a moment and our stock analysts that cover Shopify listening on the call can weigh in on that one. [5:58] BigCommerce, a slightly weirder data set. They saw an outlier, they saw 14% growth, but again, random, they're not trying to report at the industry, they're just reporting their clients. And then a particularly interesting one to me is MasterCard. I have a love-hate relationship with MasterCard. Unlike all the rest of you, MasterCard gets a set of data for stores and retailers, so they try to forecast what happened in retail, which is super valuable. Historically, I've seen some weird deviations from MasterCard that make me cautious about their numbers. But this year, they reported Black Friday, they did not report Cyber Monday. Their Black Friday number was up 8.5% year over year for eCommerce. [6:39] Which is at the high side of the mean for all these other datasets. And they reported that on Friday, total retail sales were up 2.5%. But if you back eCommerce out of that number, brick and mortar was only up 1.1%. So basically, I would call all those numbers par with our Q3 numbers. So, that kind of sets the table. Scot, take us through what we learned from Salesforce. Scot: [7:11] Yeah. So, a million questions, Rob. Let's start with, it seems like one of the biggest interesting battle royales is, A, why was Rob's face not on the sphere? And then B, it seems like one of the data sets is saying Cyber Monday is much bigger than Black Friday. And then in your pre-show, you had said you guys are seeing Black Friday exceed Cyber Monday. So let's start there. Which was bigger? Rob: [7:37] Yeah. Well, first of all, I lost the coin flip and Astro or Cody, which are critters in Salesforce world, won. So they got their faces along with Einstein on the sphere a couple of weeks ago during F1. So I'm still going for it next year, but we'll see what happens. But I digress. Let's get into the numbers. So yeah, we are seeing, you called it a battle royal. I appreciate any reference to 1980s wrestling, by the way. So thank you very much, but let's not go down that path. That could be a whole other podcast. But what we are seeing is, as you mentioned, a battle between Cyber Monday and Black Friday for supremacy. [8:19] And they are going back and forth. What we found in our data in 2019, Black Friday eclipsed Cyber Monday and has remained there, especially outside of the United States. And so we're seeing big growth and, you know, partly what's contributing to that is not only Alibaba, which has been in place for some time, but Timu and Xi'an, which I know you gentlemen like to talk about. So regardless what I think, two things based on all the data that you provide, and I appreciate the broad perspective that you share here, is people are actually buying. They might not be buying as much as they were in the past and throughout the pandemic, but But there is demand. And you know, I think that's important because when we look at our numbers and just to put it out there for Cyber Monday, and we can bounce around here wherever you'd like to go, is we chalked our number at 12.6. [9:13] Billion in the United States, and that's a growth of 3%. And I'll call it a healthy growth of 3%. And the reason being is, for the first time in five quarters, we saw growth being generated by increased consumer demand and not just merely higher prices, which is our indicator for inflation. And just to put it in perspective, let me talk about Black Friday here, because you mentioned the battle that's happening here. We saw 16.4 billion in online sales for Black Friday in the US, and that was up 9%. And so, as I mentioned, what this shows us is people are buying. What it's also showing is that there's a high concentration of online sales for those two days. And sure, you two gentlemen are laughing because that's been that way since Cyber Monday was coined in 2005, but there has been a smoothing out of demand, particularly around Cyber Week or cyber five for the last several years, but there's been a stark shift back to those two prominent days. Jason: [10:27] So interesting on the top line numbers, one of the, you mentioned that you're, you're seeing items increase, not just prices, right? Which kind of opens the whole specter of, of it's, we're not just seeing growth for from inflation, right? Are there any categories that you're like going into the holiday? It was like, hey, the growth was in essentials and food and things like that. And discretionary items like apparel and electronics and toys were not doing well. Did you guys see, like, are people opening their wallets on discretionary items or are sales continuing to be these kind of essentials and affordable luxuries? Rob: [11:06] Yeah, it's a mixed bag. And I do want to underscore your point, Jason, around. Growth being generated by more volume and not just higher prices. So that's exactly what we saw. 3% growth when you're seeing 9% increase in inflation is a tough equation to, be profitable and to work out in the consumer's favor. But in this case, we are seeing more demand. And the demand, as I mentioned, is a mixed bag. On one hand, we are seeing really nice growth in areas like makeup and health and beauty, skin care. We're also seeing nice growth in active apparel and active footwear as well. I categorize that actually as comfort. In uncertain times when consumers certainly are looking to really take control of their household balance sheets, oftentimes you migrate to comfort. You know, you can talk about comfort food, but this is just comfort gifting and comfort what you put on your body, both clothes and literally on your skin. And so we are seeing nice growth there where actually, if you think about it over the last 12 months, those categories have been hit a bit in terms of the growth curve. [12:20] And what you're seeing on the other side actually is luxury is softening a little bit, which which I think is important to note because for the last, I mean, gosh, through the pandemic and after, luxury was one of the most, no, not one of the most, was the most resilient categories. And we're starting to see a bit of breaking down, especially around the aspirational luxury side. So we're going to keep an eye on that. I will mention one other thing, actually, as it relates to categories that are doing well in the holiday and that is food and beverage and gifting, you know, in terms of. What people look to for comfort and experiences, they are gifting chocolate, they're gifting wine, they're gifting various gift baskets. We saw really strong growth, even starting, you know, the Tuesday before Thanksgiving and working its way through the entire holiday. Jason: [13:22] Interesting. One category or two categories that come up a lot, like coming into holiday, electronics had been in a pretty big swamp, like for the whole pandemic. And I'm curious, I've seen conflicting data about whether electronics are back or whether they're still soft. Traditionally, electronics would be one of the fastest movers for holiday. Rob: [13:43] Of course, of course. Yeah, I mean, consumer electronics, toys, right? Those two are still pretty soft. I think you really though need to put it in perspective in terms of the astronomical growth we saw on those categories over the last four years. I haven't done the math. You're really good at this, Jason. So I'm gonna put you to task maybe on your next LinkedIn post, but I am willing to wager, and I'm not a betting person, so I'm not really willing

Softness in Consumer Electronics and Toys Market [14:07] to wager, but I'd love to see the CAGR of those categories over the last four years. I'm guessing they're in really strong, like high team growth, which any retailer would be happy with that on a given holiday time period. So there is a bit of softening, but I think it's really important to understand it in context with the growth that they've seen over the last several years. Scot: [14:32] Cool. Um, so, you know, with these good showings and Cyber Monday and Black Friday, what's that mean for the rest of the season? Are you guys like doubling your forecast, tripling or, and what's that mean for the shape? We talk a lot about the shape of the holiday. Any, any, any changes to your thoughts on those? Rob: [14:49] Yeah. The shape or the anatomy. I've been asked this by a lot of retail executives because they're being asked by their board, like, are you sandbagging us?

Black Friday and Cyber Monday Impact on Holiday Season Shape [14:59] We need to really relook at this forecast. We crawled through the data over the last couple of days just to look through our model and see if we could see the data in different ways through different lenses. The reality is what we're seeing is that Black Friday and Cyber Monday were taking market share from the bookends of the holiday, from earlier on and later on, right before the shipping cutoff date. And so for the last five years or so, we have been seeing a smoothing out of demand for the seven days that we define as Cyber Week, Tuesday before Thanksgiving through Cyber Monday. And Thanksgiving became a really strong and important day, especially on the mobile device, especially as consumers. [15:47] Either being distracted or inspired, whichever you want to think about it, on the couch after Thanksgiving meal, looking at social. [15:54] But we've seen a snapback of the higher concentration of Black Friday and Cyber Monday. So it's not like there's incremental sales, and that's what I think you were getting at, right? I don't think there's incremental sales that we can now account for. We're still staying to our forecast of 1% growth in the US for November and December. That's how we define holiday and in the US and we're looking at 4% growth globally, really led by Europe. And I want to just put a caveat on this. Not only again, are we seeing that growth come from increased demand, but retailers have gotten smarter.

Retailers' Inventory Management and Positive Growth Forecast [16:33] I don't know if it's smarter, but they were very deliberate going into this holiday starting six months ago about managing inventory levels and margins. So there's been a lot of talk about how are we going to handle shipping? How are we going to handle our return policies? And also, how are we going to think about our open to buys? And so I think most retail executives, especially on the merchandising side, are feeling pretty good because they're working their way through the inventory, which by the way, as you know, has been a big glut over the last couple of years, especially in 2021, when so many products were stuck in the port of LA. I mean, that just created this bullwhip effect that we're still just getting our arms around now and getting over the hump. And so that's my long way of saying is we're not reforecasting. We still feel positive with that 1% and 4% growth in U.S. and global, respectively, because. [17:24] Retailers are taking a very close look at overall profitability and this concept of customer profitability as well. Scot: [17:32] Yeah. You'd said, so it seems like the curve was kind of flattening out and now it's like steepening again it's like kind of coming in at the edges and in kind of like shaping up in the middle part of the bell curve which is like the that,

Retailers analyzing profitability and customer profitability. [17:48] cyber week. Is that that's right. Okay. Rob: [17:51] That's really good. Yeah. It's kind of snapped back. Right. Yeah. Definitely. Yeah. Scot: [17:56] It's going to make that sound. Rob: [17:58] Where's the sound effects in turn? Are they there? Are they on call? Can we get that bullying? Jason: [18:02] I'll be adding that in post. Scot: [18:06] You had said something that kind of piqued my interest. You said people are kind of, you know, I may be rephrasing this wrong, but you said kind of demand is back. Like I knew it almost felt like you were saying before there was, you know, people were shopping, but it didn't seem like, you know, a new increase in demand. And now it is because you're seeing robustness in pricing and stuff. Is that say a little bit more about that? I'll make sure I understand what you were saying.

Increase in Demand and Robust Pricing Rob: [18:32] Yeah, you got it. So yes. And I, again, and don't think retail executives are doing backflips and thinking that we're getting back to roaring double-digit, growth coming out of the holiday. But what this is an indication, and by the way, we're seeing this as a leading indicator in Europe, let's exclude the UK, which is probably in the same rebound curve as the United States and Canada, but you take continental Europe and who are about two, maybe three quarters ahead of us in terms of the rebound, we're seeing inflation settle, the average selling prices settle down and people are buying more. So we're seeing average orders volume higher. We're seeing slight uptick in units per transaction, only slight. But the order piece is super interesting. We're seeing traffic. We're seeing continued really strong traffic. People are just really being diligent and patient and shopping a lot and looking for the best deals. And we'll have to talk about that in terms of what discounting patterns we saw as well. So that's my long way of saying Scot is people are buying more, they're doing it. By still making trade-offs. So there is a sense of let's load up on some essentials while we're getting good deals. [19:57] Let's look for travel, entertainment, like experiences. And you have to also think of the adjacent categories like luggage, as an example, if you're going on a trip, do you need something new to put your clothes in? And though they are, again, increasing, as I mentioned. So as I think about the sentiment, even with a 1% in the US growth, 4% global is what we're forecasting for the full holiday, retailers are feeling good about that. They want to exit this holiday on a really good foundation of profitability, a really good foundation on inventory levels. And most every retailer I'm talking to has a growth mindset. They're thinking about customer acquisition, finding new ways to do that because customer acquisition costs are still off the charts, but also loyalty, finding new ways to create stickiness, looking for adjacent categories, adjacent services, looking for partnerships to supplement what they're doing organically. And I mean, this would take us down a whole other path, but they're leaning into data. They're leaning into AI to better understand who those consumers are and what they're likely to buy and making sure they're able to create profitable customers. How was that soapbox? I just rattled off too much, too fast. Jason: [21:13] So hopefully you were able to digest it. But you kind of, you glossed over what they're really looking at is just selling ads to brands. Rob: [21:18] That's fair. Thank you. I could have just said that. You're right. That's a very good point. And yeah, we could, I love your take actually, seriously, given that on Amazon's move for the football game on Friday. Jason: [21:31] Yeah. So that's a great point. And maybe just to catch up listeners that might not have followed it. Something very different and unique for this year is that the NFL, you know, normally they have a Thursday game and they have Sunday games and a Monday night game. On Thanksgiving, they have Thursday day games during Thanksgiving. This year, they added a Friday game for the first time. And the sponsor of that Friday game was Amazon. It was broadcast on Amazon Prime, and Amazon actually had shoppable ads via QR codes in the broadcast, all sort of innovative, cool, new stuff. [22:11] The early read is that the viewership was pretty good for the Friday game. There's no history, so we have nothing to compare it to. I would argue fewer people are going and standing in line at brick and mortar stores for door busters. You know, the little bit of data we do have on brick and mortar shows that, like, there wasn't a huge, huge spike in in-store shopping. I feel like Friday has become more of an online shopping day,

Amazon's Innovative Advertising and Potential Profitability for Holiday [22:36] which means people are home more, which means there's an opportunity to watch a football game. I kind of don't imagine that the interactive ad formats, like, you know, we're high volume and really move the needle, but they're innovative. And I do think that that Friday game is likely to be a new tradition as the holiday shopping season goes from an omni-channel thing to an online thing. At least that's my POV. Rob: [23:03] Yeah, I am super interested in your point of view given how close you are to this. So I guess I'm gonna put you on the spot. Wow, look at me, I'm totally turning the table here, but this has been on my mind. And actually, interestingly enough, over the weekend at a party, somebody who's not in like retail, you know, he shops. That's the extent of it. He pointed out what Amazon did and thought it was really clever. So what did I hear? Like, did they spend a hundred million dollars for that? Regardless, do you think they made the money back going to your point, Jason, on selling ad space in there and kind of even if it's a break even and or they're gaining more prime members, it was a good day for Amazon? Jason: [23:42] Yeah, I am pretty confident it was a good day for Amazon. Like, one thing to remember is Amazon has a better model for monetizing eyeballs than anyone else, right? So, like, if you're Coca-Cola and you sponsor a football game, you're trying to get eyeballs and the only way you have to monetize those eyeballs is to get them to drink more Coke. Rob: [24:03] Right. Jason: [24:04] If you're Amazon, here's what you do. You get a bunch of eyeballs. You try to sell them something that you make money on. And after you do that, you sell ads to other people for more than you paid. And they try to sell something to that person, right? And so, you know, the combination of the ad revenue that Amazon generates and the top of funnel, and bottom of funnel benefit that Amazon gets, again, they're building their brand. Your friend that was just talking to you, he wasn't talking about a particular product he was shopping for. The brand he remembers is Amazon, right? And so you got that Amazon top of the funnel benefit, which is valuable and important. Amazon probably sold some stuff to people. So you got that Amazon bottom of funnel benefit. And then we know Amazon sold a bunch of ads, which is, you know, a huge, huge driver of incremental profit. So yeah, I definitely think we can call Amazon a winner there. I think when it all settles, we're also going to see that it was just a pretty good sales day for Amazon as well. Rob: [25:09] Yeah, I bet you're right. Yeah. The last point and then we can move on and by the way, welcome to episode one of the Rob Garf podcast, is the fact that I mean, knowing Amazon, those ads that you're getting are personalized in terms of them understanding who you are and even if it's a different size or a different brand or a different you know, whatever, even what they know about what's in your shopping cart, what you bought in the past. So anyways, it sounds like, as I would have suspected, you're pretty bullish about it and I am too. Jason: [25:37] So yeah, I do want to cover something just kind of fundamental. So, so we rebounded a little bit and we got bigger sales on, on Friday and Monday. Potentially we might've just pulled some sales in that were going to happen later in the month per your, your comments about not wanting to re-forecast. Did we partly pull those in by giving deeper discounts than we usually give? Like what, what did you see from a discounting standpoint and what does that say about potential profitability for Holiday? Rob: [26:03] Yeah, yeah. Yeah. So we actually looked at this going into the Holiday and we went back to 2019 and I have the team look at discount rates starting in November 1st for 2019, 2021, and 2023, what we had anticipated for this year. And what we saw and actually came true is we saw discount rates over Cyber Week hover just north of where they were in 2019.

Discount rates over Cyber Week in comparison to previous years [26:31] Don't forget, 2021, there were the lowest discount rates that we've seen because the product just wasn't there. So retailers, it was the first time they won the game of Discount Chicken. The short answer is yes. Retailers did discount the heaviest they have all year, right around 30% on average. And I think that's important. It's on average. I mean, we've all seen discounts of 40%, 50%, really creative discounting strategies. And so that definitely drove demand. I mean, going back to the consumer, while they're buying more, they're making trade-offs and they were really diligent. [27:09] They were really patient and they waited and they waited and they ultimately saw the attractive deals starting in earnest on Black Friday. They weren't even that great on the Monday, Tuesday, I'm sorry, the Tuesday, Wednesday, and Thanksgiving, Thursday until Black Friday, and then they started to buy. So they held out and they ultimately purchased those attractive deals. In terms of margin, I think we're doing okay. And the secret here is when we looked at the data, given all the inflation that happened, And actually, consumers are still, even with these deep discounts, paying more than they were in 2019. The optics are there. They're feeling like they're getting a good deal, but the reality is they're still spending more. So I think they'll be okay. And there wasn't this protracted discounting that did happen. And because they manage their inventory well, the retailers, and their discounting strategy as well, I don't think they're going to be forced with the hail Mary discounts that you often see right before the shipping cutoff date. So I think that retailers actually managed it pretty well. I give them credit too, by the way, what we saw in our data as well is retailers were a lot more transparent around their discounting strategy. [28:23] Many were offering price match guarantees. If they saw, you know, the consumer saw the price for less, and they were also much more transparent around their return policies as well. So people felt a little more comfortable buying earlier, even if the prices weren't exactly where they wanted it. So the long of it is, or the short of it, whichever way I look at it, is there were healthy discounts. Consumers took advantage of them. I'm still feeling more positive, especially than I have from last year, about margins. Scot: [28:57] Cool. You said something I want to dig into, and then I want to pivot to be in PL. You said luxury was a little soft. What do we make of that?

Retailers' management of inventory and transparency in discounting strategy Rob: [29:06] Yeah, and like I said, it's had a run, like I haven't seen before in any one category. I mean, don't get me wrong. Consumer electronics really strong and some other categories in the pandemic home looked really strong as well. But it continued after the pandemic, both in store and online. What we saw compared again, just to put in perspective, three percent increase on Cyber Monday in the U.S., nine percent increase in Black Friday in the U.S. [29:34] There was a tick low beyond flat for luxury. What it also showed is they started to. [29:41] Discount more than they typically do. You think of luxury, they're going to hold their really price and be sensitive around preserving their brand and their margins. And we were seeing that tick up as well. I think the ultra luxury is still alive and kicking, no problem. It's more of that aspirational luxury. One area that I think is really important to point out is the resale market. More and more luxury brands are playing in the luxury market game. I'm sorry, the resale market game, because they realize people are doing it anyways, and they might as well offer that in many cases on their own website. So like Coach as an example, Canada Goose as an example, have the capability to exchange product, which then allows existing customers to likely buy something at a higher price point. And then if the product is in good enough shape, they're able to resell it and allow for aspirational shoppers to actually access that brand and buy it where they might not have been able to in the past. So yeah, I'm not overly concerned about luxury. I mean, the brands are so strong and there's so much loyalty there, but it just does show that in the aspirational space, people are trading down to a degree. [30:55] You know, they're trading down for value in the resale market. In many cases, they're trading down for vintage. It's amazing to see how many, you know, sneaker brands and specific models are hot that we all remember from our high school days. And you know, even the younger generations like to save the world a little bit as well. Scot: [31:14] Yeah. So I guess what I'm getting at is, do we think the consumer's rolling over and that's kind of the BNPL question too, because one way to read BNPL increasing is people are under financial stress. So they're stretching out payments. Another way is, you know, seeing all this data and it's always sponsored by one of the BNPL providers. So I'm never sure how to take it, but it shows that, you know, millennials and Gen Zers like, they don't like open credit. And it's weird because my kids have this perspective too. I thought it was like, I thought it was totally made up and then they're like, oh no, I, you know, I hate having like these credit cards with big limits. And I'm like, well, if you don't use it, it doesn't matter. It just makes them

Consumer behavior and the rise of Buy Now, Pay Later (BNPL) [31:52] nervous for some reason. And do you think it's a generational thing or is it a little sign of softness on the consumer? And maybe the luxury is another indication that it feels like the consumer is rolling over a little bit or you don't see that. Rob: [32:06] Yeah, I mean, I think it is a bit generational to your point. I don't have those data's points to substantiate what you're describing. But a lot of what I learned is from my 17-year-old and 14-year-old because they're right in the smack dab of purchasing and trends and so forth. Don't worry, we have a lot more data at Salesforce to back this up, billions and billions of shoppers. But in any case, the anecdotes definitely help provide a full commentary. But we saw an outpay later over Cyber Week increase 7%. So that's healthy. It's a little slower than we've seen in past. What we're also seeing, and it started last year, is it's on lower and lower price point merchandise. So that also speaks to the adoption as well. It's not just on the big ticket items. I think if I zoom out for a moment as well, mobile wallets were really strong. Mobile wallets were really strong. We saw about a 50% increase year over year in that. Now, of course, it's a smaller base than traditional credit cards and debit cards. But still, it's showing the adoption because it's really breaking down the friction in the checkout process. But we keep a close eye on buy now, pay later, because you're right. It could be an indication, especially as consumers look to buy lower price merchandise, that it might be a softening in the market. But we're not quite there in proclaiming that. Scot: [33:25] You said a mobile wallet. That is catnip for retail geek, so I'll get out of his way. I bet he has a million questions. Jason: [33:32] Yeah, no, Scot knows I love a good mobile wallet and I'm sure everyone's already heard this,

Mobile wallets and the impact on checkout process and shopping experiences [33:37] but I have a hypothesis that some of the popular shopping behaviors we see in Asia aren't as popular here because we don't have as good a penetration of mobile wallets and that if you have mobile wallets, it makes certain experiences like shopping on social media and things like that easier because it only requires one hand instead of three hands. So I'd be curious, do you guys think you're seeing more mobile wallet users, or do you think you're seeing more transaction from the existing users, or do you have the ability to? To see between those two? I suspect I just asked you a question you're going to now have to go do research on. Rob: [34:17] Nick Neumann We may have that based on some of the primary research we do. We don't have access to personally identifiable information, so we can't see by user. But my thesis there is it's both. There are more people adopting mobile wallets because they see the convenience and the friction that's removed. And then once that happens, they're buying more. I think you go back to the Amazon example, part of why that's probably a home run for them is because it's a lot easier for somebody to buy in that form factor than let's say Roku or other Verizon user interfaces that you don't have a wallet associated with it. I didn't go through the shopping process on the Friday NFL game, but I can only imagine it was much easier than having to do it through other types of media. So I think that, yeah, I agree by the way, with your hypothesis that, you know, embedded commerce or shopping at the edge has been a bit stunted because, the wallet piece is not there or as accessible as it is in other countries.

Buy Now, Pay Later Growing and Replacing Layaway Jason: [35:30] Yeah. Two things I'll just throw out there on buy now, pay later. I mean, I do, I think it, it legitimately resonates with the new crop of consumers. And so I think it's growing for all the reasons that the Buy Now Pay Later people claim it's growing. But I would, there's two accelerators that are just kind of convenient in there. Holiday used to be a big time for this payment method that the youngsters on the call wouldn't have heard of called the layaway. And almost no retailer that I'm aware of has brought back layaway, like they all retired it in the last several years, largely because Buy Now Pay Later has replaced it. And so, you know, layaway is most popular around holiday. So, you know, to the extent that buy now pay later is the digital version of layaway. It kind of makes sense that you would see a spike over a holiday. Also, digital is growing much faster than brick and mortar. Buy Now, Pay Later is disproportionately online. So that, you know, is another reason you would expect Buy Now, Pay Later to spike. One thing that's a little alarming slash interesting to me is that Buy Now, Pay Later gets used for a wider range of purchases and merchandise than LayAway did. Like, LayAway tended to be big ticket items, your kid's aspirational toys, but Buy Now Pay Later gets used for food and consumables and things that economically you would argue probably don't want to be financing something that you need to rebuy every month. Rob: [36:52] Yes. Jason: [36:53] So I'll just throw that out there on Buy Now Pay Later. We are coming up on our allotted time. I do have two other pieces of news that just kind of interrupted the Turkey Five news cycle. And one of them I'm super sad about, and it's actual breaking news that happened while we were recording this show, Charlie Munger just passed away at 99. Rob: [37:13] Oh, wow. Scot: [37:14] That's terrible. Jason: [37:15] Warren Buffett's partner, and I just, I feel like, very admirable person. I've learned a lot. He and Warren Buffett, like, are super generous with sharing

Charlie Munger's Passing and Xi'an's IPO Announcement [37:23] all this thought leadership, and I just want to say best wishes to all his family and loved ones. Seems like you had an amazing life. Rob: [37:31] Yeah, I echo your sentiment. Jason: [37:33] Yep. And then in the middle of Cyber 5, you guys teased this a couple of times talking about Xi'an. and Xi'an disclosed that they filed an IPO. So that came out yesterday. It's a confidential IPO, so we won't actually see the prospectus until probably 2024 sometime. Okay. And the theory is that it's going to be, because of their not super transparent ownership structure and their Chinese ownership, it's gonna have extra regulatory scrutiny. And so the reason you'd file a confidential IPO is so you could start talking to regulators and negotiating what you're gonna do and what you're gonna disclose. And so they're probably working through all that stuff to then do the public IPO later. But it's, I'm excited for when that gets disclosed because there's a lot of speculation about how big Shein is and how profitable or unprofitable their model has been. And we're gonna be able to do away with all that speculation and get some real certified data. Rob: [38:38] I can't wait to listen to that show when you dissect that. It will be super interesting to see where they're allocating the investment and the capital. Beyond, obviously, hiring people, but what parts of the business. Jason: [38:51] I totally agree and that's going to be a great place to leave it because we have used up our allotted time. Rob, so grateful and congratulations on being our first six-time guest. And as per usual, if you enjoyed this episode or it was useful to us in any way, the two ways you can reward us are to do a giant enterprise contract for all your marketing services with Salesforce.com or, you can leave a five-star review on iTunes for Scot and I. So, you know, those are the two paths, choose whichever one makes most financial sense to you, but appreciate it if you do one or the other. Rob: [39:29] Yeah. And if I could say too, I know we're running up against time, but I want to give a big, sincere thank you. Obviously we just came out of Thanksgiving, so I want to show my gratitude. You know, it's amazing. Anytime I'm on the show, the people that reach out to me, not only talking about the show, but how much they've learned from you. And so for you to trust me and providing my perspective and Salesforce perspective means a lot and just thanks for being such good friends. Scot: [39:56] Robert Leonard Jason said, no, but I overrode him just so you know the history. I thought, you know, Jason's like, I'm the retail geek. We don't need any Garfies in here. Rob, remind us where could people go? You guys will be updating your data. I assume, you know, this is the last time you'll be on for this year, but I'm sure you'll be publishing more data as we get deeper in the holiday. Where do people go to see that? Rob: [40:19] Jason Cosper Yeah, we have our Shopping Insights HQ on salesforce.com. We will be updating the information. We'll do a mid-season report right around the shipping cutoff window, and then we'll do an all-wrapped-up just around the beginning of NRF. So keep an eye out. Scot: [40:34] Awesome. Well, thanks, everyone, and until next time... Jason: [40:38] Happy commercing!

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The Jason & Scot Show. Podcast about e-commerce and digital shopper marketing.

Editor note: We're trying some fun new AI features for this episode. The following show notes were written by ChatGPT. We're also let AI remove all the "stop words" in our audio, and we've switched from Google to OpenAI for our audio transcription. Let us know your feedback.

In this episode of the Jason and Scot show, our special guest is Sean D. Nelson, the CEO and founder of Lovesac. He shares his inspiring journey of starting the company as a beanbag business in his basement and growing it into a successful public company. Sean highlights the key moments of his entrepreneurial journey, including winning a million dollars on Richard Branson's reality TV show and navigating the ups and downs of the business. Sean has upcoming book and podcast, both entitled "Let Me Save You 25 Years: Mistakes, Miracles, and Lessons from the Lovesac Story." Sean emphasizes the importance of being a direct-to-consumer brand and how Lovesac has found sustained success by focusing on customer acquisition costs and offering a high-quality product. He discusses the concept of direct-to-consumer and shares his thoughts on its significance. Sean believes that having a differentiated product that provides value to customers is crucial, rather than simply relying on an online sales strategy. The conversation also touches on the topic of innovation and how Lovesac has been able to push the boundaries of what a furniture company can offer. Sean discusses their Stealth Tech innovation, which incorporates surround sound into their couches, as well as their commitment to creating products that are built to last and designed to evolve. Sean acknowledges the challenges of operating in physical retail and highlights the importance of their showrooms in reducing customer acquisition costs and providing a hands-on experience for customers. He also mentions their partnerships with Best Buy and Costco to expand their reach. The discussion expands to the future of retail and e-commerce, with Sean mentioning the transformative role of AI but cautioning that it takes time for movements to fully evolve. He emphasizes the importance of being patient and keeping an eye on developments in the industry. The conversation concludes with Sean expressing his long-term commitment to Lovesac and his desire to build something meaningful rather than focusing solely on personal gain. Listeners are invited to check out Sean's podcast and website, as well as his upcoming book, which will be released in January. Overall, this episode provides insights into the journey and philosophy behind Lovesac's success and offers valuable perspectives on entrepreneurship, innovation, and the future of retail.

Chapters 0:00:46 Introduction and Welcome to the Show 0:08:36 The Journey of Love Sack: From Highs to Lows 0:12:05 Love Sack's Traditional IPO and Company Performance 0:15:49 The Importance of Having a Differentiated Product 0:19:49 The Value and Overhype of Market Movements 0:23:18 Sactionals: Built to Last, Designed to Evolve 0:25:56 Driving a Movement for Sustainable Consumerism 0:31:36 Innovation and the Evolution of Lovesac's Product Line 0:37:07 The Strength of Lovesac's Physical Showrooms in the DTC Landscape 0:40:03 Testing and Learning: Mobile Concierge and Shop and Shop 0:41:52 AI's transformative role in the future of technology 0:50:08 Long-Term Vision vs Quick Profit

Episode 313 of the Jason & Scot show was recorded on Thursday, November 9th, 2023.

Transcript Jason: [0:23] Welcome to the Jason and Scot show. This episode is being recorded on Thursday, November 9th, 2023. I'm your host, Jason "RetailGeek" Goldberg, and as usual, I'm here with your co-host, Scot Wingo. Scot: [0:37] Hey, Jason, and welcome back. Jason and Scot show listeners. Jason, we're very fortunate to have a entrepreneur on the show. I'm the entrepreneur side of our partnership. So I always really enjoy these.

Introduction and Welcome to the Show [0:49] We have on the show, Sean D. Nelson. He is the CEO and founder of Lovesack. And a little birdie told me that he recently started a podcast himself. He started Love Sack as a beanbag company in his basement when he was around 18. And now it's a public company and doing relatively large revenues over 600 kind of run rate. If I look at the last quarter, I took a little glance at that. Sean, welcome to the show. Shawn : [1:13] Thank you. Thanks for having me. Great to be with you. Jason: [1:16] We are thrilled to have you, Sean. Listeners always like to kind of get the background. I'm imagining you don't have a deep background before you started Love Sack because you started it so young. But can you, like where were you in life when that brought you to start build your own product? Shawn : [1:34] Yeah, strangely, 25 years in and still running the same company I founded as my side hustle in college, which is exactly what Love Sack was. So 95, all the way back then, I made a giant not bean bag because I thought it would be funny. I literally, 10 days out of high school, got off the couch at my parents' house, having this dumb idea, like, how about a beanbag, like, me to the TV, like, the whole floor, like, huge. Drove down to the fabric store, bought some fabric, brought it home, cut it out, and then began sewing it up, broke my mom's sewing machine, neighbor finished it, took three or four weeks to try and stuff it, originally with beads, but couldn't possibly find enough, so looked around the house, I just found out my parents' camping mattresses chopped up yellow foam, you know, like those yellow slabs of foam you take camping, on a paper cutter in the basement. And eventually, I mean, foam, packing peanuts, old blankets, had this thing stuffed and started using it out and about through university, taking it camping, back of the truck, driving movies. Ended up putting it away for a couple years. And by the way, everywhere I took it, everybody wants one. Like everyone's always like, Oh my gosh, what is that thing? Where'd you get it? I was like, I'll never make another one. It was such a pain in the butt and put it away for a couple of years to go be a missionary for my church. [2:58] And came back to finish up university in 1998. And that's when I founded the company. Cause people kept bugging me to make them one. And it became my side hustle in college. And we tried to sell these things eventually beyond our friends and family and beer fest, May fest, October fest, car shows, boat shows, 10 by 10 booths, how we got started. Tried to sell them to furniture stores and they laughed at us and told us it was a dumb idea. [3:34] Eventually, at a trade show got discovered by the limited to this is like, you would not today as justice like in the malls, like little girls pink and purple fuzzy stuff for their bedrooms and, and clothing. Anyway, they ordered 12,000 little love sacks, not knowing it was me and a buddy and like a woodchipper shredding foam in the back of this furniture place. And, and that forced us to source over in Asia, which is, you know, where I had served my mission. So I speak Mandarin Chinese. There's a whole story there I won't get into it it was just kind of one thing led to another led to another week we built a factory to support that 12,000 sack order we then went out to the furniture stores who again laughed at us didn't want our $500,000. [4:19] Beanbags having completed that order wanting to keep the factory going so we finally opened our own store in a mall that didn't even want us there but finally capitulated let us in because they We had a space to fill for the holiday season, in Salt Lake City, Utah, and it just exploded. We did a good job, carpet paint, neon sign, made it look like a proper mall chain store selling giant beanbags, and it just took off. Like, it worked. People came in, flopped down, music bumpin', big screen TV, playin' movies, had a great time. There was a couch in the corner to look pretty, be part of the decor. People kept asking about the couch, And that led us to eventually, many stores later, many states later, invent Saxionals, which is our modular sofa solution, which now drives almost 90% of our sales today. So we're more a couch company by far today than we are a beanbag company. And there was a whole, listen, I'm skipping over decades of time really, but there was a whole transition where we... We went through after we invented the sectionals and solved all these problems people have with couches not only can you ship it to your house via FedEx which was hyper relevant you know for. [5:32] E-commerce and digital marketing obviously but it's watchable and changeable, and movable and it can be with you the rest of your life that that led us to a whole design philosophy that now. [5:42] Drives are innovation we think is a really cool secret sauce called design for life but. 10, 20, 50, 100, 250 locations now. We came public in 2018 on about 100 million in sales. Right around the time there was just tons of fervor in this direct consumer movement. We had farted around, we'll call it as a furniture store, selling rugs and lamps and bowls and baskets and all the obvious things along the way. And it was really when we purged all that stuff around 2015, seeing the Caspers of the world emerge and Warby Parker's and even Tesla with their showrooms. Could we adopt a more e-commerce-led model with showrooms for people to kick the tires, so to speak? And that transition is really what unlocked the lovesack that you see today and where most of our growth has come since about 2015, 16, when we made that pivot, took the company public, wrapped around that direct consumer story. So we're not a digitally native brand originally, we were actually a retailer that pivoted and became digitally led. And now we don't even operate stores in the traditional sense. We don't, we don't stock things there. You know, you don't walk out of there with your product. They're all really online sales and those showrooms are extremely powerful mechanisms for helping people make up their mind around a five or 10, $15,000. [7:06] Purchase where they want to see the thing and sit on it and, and, and see if it's everything it's cracked, it's cracked up to be online. And so we, we, we believe that we really, uh, through that arc. And then by the way, since coming public, I don't know, six, seven X, the company this year, you know, we'll, we'll be on a run rate to the analysts were a public company. So the analysts show us around, you know, it's called 700 plus in revenue and profitable, very profitable and cash generative. So we think, you know, the direct consumer game, in a lot of respects, Love Sack is one of the unlikely winners of that entire movement. Because I think at that scale, there are very, very few, what I call successful direct to consumer brands. And so we're really proud of that. And it's been a long saga, and we continue to grow and change and adapt and evolve. Jason: [8:01] It's an amazing story. And we definitely want to unpack it. But I want to go all the way back to the beginning for one second. Did that neighbor who helped finish sewing the first prototype get any equity? Shawn : [8:13] No, it was my ex-girlfriend's, mom, so about the time she exited, you know. No, it was just a friendly favor, but the truth is a lot of people helped out along the way, and a lot of people had equity or have equity in Love Sack from along the way, but look, we've been through every high, every low. Somewhere in the middle there, I skipped over it just because of brevity. Not only did I win a million dollars on TV with Richard Branson,

The Journey of Love Sack: From Highs to Lows [8:38] his reality TV show on Fox Network back in 2005, if you can believe that, the rebel billionaire. But I also guided the company through a complete chapter 11 reorganization back in 2006, spearheaded by Venture Capital, which was painful and ugly and embarrassing and humiliating. So we've been through every kind of thing over these better than two decades. Scot: [9:01] Yeah, my deep dive question is, when you rented or bought the wood chipper, did you tell them you'd be throwing foam in there, or did they think you were clearing up a tree? Shawn : [9:09] Oh, that's so the original story. Yeah, the original woodchipper actually, you know, if you've ever used one in your backyard or, you know, you shove sticks into these things, that's basically what the original shredder was. And it was in the back room of this furniture factory already. They had used it back in the seventies to shred foam, but it had an electric motor, right? Instead of like, okay. Scot: [9:30] So it's okay to be inside here. Shawn : [9:32] Well, yeah, but I had to rehab it because it hadn't been used in like a decade or two because shredded foam had fallen out of favor in furniture. And then later to do that bigger order, we couldn't afford like a proper German, shredder, so we ended up driving out to farm country to find more of those same kind of shredders and actually found a hay grinder called a hay buster can shred 2000 pounds at a whack. Scot: [9:57] And that's a lot of power. Shawn : [9:59] Yeah, it's powered by a tractor. So we, you know, agricultural loan for tractor and hay grinder. I mean, crazy, crazy story in the beginning. Scot: [10:07] Yeah, as a family, you gotta figure out how to get it done, right? Whatever it takes. Shawn : [10:12] Whatever it takes. Scot: [10:13] I didn't know the Richard Branson thing, so that was interesting. Did he like, was he an active investor, or that's like one of those things where his people kind of take over and you never hear from him again? Shawn : [10:22] No, I mean, it was a weird situation. He had a reality TV show, 2004-5, The Rebel Billionaire, you know, whatever, 16 contestants. It was like The Apprentice, but not for apprentices, for entrepreneurs. So my runner-up on the show was Sarah Blakely of Spanx, gives you an idea. Scot: [10:38] Oh, okay, cool, neat. Shawn : [10:39] Yeah, yeah, so we became great friends, she and I, Richard and I. I ended up also being named President of Virgin Worldwide for a minute as part of the prize, believe it or not. So, worked with Richard, worked with all of his CEOs. Totally weird outcome. And, you know, but huge, huge blessing and a huge piece of story. And he was involved in sort of our VC round that ensued on the tail of that. Scot: [11:06] Okay, and then I think I saw that you guys were on Shark Tank, right? You were like one of those that you know, kind of one of the big success stories. Was that the OG Shark Tank or? Shawn : [11:16] No, we weren't on Shark Tank. A lot of people thought that. There was a Love Sack copycat that's on Shark Tank. Okay, and so they got... Scot: [11:23] I was confused because like Google says you were and then I was like, but then I couldn't find the episode. Jason: [11:28] There's a whole TikTok channel dedicated to Love Sack and Shark Tank and it's super weird. Shawn : [11:36] That's super, yeah, people get confused. Scot: [11:42] Yeah, yeah, super weird. Yeah. And then when you did your IPO, was it a traditional IPO or did you guys get caught up in the SPAC craziness? Shawn : [11:51] No, we did a traditional IPO back in 2018 and you know, our stock has been really volatile for lots of different reasons that, you know, COVID was crazy, but the company performance has been really solid. So we're just trucking.

Love Sack's Traditional IPO and Company Performance Scot: [12:06] He, I think, was at Graham that said in the short-term it's an emotional machine, in the long-term it weighs your financials. So you got to, it's very hard, you know, I took a company public, not to the level you have. And yeah, it is, I was like, I'm not going to look at the stock, it's not going to influence me. And then suddenly everyone's like, are we making the quarter? And it's like, okay. And then suddenly it's very hard to get out of that, that short-term mindset. So congrats to you for sticking to it for so long. Shawn : [12:29] Yeah, look, I'm actually a big advocate of it, having lived inside of it now for almost six years. Scot: [12:36] Yeah, the transparency is good, you know, and I like that part of it, I think that's good for, you know, to kind of have to put out everything that you're doing, you know, it's a, the ultimate, yeah, it's like, yeah, transparency tends to be a good thing. Shawn : [12:48] I think it's the right way for companies to be governed and ran. Anyway, we could get into that if you want. Scot: [12:56] Yeah, I like the, you know, and you talked about all the other, we call them digitally native vertical brands, like the Warby's and Bonobos and all that. And yeah, a lot of them have not made it past kind of like that hundred million dollar level. And you guys have obviously, you know, six, seven X that, which is awesome. And then, you know, the big knock on Casper for a long time was as we've actually had this guy, Dan on the show, people were able to pick apart the CAC LTV and they found the average selling price was like, Jason will know these numbers, but it was like 350 and their cost to acquire a customer was 400. And they were like, you know, that obviously wasn't sustainable. So it's pretty neat that you guys have figured that out. Shawn : [13:36] Yeah. I mean, that's at the root of why obviously we've had some sustained success. And I think it's also at the root of why there are almost no other direct consumer brands making any money. End of story, full stop. And it's pretty fascinating to watch the whole thing unfold, because it really has been a movement for almost a decade. Scot: [14:01] Yeah, and I don't want to dig into the information you don't divulge publicly, so this is not a trap or anything but is it because the selection or your products, you've kind of cracked the code on Kakao TV, like what do you, and I don't want to know any methods or anything. and what do you attribute it to? Shawn : [14:18] Look, I think, let's start at the root. I think that many companies, product companies, let's start there, overlook the fact that you need a really good product. I think they pick a category and they say, oh, it could be a direct consumer brand. And the truth is, what does that even mean? Do you mean, because here's the funny thing. When I hear analysts and industry people talk about direct consumer, it has become synonymous over the last decade as it's unfolded today with e-comm. Oh, you mean you're an e-comm company and in many cases you do half of your sales through wholesale. So what does it even mean? I mean, if you want to talk about a direct consumer brand, LoveSack may be the most direct. We don't have any wholesale. I'm talking zero, and we only sell through our own channels, whether it's our website or our showrooms. And we have these partnerships, for instance, where we operate our own showrooms inside of a Best Buy or a Costco. [15:26] But you know, so this whole phrase even, direct-to-consumer, I think is really kind of silly. You mean you're a company that sells stuff online and maybe in showrooms and maybe in wholesale? So you're a company that sells stuff. So let's start with stuff. And you have to make, I think, if you want to be successful in the world, it's not a new concept. You have to have... A great product or or you have to have some other really. Hiller efficiency

The Importance of Having a Differentiated Product [15:52] and i think what most have discovered it was a list again over this long decade of direction sumer evolution is that without a really differentiated product. You're just another company with a clever name lots of funding and if you throw lots of money at anything it's gonna grow. But you need to be differentiated. So Love Sack, you know, start with the giant beanbags. They were unique, especially in their day. There's tons of copycats out there now. [16:24] Sactionals are extremely unique. The problem is they photograph just like any other sectional sofa. Like if you took an image of Sactionals and an image of one of, you know, out of any competitor that sells couches, ours looks a lot like theirs. But the difference, the differences are myriad in terms of their washability, changeability, quality, and modularity, and many of those aspects, especially on the modular side, are patented at LoveSac. And so once you dig into it, you find that that's the number one driving factor, is we have a product that's truly differentiated, truly gives more value to the customer, and therefore, we can extract more from the market. It's really that simple, right? And that's at the root of why our CLV to CAC ratio it was so high and sustainable and cash-generative and profitable. And then we could go down all kinds of other paths. We could talk about our website, execution and stuff like that. And all of it needs to be there. Look, running a business is multifaceted and difficult. But at the root of it is that. Jason: [17:27] For sure. One of the things I sort of admire about your company is the original premise was not to have a particular go-to-market strategy. It was to have this great product that people wanted to have in their lives, right? And it feels to me like that, the whole quote unquote D to C movement, like this notion that before you solve any other problem, you're just gonna put a flag in the ground, like this is how you're gonna go to market, that just, it just seems silly because that may not be how the customer wants to acquire your product. Shawn : [18:00] Yeah, I think you're right. And I think that, so I think that whole movement that we're a part of, so I don't mean to like bag on the movement. I'm just an observer as well. Like I've been living in it, right? And we put, and I'm being really transparent, we put on those clothes very intentionally. [18:16] Because people that planted those flags were getting funded. People that planted those flags were being understood at the time. And these movements come. Right now, I could hold up a flag that said AI on it and go out there and raise a bunch of money and do something. And in the end, 99 out of 100 of those, flags are going to fall by the wayside after having tons of money thrown at them and Probably 1% of them will go on to you know be the next Googlers or who knows what right? But these movements come and go and and and I'm and this is what I'm saying You gotta be careful. I'm not bagging on the movement because these movements are useful these movements drive economic activity these movements drive innovation But they're often way overhyped, not as, I think, not as, so, you know, I mean, we could get into AI, you guys are, I'm sure, tracking it just like I am. What does that even mean? Oh, you mean like software? You mean like software that, that does stuff in an automated fashion? Like is that, is that, is it really that new? But it doesn't matter. It's a story that's being heard. It's a story that's being understood and it's where the momentum is. And so if you're able to wield, take advantage of these movements in the marketplace to your end, that's what, and that's exactly what LoveSack did. We put on those clothes, we took a concept that had been around for a long time, our concept. [19:42] And look, in the end, the thinking and the development and even like, let's say the web services and all the things available to that movement that

The Value and Overhype of Market Movements [19:49] were spun up because of that movement, we benefited from. The money raising pricing aside, momentum, going public, whatever, all these things aside. So that's why I'm saying I think that there is value in these movements, but fundamentally, you still need to have a great business, a great product, something that's truly differentiated, because anyone with some funding can go out, buy a logo, buy a name, and look like they know what they're doing. Jason: [20:20] And yeah, for sure. And to your point, there's a, there's a funny data by going around in, in our industry this week that like over a hundred million dollars or I'm sorry, Amazon's GMV is, I'm sorry, a hundred billion dollars of Amazon's GMV is from AI. And you hear that and you're like, oh my God, that's huge. And then you find out it's product recommendation tiles that they launched in 1997. Shawn : [20:45] Yeah. Yeah. Yeah. Jason: [20:47] Which, yeah. Yeah, so I do just want to like kind of wrap up this section, but put it in context. When you open that first store in a mall, like the mall competition for furniture stores was like Expressions Furniture, right? Which no one on this call would even remember probably. And then like by the time you really, after your IPO and really caught fire, you were competing directly against all these D to C companies that were expanding in malls. You were probably competing for leases. Shawn : [21:18] Yeah. Jason: [21:19] It's quite the, quite the journey. Now, Scot mentioned at the beginning of the show that you had recently started a podcast and I'm two part question. How the heck did you have time to start a podcast and tell us what the premise behind the podcast is and what you're talking about? Shawn : [21:36] Sure. Yeah. Just to comment first on what you pointed out, there is this whole strip in the malls now out there right now. But by the way, in these shopping malls that I was told were dead, you know, I could read the headlines of shopping malls are dead back in 2001 when I was opening my first shopping mall and I was forwarded those kind of emails by friends and family who were concerned. And here we are in 2023 and while these things change, they take decades to change. Meanwhile, they've evolved and you have all of these direct consumer players now and it It just cycles through, you know? What the players inside of these shopping centers happen to rotate, and I've watched it all evolve, and by the way, they're rotating again, because a lot of those players are not viable. Some of the best ones, biggest ones, you know? Like, concepts like Peloton, who I think is amazing as a concept, you know? They have their struggles, and so we watch these things evolve. In terms of, the podcast is relevant to this. Let me explain why. We had the chicken, I'm going to go, given the nature of what your podcast is, I'll give you a much broader picture than just, hey, why am I recording a podcast on my own and writing a book? [22:55] It works like this. We had the chicken before the egg. Sactionals being the chicken, we discovered, as we observed and had success with it, we believe are so successful because they are are built to last a lifetime and designed to evolve. Like those two attributes in our product are quite unique. And those two attributes underpin what we call our designed for life philosophy.

Sactionals: Built to Last, Designed to Evolve [23:21] I did not found Love Sack to make products that are super sustainable, sustain hyphenable. In other words, things that actually sustain. Who's talking about that? I was just trying to survive. I made a big beanbag, people liked it. Made a couch because people were asking about couches. who has solved all these problems, observed the success, and that success was rooted in the fact that things were built to last, designed to evolve. Now that's led us to this whole philosophy that will inform our innovation on every product going forward, and it's why I'm so confident that we can continue to succeed, is because of this design philosophy that I'm sharing with you openly. Because it's one thing to say it, it's another thing to execute to it. That's the hard part. It's the execution that's the hard part, you know? Now, that said... [24:08] I'm trying to drive a movement. I believe that there are many people that are sort of aware now that we have been conned into buying too much crap. New season, new collection, the merchandising hamster wheel, new iPhone, now it's got a titanium band. Really? Everyone knows. No, it's not even hidden. It's not even like a secret. it. This whole hamster wheel called planned obsolescence that was not an accident, it's absolutely an economic strategy to lift us out of the Great Depression and onward. And it has roots all the way back to Louis XIV. What's my point? The world has just, I guess, accidentally, not so accidentally, fallen into all kinds of rhythms that are unhealthy, unsustainable, and not good for anyone, not good for the environment, not good for people, you know, we're frenetically chasing out. Now my jeans are too tight, now they're too loose, now they're too long, now they're short, now I got, now they got to show my ankles, now they got to drape over my, like, this is not an accident. This is a self-propelling machine that we have created. What's my point? I believe we can drive a movement amongst people to reject that. And I believe factionals is one of the embodiments of that. Things built to last a lifetime are designed to evolve. So that movement is actually my long-term strategy. [25:33] In the near term, I need to... One of the ways that we will reach people besides buying advertising and using it to drive a strong CLV to CAC ratio is through... I don't know, even podcasts like this is through people finding our brand, finding out about me, finding out about the company through... Whether it be me, whether it be through the goodwill of our customers, sharing this or that, the other. And so I wrote a book called Let Me Save You 25 Years. It's our clever story

Driving a Movement for Sustainable Consumerism [25:59] at Love Sack. It's really great. I think it launches in January. I spun up a podcast called Let Me Save You 25 Years where I share my own entrepreneurial mistakes, miracles, and lessons of the Love Sack story. That's the subtitle of the book. That's the spirit of the podcast. I talk to successful people, some of the world's most successful entrepreneurs and successful people about these concepts. And it's not an interview podcast. We go really deep into some of these concepts. So my long-term goal ultimately, is to write another book that can help drive this consumer movement that I'm describing because I think if we can get a little bit of luck and get people thinking about these things and then eventually seeking out. Products that can do this, and just a lifestyle that is supported in the way that I'm describing. Buy better to buy less. Buy better stuff so you can buy less stuff. Well, obviously, LoveSack will benefit from that as a company that makes better stuff. And so, look, it's a long, long, long, long way around, but you asked the question, and I'm totally serious about that. Scot: [26:58] Yeah. So I'm gonna guess you're not a fan of fast fashion. Shawn : [27:03] No, I mean, that's obviously gonna be I made the topic of the book, you know? Scot: [27:06] And I'm not. Jason's a huge Xi'an fan, so you just really hurt his feelings. No, I'm just kidding. Jason: [27:11] Hey, I wore a Patagonia, a used Patagonia jacket in honor of tonight's show. What are you talking about? Shawn : [27:18] You are speaking my language, man. And look, it's not even about being a tree hugger. I think that people have a brain. And people, I think, are waking up to the idea after the iPhone 15, that holy crap, Apple probably should have been forced to innovate a long, long time ago. Biggest company on planet Earth because they sell us the same thing every year or two. Had we not allowed them to do that, they would have had to use their enormous treasure and enormous skill base to innovate into other categories and and change the world. Instead, we've allowed them to sell us the same thing every year. Scot: [28:06] That's an interesting ethos. Having built a company, about how many people are in your company at this point? Shawn : [28:12] Total about 1,500. It's about 400 at the headquarters and another 1,000 out in the field-ish. Scot: [28:19] Yeah, you're at that phase where there's people at the company that you've never really met before. And it's awkward because they always expect you to know their name and they all know your name. Yeah. Yeah. Yeah. So when you get a company to that scale, how do you keep innovating? And, you know, one of the ones that I really love that you guys have done is the Stealth Tech. I think that's genius because I love AV and like having a really immersive experience. And I'll let you explain what it is, but, you know, my wife hates the big black speakers that I try to put all over the house. So I think it kind of solves like six problems in one. So A, maybe let listeners know a little bit more about what we're talking about. And then be I'd love to hear like how do you guys you know it's really hard to kind of you know ideas are easy and execution is hard on execution. It's really hard to like you know nail what you're doing and you have a lot going on and then like keep innovating. How do you how do you like get the org functional that way? Shawn : [29:16] Yeah. I mean, I think number one is you have to, you have to really want it, you know, not, not just like, Hey, I want to, I want to get, I want to get more business. I want to sell more stuff. Obviously there's that. But this ethos that I just kind of unpacked for you that, that we tripped stumbled into does the design for life ethos animates this organization. Like, it is a lot of, it is very motivating to think about, holy cow, now that we know our purpose, and it's been identified, right? Inspiring humankind to buy better so they can buy, you know, everyone's like, it was purpose, purpose, purpose, and hire some consultant, you know what I mean? But for real, if you have something that's truly unique, and it's meaningful, it's not just like words on the wall, it really is motivating, it's exciting. Scot: [30:11] And you bake baked in the products have to get better too, right? Like you, that's not well, so you have to support it. Shawn : [30:17] That's exactly right. Like, yeah, like we have to make stuff that's built to last a lifetime and design to evolve, which is really hard because if it was easy, everyone would do that. And here I am telling you openly about it. Like that's what we're going to do. And I'm not afraid to tell you because most companies won't do it because it's just freaking hard. Like it's a lot easier. Like why doesn't love sack? You know, you brought up stealth tech. So Stealth Tech is full Harman Kardon surround sound, no quality sound loss audio. Perfect audio emanating from your couch through the phone through the next layer of fabric and through the decorative layer of fabric that's washable, changeable, removable, tuned down to the color of that fabric so that the audio is perfect rear, front, center, subwoofer, invisible, beautiful, because you don't see it, it looks just like a couch, and it has all that packed in there, it's radically successful. It's been, it's now a huge piece of our business. And nobody saw that coming, because what would they expect a couch company to do next? A couch beanbag company. An end table, a coffee table, a rug, a lamp, you know, decorative accessories, get into the bedroom, who knows, right? Like the obvious stuff. Scot: [31:32] Meatballs. Shawn : [31:32] And what, yeah, right? Why did we do that? We anyway, we saw the opportunity and we also invented it. So one is,

Innovation and the Evolution of LoveSack's Product Line [31:40] to answer your question, a lot of play. We are constantly at our innovation lab playing. So it's not just consumer-led insights, which is a big piece of what we do, but it's also a lot of inventions. You gotta have teams to invent. You gotta have engineers. You gotta have, so you gotta support that. So there's a cost structure there. And that's why LoveSack is quite profitable, but not as profitable as it could be in the future, because we are investing in innovation. And there's a lot of heads. there's a lot of engineers, there's a lot of designers doing things. Now they're not just all running around playing, they also have a very disciplined approach to executing on innovation, like launching Stealth Tech a couple years ago, and bringing that to market, which is a heavy lift because it's our invention, it's our patents, and it was not easy for this beanbag company to get into home electronics in a real way. [32:29] We've done, I think, more than 100 million in home electronic sales and making us a pretty, a pretty big player in that space, believe it or not. Already, and I don't think most people even, you know, would think that. But we're, you know, totally serious about it. So, innovation, wrapped around an inspiring path to innovation, I think is the key. Do you have an inspiring path, or are you just trying to make more stuff? Because if I wanted all those things I mentioned, like I'm over here in Asia right now, I'm in Hong Kong. And if I wanted a whole line of living room furniture with our logo on it to make myself feel good, I could have it in four weeks. The suppliers will do it for me. They've been doing it for 30 years over here for all the biggest brands you can think of, you know? And we could give them some designs and give them some ideas and let our, I mean, it's so easy to just source stuff. I'm talking about, you know, product land. Now we're talking fashion, talking furniture, talk any category you want, the same is true. But to truly invent stuff's a lot harder. And that's why I think we've had success, that's why I think we will continue to have success. Jason: [33:35] Yeah, you know, so I am interested, I mean, obviously the product has to be the lead in solving that real problem for a customer. But I do think another helpful aspect to your business is that in order for those products to be successful, like, they have to be demonstrated somehow. Like, per your point, the catalog for the StealthTech sectional looks just like the catalog for a generic sectional. And so I'm thinking you having your own showrooms was a big advantage for being able to tell the story. And ironically, I'm not sure you opened that first showroom because you recognize that problem. It sounds like you opened that first showroom because you had no other way to get distribution. Shawn : [34:21] Oh yeah, yeah. And that's why I'm not taking any claim as some kind of marketing genius. We just kind of tried to survive in the beginning. And opening a showroom was actually a reaction to being rejected by the big furniture guys, because they didn't, you know, want our product, they didn't believe in us, whatever. They couldn't see it. And so thankfully, it went that way. And by the way, they weren't showrooms, they were stores. We were a furniture store for a decade and a half. And we did all the furniture store things. And we sold merchandise, and you pulled your car around and we loaded you up, believe it or not, or we shipped to you. And it took us a long, long time to, after copycatting all those furniture stores and hiring merchandisers and window dressers and all those kinds of things from our competition to do that stuff in our stores. [35:14] To make that pivot to the direct consumer model that we operate on today that obviously looks very prescient in today's model. Now, the reason I think we've been so successful at it is because we had those 15, 20 years to get really good at operating now 250 locations across every state, almost in the United States of America, where people are fighting and bickering and hiring and firing and touching each other, whatever it takes. The point is operating physical showrooms is not something you get good at in a day or a week or a year just because that seems like the next thing to do. We have a website, now people need to see our stuff, to your point. And that's the approach I think a lot of the direct consumer brands have taken. And I don't think that they realize how hard it is to be profitable at retail and how many pitfalls there are. Where if I want to get a little better at digital marketing, which I think we're pretty good at now, but I can hire that. I can agency that, I can platform that. And so I think that the physical side of things is really underestimated. And so thankfully, our very long haphazard history has played out in our favor in that realm. And I think it's a huge strength of ours, because by the way, now that the economy's pulling back and this and that, we're 250 locations ahead of most that are just really coming around to the marriage of physical with digital and not realizing that, You know, it's not something you can just turn on and be good at. Jason: [36:44] Yeah. And I think it's you, you rightly pointed out that like the whole landscape of DTC hasn't been particularly successful. There's not a lot of wins, but the, the people that are outperforming the average, even one thing they all have in common is they all have some kind of physical footprint to, to reduce CAC, right? So they're either have their own stores or they, they are white selling through wholesale, or they're, they're in front of customers in some way,

The Strength of LoveSack's Physical Showrooms in the DTC Landscape [37:09] other than, than Facebook ads. Yeah, I, I did. I think there's a super interesting new evolution. I thought I read about though. So like Amen stores and showrooms are super complicated. People wildly underestimate how many mistakes you can, you can make owning and operating a retail store. And now, now that you seem to have that clicking, you guys are bringing the retail store to the customer's driveways. Is that true? Like talk to us about the mobile concierge. Shawn : [37:37] Yeah, so just like we're innovating in product, we're also always innovating go to market. So whether it's mobile concierge, which is a lovesack trucks, where you can, you know, from the comfort of your home, have us pull up in the driveway and show you our products, which we've which we've dabbled in, and have tested into. And we'll see, you know, where that goes. I think that that has its own just like retail has its own complications, but also more, I think, more. I guess scalable already is Shop and Shop. So our showrooms right now in shopping malls, they're only like 800 square feet. So obviously the metrics are great, right? We're selling very big ticket items out of very tiny footprints with a small staff. There's just good metrics. And I don't hide from that. That's been a big part of our success, right? So we chose a good category in that way. We chose a terrible category in the sense is that the home category has all kinds of other issues. Jason: [38:38] Not the easiest category to deliver the product. Shawn : [38:41] Yeah, I mean, there's delivery, but there's also just the cyclical nature. You couple that with the idea that, look, we are selling you something that we are intending you to have for decades. My sectionals in my home are 16 years old, some of them, made with brand new pieces, made with Stealth Tech. That's pretty cool. On the other hand, unless we give you Stealth Tech and other reasons to come back, like, you know, you've got your satchels and you've made your investment. And so look, we deal with cover. So we're innovating on product, we're innovating on go to market, shop and shop. So these thousand square foot showrooms have been very useful for us. We have 200 square foot showrooms inside of Best Buy's or Costco's, where our people are basically checking you out and allowing you to kick the tires on the product. And then look, whether you buy there or whether you go back and buy online, we don't care. We built an agnostic platform where we just want you to be in the family. So I think these are things that have evolved over time and you've got to test and learn, whether it's mobile concierge, as you described, whether it's shop and shops. And these tests and learn activities can take years to play out and really take to scale and stuff like that. And so I think in this day and age of, hey, I'm gonna go raise a ton of money and build my company to X revenue and exit for X multiple, which is I think

Testing and Learning: Mobile Concierge and Shop and Shop [40:05] what drives a lot of entrepreneurial activity. [40:09] That kind of mentality just doesn't have the staying power necessary. And that's why you see so many of these brands reach a point where they have to be retooled, like some of them are going through now. And look, they've made someone rich. Sometimes these founders find ways to squeeze a bunch of money out of it, or private equity tosses the hot potato to the next guy and they make a ton of money out of it. But in the end, what's left? a brand that is at scale, doesn't make money, and can't go anywhere. So my point is you gotta have the stomach to grind it out, to spend the time, to really slow cook some of these things, and to be flexible when they don't work, and shut them down and move on to the next. And so constantly innovating on go-to-market, constantly innovating on product, and really putting in the time and energy it takes to refine concepts, you know. Scot: [41:03] I know we're running up against time, and you've obviously spent a lot of time thinking about this. I know your goal is to bring this ethos out, but if you think about retail and e-commerce, what do you think the next five years hold? You talked about AI. There's a lot of this stuff that's temporal, but anything you think that you believe is going to change the way we shop and buy, either in-store or online? Shawn : [41:29] Yeah, look, I think that it will just continue to evolve, and so I think AI is real. I think it will play a transformative role, and I think everyone's trying to figure out exactly what that is, and nobody really knows yet. I wish I could just give you a clever answer, but I think I've witnessed,

AI's transformative role in the future of technology [41:53] you know, that's What's the benefit of having a 25-year perspective is it's like I was saying about shopping malls. The mall is dead, headline from 2001. TV is dead, headline from 2008. Here we are with both of them still intact. By the way, TV advertising is still a big piece of our marketing spend. I know that's kind of mind-blowing because it seems like everybody's cut the cord or gone to this extreme. And I'm just telling you, these movements take decades. And so while it's great to be ahead of a movement, you don't, unless you are trying to drive that movement, like unless you are trying to take advantage of that AI, boom, to go raise money and wave that flag or whatever. [42:40] I've found it's okay to be a laggard. It's not always beneficial to, unless you're trying to build your concept around that and take advantage of that movement itself, let the movements evolve. So I can't give you a great prediction of exactly what's going to happen. AI is important. But how, where the winners will actually be and what the effects will actually be, I think it's way too early to tell. But I do think it's important to keep your finger and keep watching and eventually, you know, to find the connection and lean into that to affect your business. You have to be a little bit patient, I think. Jason: [43:27] Yeah, well, certainly 25 years in, I think you've earned your patience creds, by the way. Shawn : [43:35] Maybe too much. Jason: [43:37] Yeah, I mean, there's pros and cons to both. Urgency can be useful in certain circumstances, but short time horizons come with a lot of problems, as you have rightly pointed out. That did lead me to one sort of thought question. And you, you referenced some of your, your CAC economics and side note, we've, we've one of the, our favorite guests on the show is this professor Dan McCarthy. Who's, who's a huge advocate for cohort analysis and customer lifetime value based businesses. And so he would be thrilled that you're on, because I know you guys disclose some of your cohort metrics in, in your financial statements, which he loves. And to me, you're in a really interesting category to do that because although your product has invented a reason for customers to come back and you've sort of turned a product into a system, it's not like a fast cycle, right? Like, and so like when you're thinking about like a time horizon for LTV, and you guys have a very good return on your CAC, but compared to most companies, your CAC still is really high, right? Like, you sell a lot of product to compensate for that. Shawn : [44:57] Yeah. Jason: [44:58] So how, like, you know, you're spending five or six hundred bucks to acquire a customer and then you're earning thousands of dollars on each of those customers. Like, was it difficult to sort of have the financial discipline to have a long enough time horizon to see those sorts of high CLVs come back for that initial customer acquisition? Shawn : [45:23] Yeah, I mean, you could call it discipline. In our case, again, it was just survival, being really transparent. You know, we were just trying to find a way to make this business work, and we weren't profitable right out of the gate. It took us many years to get better at retail, to get better at e-commerce, to have a shopping cart experience that was commensurate to the product, because that's really hard with our product. Our product is really weird and complicated. And so that's something that's overlooked with Lovesack. And I think a lot of our copycats and competitors are realizing that. You can't just use a Shopify checkout if you're going to sell something as dynamic as, let's say, factionals where, you know, you can buy a bunch of these and a bunch of those and combine them in a million different ways. How do you, how do you shopping cart that? How do you Amazon that, you know? And so, and so these are superpowers that we've developed over a long time and thankfully given it enough time to become profitable. So to answer your question about, you know, patience, I think part of it is just been our lot in life to, to be, to have patience forced on us. But secondly, real discipline around. [46:32] Our CLV and CAC metrics. So we are, we are, and have been for a long time, carefully monitoring them, tracking them, constantly innovating and refining on the marketing side, these things that I mentioned, whether TV, you know, over the top, linear, nonlinear, digital marketing with its 500 heads, you know, like I'm talking about species of digital marketing, it's such a big word, right? I have to be constantly and tirelessly refined and risk taken and stuff tried and stuff failed and all rolled it and it all rolls up into that CLV to CAC ratio that you can hope you can keep moving and then couple that with innovation so that people can come back and buy more. And so thankfully, look, we chose a category with a high ticket and that drives the lion's share. That first purchase drives the lion's share of that CLV to CAC relationship. But our long-term point of view now is not only to find other ways that we can do more of that, maybe even in other categories and adjacencies. [47:32] But also give like StealthTack, give people a reason to come back and add on. And then by the way, when they do come back, then they face the consequence of, well, what do I do with some of these things that I need to, let's say, I get StealthTack and I got to swap out two of my sides. Well, okay, the obvious answer is I don't want to throw those in the trash. We don't want them throwing them in the trash and they may not need another couch in another room. So it's leading us to services, trade in, trade up, recycle, you know, all kinds of things that will again, give us more reasons to reach out and touch that customer. And so I think that if you relentlessly pursue. [48:13] A good concept with good intentions being driven by good philosophy and purpose like I've described, it's been my experience that the universe kind of unfolds for you, but it doesn't do it overnight. And you can't just have a, at least in my experience, you can't just have a master plan and be like, we're gonna do this and then that and that. You have to iterate to it. You have to observe, you have to live some, like when we launched Stealth Tech, we just, you know, it's easy now to look back in hindsight and be like, well, of course people are gonna want to or trade in their sides or do whatever. But some of those things aren't always so apparent. And you need to plunge yourself into the pool, see what comes of it, and then react to that. And some of those reactions can take years to unfold. Like some of these services that I just described and whatnot, they'll take us years to manifest. [48:59] But the nice thing is, the core business can generate profits that will carry us to that and we'll invest some of those profits in that innovation that I'm describing. But it's like, it's just relentless, man. It's tiring. It's like you have to have the stomach to go the distance. And that's where the time horizon, look, I'm a big advocate of it. Culturally, you know, like when my whole organization knows, like the theme of our manager fest a month ago, this is where we all get together once a year, was 25 and 25 more. And I'm not kidding. Like my personal point of view, if I'm allowed to be here as a public company CEO, if I do good enough to stay in the seat, which is inherent, and that's why I love the structure. It forces you to be awesome, you know? [49:45] If I can do that, but the fact that my organization knows that I'm in for another 25, you know how grounding that is and stabilizing that is, as opposed to, man, when's Sean's gonna sell his stock and bail and go start his next company? That's what I'm supposed to do, isn't it? That's how I become a bazillionaire, isn't it? I'm not interested in that. I'm interested in building something. And I think that that, I don't know, desire is actually kind of rare these days.

Long-Term Vision vs Quick Profit [50:14] I think everyone just wants to be a bazillionaire as fast as they can. Jason: [50:17] Oh, for sure. Yeah. Everybody's assuming you're going to cash out and invest in your first rocket. Shawn : [50:24] Yeah, whatever. And I think it's sad. Look, I'd love to make a ton of money, whatever. That's all great. But whatever happened to the ambition of let's build something awesome, no matter how long it takes. And that's where I'm at. Jason: [50:41] Yeah. Well, Sean, it's been an amazing run so far. This is going to be a great spot to leave it because we have used up our allotted time, but I know listeners are going to appreciate you saving them the first 25 years, and we're going to be super excited to watch what happens in the next 25. Shawn : [50:57] Thank you. Thank you. Scot: [50:59] We really appreciate it, Sean. I know you're in Hong Kong, you're in the middle of your day there, and we appreciate you coming on the show. If folks want to check out your podcast, where would you point them to? Shawn : [51:09] Yeah, wherever you love listening to podcasts, Let Me Save You 25 Years is the name. LetMeSaveYou25Years.com. You can find me on social media, Sean of Lovesack. I'm all over that and love to be connected, slide into my DMs. I mean, I love talking to customers, friends, peers, being very accessible and looking forward to building the movement. Of course, Lovesack.com. We're easy to find. Scot: [51:33] Trey Lockerbie 41 Yep. And the book's coming out in January and I assume it's going to be in all the usual places. Shawn : [51:37] Sean O'Toole 41 All the usual places. Yeah. Let Awesome. Jason: [51:45] Thanks again and until next time, happy commercing!

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EP313 - Holiday 2023 Preview with Rob Garf of Salesforce

Episode 313 is preview of Holiday 2023 with Rob Garf, Vice President and General Manager, Retail at Salesforce. This is Robs' fifth time on the show, having previously been on episodes 110, 248, 282, and 299.

It's happened again. Your Halloween decorations have come down (or at least your pumpkin is not in good shape), you survived Amazon Prime Big Deal Days, and now you're getting ready to ditch your in-laws and enjoy one of the most exciting retail weeks of the year. Yes, it's time for Holiday 2023!

This year, we've decided to do things a bit different by previewing the holiday in advance of Turkey 5. Rob Garf has kindly joined to walk us through Salesforce's e-commerce forecast for November and December, and we compare it to all the other forecasts out there (NRF, Deloitte, Bain, US Dept of Commerce). In addition to the top line forecasts, we touch on retail versus e-commerce, changing shape of the holiday, discounting climate, inventory and supply chain impacts, top performing categories, the economy, and the impact of rapidly growing Chinese brands (Temu, Shein, TikTok).

Episode 313 of the Jason & Scot show was recorded on Wednesday November 8th, 2023.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 313 being recorded on Wednesday November 8th 2023 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:39] Hey Jason and welcome back Jason and Scot show listeners Jason is 3:13 the lucky number I had the 13 is kind of on there so I think we'll count it. Jason: [0:48] It's a lot of threes. Scot: [0:50] Yeah yeah I think it's a primal have to get one of our research analyst to work on the okay so we are recording this in early November as Jason said so at that critical part of the retail calendar all the plans are laid the discounts are on the table Cyber Monday. Thanksgiving Black Friday everything's teed up and everyone's waiting in anticipation of what holiday is going to bring us this year. And we know longtime listeners will know that our holiday turkey five coverage with a lot of sprinkling of data is second to none in the industry and this year we're going to take it up a notch in past years we've had our friend of the show Rob Garf VP and GM for retail at Salesforce on after the turkey 5 give us a real-time view of what they saw and for those of you that have been with us very long time this is her Jason's mom primarily those were episodes 110 249 282 and 299 man that's quite a track record this year we are going to take it up and have a delicious rub Garf before and after holiday sandwich it's kind of like that turkey sandwich but we're going to kind of sample it here before we even even have Thanksgiving. Rob before I before I go on welcome back for the fifth and I think record time on the show. Rob: [2:11] Wow I love it this is I will have to call the Guinness book up and make sure we get this knocked in memory on this is fantastic it's always good to be here and even better Scott and Jason and first of all thank you for having me on doing a little bit of a preview because as you mention were normally crawling through the data talking about the holiday weekend and seeing where everything lands after the critical time period and it's fun to take a little bit of a sneak preview and look at what we're anticipating and what we're seeing going into as you mentioned one of the most critical times of the year. Jason: [2:45] I think you're exactly right Rob I don't know why we didn't think of this sooner I feel like they should have always been part of our holiday tradition. And I do feel like we're getting all of the Rob protein with none of the nasty carbs so that's like a. Particularly healthy Thanksgiving treat but Rob before we jump into all of the good data remind listeners what the heck it is you do for Salesforce and how you get all this juicy data. Rob: [3:13] Yeah that's awesome let's by the way the listeners decide you know how. Advantageous this is after the fact I hope it is and again we'll do our best so yeah and I've been I always thinking about it thinking into this conversation now at Salesforce for over 7 years but I came. To the CRM Leader by way of demand where and if you remember demandware now Commerce Cloud was the leader and the cloud space and we instrumented the platform early on to get access to everything that flows. Through our Cloud so you think about all the Taps all the clicks all the swipes. [3:48] Now we don't have any access to personally identifiable information but we bubble that up and it becomes really The Benchmark for what's happening in digital and over the years we've included. Things from marketing and Service as well to look at a more complete buyers Journey. [4:08] And it's been really fun each quarter we release our shopping index which is available on salesforce.com built on Tableau and it's interactive so you can slice and dice it by vertical and by geography and it really helps. Retailers gauge how they're doing vis-à-vis their peer set which of course is extremely important anytime of the year but certainly even more important during. The holiday week now I think there's one thing that I sometimes forget to say so I want to make sure right cover it now which is. Our index and by virtue of that our benchmarks are from a outside in perspective so they are a look at the entire industry, not just Salesforce data we've modeled this over the last 10 years since its Inception so it's really intended to look at. The overall industry and benchmarking how peers are doing rather than speaking to anything that Salesforce is doing so that's my quick infomercial but hopefully more than anything just a little bit of credibility as to where we get the data, what we do with it and most importantly the conversations were able to have similar to what we're doing here. Jason: [5:19] God so that that sounds perfect. I do want just a couple clarifying questions before we jump into the actual data because I know we're going to talk about holiday like what is your official definition of holiday what what dates are you looking at. Rob: [5:38] Yeah thanks for asking that's always an important question so we've defined it over the years as the complete November and December so that's our holiday our peak season look. And we look at in particular for again the holiday weekend I know you call it cyber five or thirty five, we have cyber week which starts the Tuesday before, American Thanksgiving and works its way through Cyber Monday it's just something we started from the beginning and 4y like to like, your rear comparisons we've kept that intact so in on referencing cyber week or cyber five it's really looking at those, those seven days now of course the definition by some has been elongated and I hope we'll get into that in terms of when does the official real demand start but to answer your question straight on Jason it's for us at Salesforce November December. Jason: [6:27] Got it and so for historical purposes you've always been located in November December and then you're predominantly or exclusively focused on digital sales so you're you're reporting on what actually happened and forecasting what you think is going to happen in terms of e-commerce sales but unless I had this wrong you guys don't put a flag in the ground on on what you think is going to happen in brick-and-mortar is that true. Rob: [6:50] That is accurate now we do kind of go on the fringes a little bit because the bleeding between online or the blurring I should say between online and offline so we do have, data on buy online pick up at store we do have data on returns as well which is by virtue of, definition multi-channel omni-channel type of process but we don't put a stake in the ground because we just don't have the intrinsic data to be able to bubble that up and provide on the actuals. Jason: [7:20] Sure and then one other fun fact you reference the shopping index and you always have like the quarterly recap on there but I think. For sure during holidays and I think you're going to tell me your round you actually have a real-time dashboard up there so it's kind of a fun thing during the individual days of cyber week to kind of pop in and see see what's going on after your family Thanksgiving dinner to see if you're still going to have a retail job when this is all over. Rob: [7:50] Yeah yeah we do exactly so during particularly cyber week each morning the team is getting up super early as you can imagine and work around through the data and we're updating in real-time the data from the previous day and so for any retailer who is looking for the latest and greatest certainly by I would say 10:00 eastern time at the latest you will get that and see that up there we do have many customers who do use that in there Roundtable boardroom discussions each day to understand how they're doing it repairing it and more than anything Jason truth be told we need to get it up that early because our boss this guy named Marc benioff is typically texting us saying where's the data because I want to tweet it so yeah as much of a motivator as anything else. Scot: [8:40] Always fun when you get the text from The Seer. Jason: [8:44] Slack's slacks the he sends wax not to. Scot: [8:48] A slacks yes sorry I was off I was off brand for a second yeah he Einsteins it to his his Einstein slacks you. You mentioned one follow-up on that you mentioned American Thanksgiving that prompted me to ask this is largely we're talking about the u.s. here primarily we're not going to this is an international I'm sure you can go International but, we're doing more us right. Rob: [9:12] Yeah I'm prepared to do whatever I thought we'd probably borrow a bit more into us but we do have Global numbers but yeah. Scot: [9:20] Okay we have time Jason's obsessed with these Chinese companies I'm sure he'll ask you some questions so. Rob: [9:25] That's fair that wouldn't. Scot: [9:26] Yeah he gets all his clothes from she in any way. So before we dive into the topic du jour which is this year's holiday 2023 maybe recap for listeners kind of that you know. I know we had you on but the dust has settled and I'm sure you're going back and looking at it now with holiday 22 what were some of the bullet items that you kind of you you're thinking about as we go into 23. Rob: [9:56] Scot you don't think the listeners have totally taken This to Memory what we talked about last November 29 come on. You're probably right that's fine yeah I get it not all of us live and breathe this but yeah let's bring us back and you know actually if I could just for a minute, to put 2022 in context you need to think a little bit about 2021 and let me just spend a minute there and then I'll fast forward to 22 which is if you remember some of us don't want to in 2021 it was truly one of the first times that demand, actually got pulled forward in the holiday season and the reason was. The first mile delivery issues were stuck if you remember so many products were stuck in the port in the US of a Lala. The containers if they even got to the port or having a difficult time getting off the ship in into the domestic supply chain and people saw a headline after headline when I say people like consumers by or shoppers and they realized if they didn't buy early in the season. [11:03] They might not get the product that they actually want because in the past they would just have a waiting game and wait for the last and final deal and so. Demand got pulled earlier in the season and oh by the way retailers didn't have to Discount as steep as they normally do so going into 2020 retailers thought. [11:26] All of a sudden there would be this magical shift to Consumers buying earlier in the year and you know what that just didn't happen, there was actually a really good point of why that didn't happen when you look at the first two weeks of November we saw some of the lowest discounting rates that we typically see during the holiday season and because of these lackluster deals. People really didn't buy anything they waited and they again went back to their normal buying Behavior. One other by-product out of that is those that did by early. [12:04] We saw that they actually return the product during cyber week cyber week last year 2022 at some of the highest. Return rates during that week of the entire season people were doing their own price adjustments if they bought the product earlier in the year and realize they could have gotten a better price so there's like. I don't know how you calculate a triple or quadruple whammy on the bottom line that retailer saw. Because they were hoping to chase the deals earlier or wait I should say for the deals into the season and consumers just didn't bite. Overall and then I'll stop talking for a second here is what we saw. For let's just take cyber week as an example in the u.s. we saw a nine percent year-over-year growth growth online and globally we saw a 2% growth so us was really buoying up the global number there but a lot of that Sales Online happened right before cyber week and through the Thanksgiving holiday. Scot: [13:07] Got it it's kind of coming back to me I Remember You coining The Phrase discount chicken I remembered that is that right remember. Rob: [13:15] Yeah yeah yeah totally and thank you so discount chicken you know for the first time that we saw, retailers won the game of discount chicken last year I'm sorry in 2021 they tried to win again in 2022 but it just didn't happen consumers are really wise the real patient and now especially as they're seeing headwinds in their economic future there's definitely searching out for better and best deals. Scot: [13:46] Yeah this this kind of goes back to our data question it just occurred to me as we were talking about this obviously the macroeconomic is different now does that factor into your when you swirl all this together and you guys put together a funk forecast is that is that an input. Rob: [14:00] Absolutely yeah for sure and another piece that we look at very closely because it's driven so much of the growth over the last two years is inflation as well and so when you look at the last two years much of the online and growth is from increased prices not increased demand so people are just not getting as much from their dollar because of those increases we're starting to see that settle down the last couple quarters which is good news we're not quite seeing in Europe by the way but here in the US and so we're hoping, some of the growth will come from We're anticipating I should say some of the growth this holiday season coming from actual increase demand. Jason: [14:41] God so I want to I want to jump in the big reveal but a quick quiz first if you don't mind so last year us e-commerce growth nine percent G20 21 was also an incredibly abnormal year do you remember what the actual number you guys got for 2021 was. Rob: [15:00] For cyber week that's a. Jason: [15:02] No or sorry for holiday if you don't have it it's fine. Rob: [15:05] Overall holiday for 2021 was nine percent but that's Global so I'd have to go back to see what it was with the US. Jason: [15:13] No problem but so last year in the u.s. nine percent growth which was outlier for because Global growth was quite a bit softer. And so now here we are getting ready for Holiday 23 and what what do you think's going to happen when how much stuff we're going to sell online in November and December of twenty three in the US. Rob: [15:35] Yeah, so we're anticipating here in the US basically flat online growth and anybody I'm talking to is candidly quite okay with that and let me tell you why they're not overly bullish about significant growth online this year. For two major factors one is, we actually looked at the kegger over the last couple of years going back to 2019 and if things play out the way we anticipate we're still looking at for the holiday season compound annual growth of somewhere between 20 and 25% and so we're really where we are better than where we've been in 2019 year-over-year so we're you know we've been looking at these data points for quite some time during the holiday season if we're going to do 10 to 12 to 13 percent year-over-year growth online we're feeling really good and we've seen the average over the last couple of years come out well over that so there's a baseline that we're still needing to consider as we think about growth the second factor is. [16:50] The store. And we can't forget about even though our data doesn't explicitly account for that what we've seen in our data is that people are still going online very, aggressively meaning traffic quarter-over-quarter year-over-year is still really strong however what we're finding is people are then doing what they've naturally done for a long time which is in many cases then go into the store to actually make the purchase and so it doesn't necessarily tell when you look at flat growth year over year for the holiday season the entire story we're still feeling really good about it what helps us by the way one more caveat that I'll put in there and I should have mentioned it's got just a moment ago when you asked how we get to the numbers one of the key influences, is what does it October look like and particularly prime or we should I was about to say Prime day but the prime big deal days and so what we've seen when it first came out a nice halo effect. And we still see a halo effect certainly during the dog days of summer in July since the Inception of prime day. What was that 56 years ago but we although we saw bumps in the early part when it. First was established in October there wasn't a significant halo effect that happened during Pride a meaning those. [18:18] Not named Amazon during the October event we saw nice traffic we though saw really low discount rates once again so people were being patient they're biding their time and so we are seeing some nice add to cart rates as well so we saw people were poking around they were doing their research they were starting to. Think about what their holiday gifting this look like but they were waiting and so that's my long way of saying we're anticipating a fairly moderate holiday but we're not at all discouraged by what we. Jason: [18:54] Totally fair and so and I want to put your forecast in a little bit of context but before I do you kind of open the door on this whole October and shape of holiday thing like hey. Super useful to have historical consistency so I'm glad you guys report. The same time period every year right like I'm by no means proposing that everyone should change periods but it is interesting there's there's a lot more promotional activity. Happening in October than was true 10 years ago right and in very specific ways you convoluted 22 years ago, Prime day was cancelled in summer and happened in October and then they move prom date back to Summer but they added this second prime day and put a lot more marketing behind it this year than last year so and every other retailer on the planet. Counter programs against that that holiday and so there's been a. An increasing amount of pressure to pull sales in in October and then on the flip side a lot of people feel like holiday doesn't really end. And told mid to late January and there's a variety of reasons for that but one very particular one heck of a lot of gift cards get sold and gifted during holidays and they get redeemed. [20:18] Predominantly in January and so I guess I'm just kind of curious I'm not sure you would have necessary data behind this but like it does feel like holiday is flattening out and I know you guys pay particular attention to cyber week which you know is still a huge outlier and obviously we see way more sales on Cyber week than a traditional holiday week but. As a. Relation to the total holiday period it does feel like that spike is starting to flatten out a little bit like do you see holiday getting kind of stretched and flattened. Rob: [20:53] Yeah I love the question in this I feel like we could look back you know in a year or 25 years and do a whole. [21:03] I don't know extensive research project around how, people in mindset and shopping has evolved because it has and of course the pandemic had a big accelerator to that what we've seen in our data Jason is there has been a flattening out throughout cyber week meeting the big Spikes have typically been Black Friday and Cyber Monday and those still remain the two largest online days of the entire year but we are seeing a flattening out throughout the entire week but we haven't seen a lot of the sales, when it's all said and done pulled into October we do see a little bit of a blip in and around, the big deal days and we actually to your point other retailers have preempted the sales and we saw that in July as well meaning doing sales events the week before and it does draw them up, some traffic but we haven't seen a large portion being pulled into that time period what I will also say again lackluster discounts played a big role we're anticipating, comparing big deal days to cyber week cyber week we'll see about a 40% higher discounting rate. [22:28] Then what we witnessed just a couple of weeks ago in October you are totally right by the way that. [22:37] The holiday season does definitely extend through December and into January that's why most every retailer has there. You know fiscal year ending in January so they can really reconcile and get out from under what happened in the holiday not just gift cards but all of the returns and exchanges that invariably happen as well but at the end of the day just put a nice little underscore here is in 2020 and 2021 we did see a bit of pulling forward into October a couple of percentage points of sales but we're forecasting that 25% of all holiday sales will happen again as we Define it the 7-Day is of cyber week. Jason: [23:27] Interesting very cool okay so before we dive into some more granular topics I do you want to put the 9% in context and some listeners will be familiar with Nate silver and his poll of polls in the the kind of boring, boring a political forecast but the way more interesting March Madness forecast so I like to fancy myself as the Nate silver of e-commerce and so I do try to watch all of this data and huge caveat, nobody's data is Apples to Apples right so it's not really a matter of though this number doesn't match up to this number. Everyone has a slightly different definition of what e-commerce means everyone has a slightly different set of dates that they're looking at and they have different methodologies right so your methodology I feel like you get perfectly accurate data from a slice of the market right like there's there's no like. Human. [24:30] Are introducing your data because it's coming right from the systems and that the challenge for you guys is to take your slice and extend that to the the entire world of retail. The and I feel like you guys do that really well. So another data source that of course people are sick of me talking about is the US Department of Commerce which are these like surveys that they force retailers to fill out and. There's. Entirely different challenges and flaws in their survey methodology and how they defined e-commerce but just to kind of put things in perspective. I'm going to talk about they give us both brick-and-mortar and e-commerce data and so I pulled right before a show I pulled their data for the historical averages of November and December and so for the 27 years before covid-19. November and December sales grew, 3.8 5% per year so that's brick-and-mortar that's not related to the number you gave it all so average retail growth in that States of America / the US Department of Commerce in November and December three point eight five percent so and then I remind people the three covid years 20 21 and 22. [25:45] Were the greatest three years in the history of retail right because we didn't let anyone spend any money on travel and we mailed 10 trillion dollars to every man woman and child in America, to spend and so via the US Department of Commerce data 2020 Drew 9.2 percent. [26:04] 20:21 Drew 12.5 percent in 2020 to grew 5.4% so three straight years of, way over the historical average growth right and then using that same methodology they US Department of Commerce reports internet sales I'm way more skeptical of their internet sales because of the methodology in the way they Define it but just to put it in perspective. [26:32] For the 27 years before covid they have e-commerce growing eleven point two five percent a year and so then 2020 when everyone was locked in the house and not going to retail we had this monster year e-commerce group 35% in November and December from their data and then the following year because there was sort of a rebound and a return into two brick-and-mortar sales e-commerce sales were actually lower than the industry average so 2021 they had sales at 10.5% so a little bit off of the historical average and then last year they were the softest of all they were seven point six eight percent which is the slowest e-commerce growth in Holiday in the last 30 years so that's just kind of an interesting context right so the orders of magnitude are all right you had nine percent growth last year they had seven point six percent growth they don't forecast of course and so then I start looking at the forecast and a big forecast that comes out every year we're all friends of the NRF here and there in RF members the NRF just did their holiday forecast their forecasting brick-and-mortar growing three to four percent so. [27:45] Pretty much in line with that historical average that's a deceleration from last year which was 5.4% and they're forecasting internet sales of 7.9 percent so they're kind of perfectly splitting the difference between the US Department of Commerce and Salesforce for whatever that's worth by pretty pretty broad range and so that just kind of passes my quick sanity check Deloitte also does a forecast now deloitte's forecast is a different time range they consider holiday November to January and they're forecasting brick-and-mortar 3.5 to four point six percent so a little more optimistic and they're forecasting e-commerce at ten point three to twelve point eight percent so again a little more optimistic and then Bain did a forecast this year and they have three percent brick-and-mortar so I just wanted to throw that out there that most people are expecting this kind of three to four percent brick-and-mortar growth and this kind of we'll call it eight to eleven percent e-commerce growth. Rob: [28:51] Yeah and I would say given what you just talked about. Others a bit more bullish on the e-commerce growth than we are but I think directionally both brick and mortar and e-commerce are telling a very similar story which is e-commerce is still alive and kicking but it now has to be looked at in the context of brick and mortar and I think there's a lot of factors in that that actually will make the reporting moving forward even more difficult it is making it difficult and Jason you and I have talked about this before it's just the attribution models because it's not just about last-click anymore especially as people might you know in many cases go online and then go into the store where's that last click and how is that I'd be factored so everything from. [29:38] What we had anticipated in seeing around, you know 60% of digital sales now influenced by the physical store because the associate is driving demand through, customer service or client telling or social media or they're fulfilling Demand with being able to, you know pick pack and ship and online order. Or what's happening in digital as well in terms of people buying online and then picking up in or around the store so I think what is super interesting. In addition to what you said is how these metrics might evolve over time because it will depend a lot on, by retailer who's getting the credit and I know that's something that's been talked about for quite some time but literally how to is it how is it being accounted for and what does that do to how their reporting the numbers. Jason: [30:33] Yeah couldn't agree more and just 11 sort of example to illustrate that 11 kind of category that sold almost no meaningful volume online before the pandemic was grocery right second biggest category of consumer spending but none of it was online before the pandemic now depending on how you count ten to twelve percent of its online and guess what it all gets attributed as store sales right because it all it's all bananas that are getting delivered from a store and you know so 100% of instacart sales look like store sales to the retailer. And so it like I agree with you it's just it's just getting more and more convoluted. Rob: [31:14] Yeah well it's an interesting point around grocery you know our data showed in 2020 and most of 2021 we saw Triple digit growth year over year because of what you just talked about you just wouldn't ordinarily or historically by groceries online what drove a lot of that and what I think will drive Behavior moving forward is in 2020 we saw a 40-percent increase of net new. Digital Shoppers so these are people that hang out online but they wouldn't click the buy button and so a lot of those people now want to go back into the store but they're using digital they're using their phone in particular to really be that connective tissue. Scot: [31:55] What's a continue to peel the onion here you hit on this a little bit but tell us more about what you think is coming up in the 2023 cyber week for example if I recall last year Cyber Monday was the biggest e-commerce Day Ever set, is that did you guys agree with that or what's a my misremembering. Rob: [32:14] Yeah yeah so we actually have seen Black Friday actually. Bust up to the largest I know that's kind of hard to how others have looked at it but they're both really strong and we anticipate that being the case again again though we are seeing a bit of smoothing out of demand throughout the seven days. [32:36] Particularly on phones and I guess that's not a big butt when we weren't traveling we saw the Resurgence of you know iPads and tablets and actual regular computers especially when you get nice groovy one Scott like you did just recently but anyways I am getting distracted here by your awesome new computer but. What we are now seeing though is I move back to mobile and what we saw also during Thanksgiving a really strong traffic particularly local times between 4:00 and 8:00 if you think about it that's essentially when people are finishing their Thanksgiving Neil and they need a little break there sitting on their couch and they pull out their phone and so we're seeing a lot of traffic. Via Mobile and social as well by the way we are anticipating and we predicted this going back in June that we're going to see. Traffic via social be at a 10 times higher rate. Than traditional marketing so there's a lot of budget being pushed towards that media and we're seeing. [33:49] A lot of success there now they're still a bit of a gap in terms of conversion rate through that channel but again if you connect the dots mobile. And social happening over cyber week in particular on Thanksgiving it's going to be really strong and we're seeing again retailers lean into that. Scot: [34:10] So Black Friday was bigger growth last year or bigger absolute dollars or both. Rob: [34:18] For us it was biggest absolute dollars the growth was essentially spot-on for both Cyber Monday and Black Friday. Scot: [34:28] Jason and I'm assuming that did other people say it was Cyber Monday or it was at all. Jason: [34:32] Yeah they're they're different different folks had that different Peak yeah so but. Scot: [34:39] Controversy in e-commerce I love it. Jason: [34:41] Yeah controversy and they're getting closer together like they're worth in the early days. E-commerce Cyber Monday was a giant Tower and no one had internet access on Black Friday like that that could really is no longer the case. Scot: [34:55] Yeah well rip Cyber Monday cool I don't have any follow-ups Jason's Europe. Jason: [35:03] Awesome so. I want to jump into one of the other topics you introduced a little earlier so far we've been mostly topping up talking about Top Line which is a kind of easy way to think about this and it's you know it's a it's a kind of easy way to get your brain around it, at the end of the day retailers care a lot more about bottom line and a huge impact on holiday bottom of line is how aggressively in deeply folks have to Discount in order to achieve those sales so, are you guys like what do you forecast I don't know if you have a formal forecast for discounts but what what should people expect from discounting this year versus last year and what what are the trends there. Rob: [35:46] Yeah yeah yeah this is good because I missed a point before that I want to make as a relates to Discount and so this will give me a good opportunity to bring that up but still has to go right at that Jason we're forecasting on average a. Thirty percent discount rate throughout cyber week and again to put that in perspective it was 20% here in the US during the October event for. Prime big deal days again we look at the entire industry not just Amazon as a relates to that and so we're seeing a much more aggressive, discount rate now it's going to differ obviously by different segments you're not seeing as high in luxury as an example we do anticipate for tour toys and a consumer electronics which have been a bit of a softer category over the last 12 months again especially because because of the high Baseline they had because of the growth over 2020 2021 but we're also seeing and this goes back to the pulling forward of demand. Is more and more retailers are providing. [36:55] Black Friday deals throughout the course of November and. What's different in the past was it was fairly opaque in terms of we're giving you deals but we're not really sure those are going to be the best deals right and though we're seeing now much more transparency there's one major retailer that I'm sure you can guess who's doing Black Friday deals throughout the course of November and they are guaranteeing price matches. If for some reason they do go lower and they are also offering buy now pay later so you can commit to getting the product so you don't miss out on it but you can then pay over time and so what really came to life for me in this topic was we were doing a round table. [37:47] In Toronto in June and one of the attendees and she talked about this again at dreamforce in. September so I feel comfortable talking about it is a digital executive from Desi mm which is a cool health and cosmetics and Beauty brand that also has two other brands one called the ordinary and they have something that they've been doing for quite some time calling it, slow vember and their whole point is don't cause any urgency but rather. Make it a more relaxed buying experience and their point is throughout the course of all of November we're going to provide the same exact discount no matter when. And if you buy it and so we're seeing that a bit more and more some of it is coming by way of. [38:38] Early Access or exclusivity but also again extending and providing visibility, part of it is again trying to create that confidence that you're getting the best and final deal and also by the way you talk about the bottom line Jason. Is trying to reduce the Deluge of returns that often happen a lot of retailers. Are changing 88 percent according to our research are changing their returns policies and that's going to be a. Big risk and what and how that impacts holiday purchases this year. Jason: [39:13] Yeah you know it's funny there's so many moving Parts it's so complicated you think about like what a big impact inflation had on last holiday and you know good news like it seems like inflation is going to be lower this holiday. Consumer was in a better economic position last year than it seems like they're getting their sure we're seeing credit and defaults and things like that start start to creep up so there's there's just all these moving Parts but one thing I think a lot of people lose sight of is in the last three years predominately driven by the pandemic every retailer has completely reinvented their supply chain and their demand forecasting and I would argue everybody's way better at it now and they have way more agile Supply chains and there they're they're a lot more accurate with their level of inventory which means. They're more confident they're going to sell through their inventory and that changes their discount strategy like they're just all these moving parts that make it really hard to compare your over year when you know. Preview point the last three years sometimes we didn't have anything to sell and then the next year we had two years worth of stuff to say so. Rob: [40:24] I was just talking about that with an executive just earlier today and how retailers have gotten as you said better at demand forecasting. Better at Inventory management and I joke sometimes although I'm only half joking that supply chain has really come to the front office it's like really part of the customer experience at this point and has such an opportunity, to either negatively impact our hopefully positively impact. The customer experience especially when you're you know trying to find product after the shipping cut off window we're anticipating once again a huge uptick for those that have the ability for Consumer to buy online and. Pick it up in and around the store after. [41:06] The ship and cut off window we're seeing seven times higher growth rate for those that have that capability because essentially you're kind of shutting down your online doors if you cannot. Fulfill those orders after the fact and so but that requires to your point Jason like a lot of tuning. Around supply chain order management inventory oh and by the way store associates as well we have to. You know planned for that extra time that they'll have to take to fulfill that order will have to provide the right incentives and will have to give them the tools as well and I think retailers have gotten better at it. I don't think anybody's fully cracked the code but going back to your bottom line point last year for us the holiday theme was profitability and that doesn't go away I think people have gotten meaning retailers have gotten better at it but certainly always opportunity so I'm glad you called that out. Jason: [42:02] Yeah I like to say profit is cool again. Rob: [42:04] Providence cool again yeah. Jason: [42:06] The if you take nothing else away from this episode profit is cool. The the way it's funny like I joke about this but it's kind of serious when I started my career the the VP of supply chain probably started his career as a truck driver and and today that VP of supply chain like probably has a PHD in data science um so it's a that that occupation has dramatically changed the one other follow-up question. One of the cool things about your data set versus some of these other ones I look at is. You guys have real-time access to the data so as we record this we're eight days into November have you seen anything interesting or there any patterns that have stood out it you does it make you more confident in your forecast or in anything that's interesting for listeners to know. Rob: [43:01] Yeah we did look at the first couple days of November and also of course looked at October it's pretty consistent with what we saw, in Q3 in the US we're basically flat in terms of growth however traffic is up so traffic is up four percent. Orders are slightly down what we've seen which I think again is a very nice leading indicator is, product view rates have increased by 5% and add to cart month-over-month so September to October plus a little bit of November we've seen a slight uptick as well so what that's telling us is people are interested. They're doing their research. They're looking for the best deals they're understanding where the inventory is available and so that they're ready to make the move when they feel like they're getting the best and most value. Scot: [43:58] Cool so it sounds like if traffic's up in orders are down a lot of Tire kick in and kind of prepping and watching and making your list and you know could be the start of discount chicken 2.0 will see. Rob: [44:10] There you go exactly 2.0 I'm using that Scott I'm grabbing that I hope that's okay. Scot: [44:14] Discount chicken the chickens Strike Back. Rob: [44:18] Well and also I mean you talked about kick the tires so I think it's a good opportunity for a promo for spiffy at this point too so don't forget to get your gift cards as well right. Scot: [44:28] Yeah yeah we will be running some promos thanks. Jason: [44:30] And if you do kick your tires Scott can come to your house and replace them for you. Rob: [44:34] Exactly. Scot: [44:36] And shop for the new shoes online. Rob: [44:38] There you go I think there's a mash up there there's going to be spiffy and a DDOS coming together for anyways I don't know we'll leave that to the markers. Scot: [44:48] That's a good segue into my question in the predictions on category so I remember last year you guys had some interesting data on that does your prediction. Kind of data science get down into the category slicing of things or that's going to be more in the rearview. Rob: [45:06] Yeah no we certainly look at that we do it obviously based on what we've seen historically we're anticipating for the holiday. Active apparel active Footwear Health and Beauty being really strong so. You know we talk about the big number because that gets the headline in terms of essentially flat growth but we had tisza Pate some nice growth in those areas it's going to be a challenging partly because of comping as a relates to toys and gaming and consumer electronics if you think about that's just macro trend. People are looking for Comfort part of it is coming out of covid and maybe not all of us getting back into three piece suits but also when you feel a little bit of economic uncertainty I was listening to some Financial show. [46:02] While I was traveling over the last couple weeks and somebody put it as kind of the household PL or the household balance sheet you know when you're looking at that in your making choices you're taking more control of your finances which is happening people often migrate not only obviously to value, and safety they're looking at comfort and so there's something to be said for comfort and shoes and Footwear comfort, in apparel and almost the openness to be a bit more comfortable both in Social and in work situation so what are anticipating like I said active apparel active Footwear Health and Beauty being really strong luxury as well don't sleep on luxury they've been the most resilient category. In the pandemic and coming out of the pandemic and so that end of the market has held really well we're seeing a little bit. Of softness and what I'll call the aspirational luxury but as a whole that category is looking really strong and we anticipate it looking pretty strong, during the holiday as well. Scot: [47:12] Yeah this is old school but I remember a channel advisor going through 08-09 we were always shocked that luxury you know it's like the world is falling apart around us and people are like oh yeah I'll get a get a 400 dog and back it's gone. That part of the market just doesn't care that they're immune to those things I guess. Rob: [47:30] They're pretty resilient. Yeah I mean one other thing I'll throw in there just because I'm talking about it more and more with customers as we think about the holiday more as a. I think Bellwether to what will anticipate next year over the course and this is a global number but over the course of holiday were anticipating 194 billion dollars of online sales being influenced by a. Sorry are you thought you were going to get through this whole I know should I have not done that I'm sorry because you definitely that's on your bingo sheet. Jason: [48:07] Now I have to check the there's a I in this episode flag on iTunes. Rob: [48:11] Exactly well might get some more traffic that way so who knows but we find that super interesting most of it I want to like temper that. A lot because people are getting really excited about that headline is most of it will be from predictive a I like product recommendations which we've been doing for quite some time we're starting to see some early adoption of generative AI whether that's in email marketing with subject lines or body copy for that Saint product detail page with product descriptions or in service super interesting wood Gucci is doing and what they call a Gucci 9 their service center and teeing up responses for their agent to make them more efficient and allow them to scale but also stay on brand and so we'll see that a bit more but again a vast majority like I said it's around globally sixteen Seventeen percent of all sales will be influenced by AI this holiday. Jason: [49:06] That interesting so Rob we're almost out of time but I want to throw a super meaty 12 you for for a final question Scott was making fun of me but I am super interested in these Chinese brands that are capturing attention and share in the u.s. right and in particular that's that's Tim ooh which is has more traffic than Target more sales than Ed see in the United States Xi'an is the largest apparel reseller in the United States and then to a lesser extent Tick-Tock which has the vast majority of consumers attention in the United States and is now trying to sell stuff to people. What super interesting is it's not obvious those guys are all growing at Breakneck Pace much faster than your your nine percent growth number it's not obvious if or who they're taking share from so I'm curious of you if you have any POV it kind of seems like there they're inventing new demand or at the very least they're taking sure from brick-and-mortar it does not appear they're taking sure from the Amazons of the world. Rob: [50:09] Yeah that's awesome I'm glad you're addressing this I've just spent a couple weeks. In Europe I was in four different cities so talking to a lot of luxury Brands talking to a lot of traditional brick and mortars, and this is an area one of the executives put out Tech intermediary and I told him I would steal that and here you go I'm stealing it. Because I would say those that you just categorized are really wedging themselves in between the demand and the supply and they're creating a whole new platform where. It was just an originally with Tik-Tok and others about inspiration and now it's about purchase and so you know what we're seeing in Jason you and I have talked about this got 20 degree as well this idea of embedded Commerce or shopping at the edge. Where the buy button is being pushed up through the funnel on these delivery platforms again these Tech intermediaries I mean if you think about it they're almost like. The next generation of the shopping mall the shopping mall is created because of access because the highway here in the states and it created a place for people to hang out for people to get some food for people to shop. [51:16] People to socialize and because of that hey they could have tenants who that would then pay rent and sell stuff right and it's not dissimilar to what these Tech into mediators are doing in that they're monetizing their traffic I think they're coming after, the brick-and-mortar to a degree they're all so I wouldn't say creating more demand but fraying some of the man from. The brand sites because the brands are showing up there and so I would say there. [51:52] A little bit creating more demand but more than that they're kind of defraying the demand we've seen is. A high degree of growth thirty percent over the last couple of years of growth on these third-party intermediaries that we're talking about and they are taking from other platforms. Jason: [52:14] Interesting I don't know what the real answer is but I do know it's super interesting and important to pay attention to so I'm glad we brought it up but Rob that is going to have to be where we leave it because we have used up all of our allotted time I'm going to make sure to put a link to the Salesforce holiday dashboard in the show notes and super grateful for you taking at time and I hope you have a great Thanksgiving and we're looking forward to talking with you right after Cyber Monday. Rob: [52:45] Thanks Jason Banks got ya looking for doing a short couple weeks looking forward to talking to you then. Scot: [52:50] You robbed remind listeners where they can find your pontification xand and do they just Google the the index to find your daily things or like is there a quick URL that you guys have that. Rob: [53:04] Yeah you know to be honest with you the best way to is go to Google and put in shopping index Salesforce and you'll get to our holiday insights Hub so it not only has the dashboards but has all of the blog's were writing and all of the up-to-date analysis. Scot: [53:20] Cool well thanks we really appreciate you taking time out of your busy schedule to deliver this delicious holiday sandwich for our for Jason I in our listeners. Jason: [53:31] All right you guys be well and until next time happy commercing!

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EP312 - Amazon Q3 2023 Earnings

Amazon reported another strong quarter across the board for Q3, soundly exceeding analyst profit expectations and retail industry averages. In this episode we break down the AWS AI, Ads, and retail performance.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 312 being recorded on Monday October 30th right before Halloween I'm Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo. Scot: [0:38] Hey Jason and welcome back to Jason and Scot show listeners Jason it's a Halloween Eve hallow Eve but also we just watch the Mac live presentation from Apple or live presented recorded earlier presentation from Apple about new Macs, so I don't know I think I'm going to ask you about Max first are you going to get a new Mac are you sitting out this upgrade cycle. Jason: [1:07] I am on the fence guy of course I want one I have scheduled a meeting with my family CFO to see if I can, I can justify it so so we'll see I did not order one tonight I'm actually. Still super happy with my M1 MacBook Pro so so I know M3 is at least three times better so so of course I want one but we'll see when I pull the trigger what about you is yours already on the way. Scot: [1:38] I have been a while without an upgrade and running a little long on the tooth on this guy so yes I have a new machine coming they were actually pretty generous on the trade-ins you should just do an experiment before you talk to the CFO plug-in that trade in and see if it. Jason: [1:56] That could be the. Scot: [1:58] You a better presentation also if you have an Apple credit card which I'm sure you do they have a really compelling offer there. Jason: [2:07] All right lots of lots of good good things to consider my nine-year-old has made it clear that we're not allowed to trade anything in it. Scot: [2:17] It's got dibs on. Jason: [2:20] He's very he's very aware of the technology trickle down. Scot: [2:24] Oh man well you can somewhere down the stream there's going to be one that you could trade in but I don't think it may have as much impact as your courage. Jason: [2:32] I I don't know if he's ever going to own a computer device with a keyboard will see but yeah he's actually not that interested in my laptop. Scot: [2:40] Speaking of baby geek or I guess now he's I don't know kindergarten geek. Jason: [2:46] Third grade geek. Scot: [2:47] Third grade geek what's he thinking about Halloween I hear he's kind of outgrown Star Wars which makes me casa. Jason: [2:56] He still like Star Wars but he yeah he is not doing a Star Wars character last year he did a Pokemon character he did Pikachu and this year he's stepped up to Charizard so that. Scot: [3:09] Very rare. Jason: [3:11] Enables well I think it depends on which Charizard butt. That steps up the whole opportunity to build pyrotechnics into the costume. Scot: [3:21] All right watch out for some evil Pokemon people that try to capture. Jason: [3:26] Yeah I think the big debate in our house which isn't hasn't fully happened yet is who's trick-or-treating with Stephen and who's staying behind to try to scare the bejesus out of neighborhood kids. Scot: [3:36] I'm thinking you and a gorilla suit or you could be in the last year's Pokemon suit or Pikachu suit that could be a fun combo. Jason: [3:45] Yeah last year I actually had knee surgery only a few days before Halloween so I won by default because I couldn't really walk but this year I feel like I have no good excuse. Scot: [3:56] Right as the title shows the purpose of this as we have some Amazon news to report on. Jason: [4:02] Amazon news your margin is there opportunity. Scot: [4:15] Well Jason it was a kind of interesting setup coming into Earth earning season this quarter the whole world was focused not on e-commerce not on marketplaces not on omni-channel not on payments some of our favorite topics but also not on ads one of your favorite topics but everyone is now obsessed with AI thanks to the success of chat Juju GPT so coming into the quarter Amazon was kind of on the backside of a lot of the other big companies so we had Microsoft come out and they did really well with AI the their partnership with open a.i. / chat gbt is bringing tons of workloads to azure. How much is their cloud computing platform and then Google really underwhelmed everyone with what they're doing there you know they're they're kind of tiptoeing it's very clear that they don't want to kill the Golden Goose that is Google search by putting too much AI to that so allow their experiments are in Bard which is kind of way off to the side I've tried barred three times I can never get it to have the features that they say it should because my corporate Google account you know either won't have access or it says that feature is not here yet. Um and I think people are really starting to worry about Google on this one. So then that teed it up where all eyes were on AWS to see how are they doing and I think we've covered this but. [5:44] The Amazons approach to this is to be kind of agnostic for lack of a better word so they're kind of like hey if you want to use. Any of these different models we're going to basically let you run them on AWS compute and we're going to have all kinds of different graphic Processing Unit or GPU tears available from you know their own chip set to older Nvidia chip sets to the new ones and kind of be y 0, LM bring your own large language model. [6:18] And then oh yeah also Facebook did pretty well and you know they're definitely through the worst of the Privacy changes that Apple put out and they have an approach to AI that is an open source one so they're basically saying hey we're going to integrate this in our products and what we build we're going to put out there kind of almost scorched Earth in a way saying why don't we just open source this thing and maybe that will slow down our competitors who are going to use this to to generate their own revenue and because they don't have a cloud piece they don't and they're pure advertising it doesn't really, Concord hurt them to do this so they're not making Cloud Revenue off of it but it's become a popular one and it's called llama in case anyone is it from there then, okay so just not to leave everyone in suspense because we usually talk about AWS kind of later in the Amazon update we're going to cover it first so the ended up having a really good ADB is showing so I would say people got kind of panicky and we're expecting it to be down and it kind of came in line. [7:22] But what that people excited was part of the talk track on the conference call Co jassy said that they're winning some big AI workloads they talked about some big deals had close towards the end of the quarter that we're pretty significant and what's happening is as you know what's what a i chat gbt is trained on the broader internet and anything that they can throw into there. [7:49] And that's interesting but what's happening is corporations and. Both big corporations for internal use but then also other corporations they're wanting to train a large language model on their data and they also don't want that data to kind of leak into the broader ecosystem so that's that's really benefiting Amazon because it turns out a lot of the data that companies want to train these lme's are are already in AWS so instead of paying all this money to pull the data out of AWS and then synchronize it back into your LM as as Amazon anticipated with this kind of open bring by0 LM model. People are bringing the LMS to them and using the data because it's already in AWS and it's easier for the llm to just kind of go right there and grab it versus moving the data around. [8:44] That may not make a lot of sense so let me give you kind of a random example let's say you're a big added see like I'll pick up, this one called publicist they're out of France and most people haven't heard of them and let's say that that French Ad Agency wanted to save a bunch of money they could take like. Let's say 3:00 of content from like a podcast transcript or something like that. And they could use that content let's say someone of their company like a detailed digital retail payment strategy vice president general manager type person with a big crazy title like that. They could put that data out there and run an llm on day ws and train that data on it. The llm on that data and then they could have for example just picking something random they could have a retailgeek bye. That was basically as good as the human probably ninety percent so good enough but you know this thing could run 24/7 you could actually you could have as many of them you could clone it on two different processors after you get through the training mode and you were in D quote-unquote inference mode and it also doesn't take breaks it doesn't need, Starbucks vanilla lattes constantly it doesn't have expense reports it just. Does its job and doesn't complain and doesn't ask for raises so that's that's a that's a use case that something like that would work did that make. Jason: [10:08] Specific hypothetical there Scott. Scot: [10:11] Is randomly chosen just kind of picked it out of the are there. Jason: [10:14] It almost sounds like the more words in your title the more vulnerable you would be to AI disruption. Scot: [10:20] I thought about that but it is does make sense because that's essentially more tokens for the AI to learn just like right there in your title you're basically asking for it if you're a robot Overlord you're kind of picking on who to go for a first I would look for large titles person. I don't know I don't know how their training these things. Jason: [10:37] There I know you're the investment guy in our podcast but there's this investment theory that you don't you don't, be the little guy chasing the big Trend that way you want to do is identify the secondary Trend and so in this scenario as soon as it seems like a i is ready to replace the the blowhard Talking Heads everyone should short Starbucks seems like the. Scot: [10:59] Mmm that's a good point yeah I hadn't thought about that. Jason: [11:02] Yeah because when I lose my job and can't afford those lattes I feel like something I would like I'll take some solace in knowing that you made some money on that. Scot: [11:14] Yeah they'll be like on their conference call we're still working on the data but we've isolated it to this to block window in Chicago and we're pretty sure we have an idea what's going on. Jason: [11:26] I feel like my Starbucks footprint is a lot bigger than Chicago. Scot: [11:29] Well you know the the core of your Bullseye answers is going around. Okay but in all seriousness this is a really interesting blurb from the call where they talked about their strategy gaining traction and they said there's multiple businesses are using their gen AI That's short for gender of a i. Apps on AWS including Adidas people in our European list listeners I think they call it a deed us but I'm here in America we call, here in South the southeast caught Adidas booking.com and United Airlines. And while Jenny eyes Revenue contribution remains small management suggested Revenue quote compares favorably. To some of the other leading providers and this is this is interesting because Amazon's always mum's on revealing anything until the SEC forces them to break out stuff like, for the longest time we didn't know at AWS was then we didn't know what ads were and then they became material enough they had to break them out so so Amazon under Bezos would never have said those words I've like even hinting about what's going on. [12:35] But kind of is interesting because there's a new sheriff in town and also it shows you how important it is that they let everyone know that they are not falling behind and that their room new quote-unquote compares favorably with other other Cloud providers obviously they're talking about Azure once Wall Street analyst I did it is back of the napkin and he kind of said all right I think that they're telling us this is always funny because it's like six degrees of. You know separation so who knows but they basically inferred what they were trying to say reading the tea leaves was that it's about a 400 million-dollar business and already two percentage points of AWS Revenue. Which was basically zero six months ago so that's that that is kind of an interesting thing that came out of nowhere and is already a 400 million quarterly business so that means it's a 1.6 billion annualized run rate business. [13:29] If they're reading the tea leaves right on that so that was the AI part so I thought I'd be important for us to get that out because that was kind of like the new cycle really centered around that, and it is interesting you know you and I are watching this very closely there are e-commerce ramifications you know there's all kinds of, The Innovation here is so rapid it's hard to keep up with there's all kinds of a eyes for creating product detail pages and you know all kinds of, e-commerce oriented support Bots and it's just like amazing a lot of AI applications for optimizing warehouses it's just like overwhelming how much is out there we're definitely in the, tippy top of the hype curve and you know a lot of businesses are still sorting through all this but that was the that was the. [14:16] Dean on e-commerce retail side of things and non ads with that behind us the other big win for the quarter I thought you'd want to kind of fill us in on was the advertising part what did you see there. Jason: [14:30] Yeah yeah I want to jump into ads I do want to just say quickly it's interesting on the AWS because they posted solid numbers they posted 12 percent growth for AWS and they announced that they won the whole dialogue was about all these AI workloads that you just covered but they haven't recognized much of the revenue from all of these new AI workload wins yet so the this 12% growth feels like. Kind of a win based on the Legacy Cloud business even before you start to factor in all this new traction they're getting, I'm AI workload so so that does seem interesting but I just want to reiterate what you started out by saying which is, the the bed at Amazon is that you're going to want to bring the llm to your data and not that you're going to want to bring your data to the llm and that, intuitively. [15:24] Makes a lot of sense so it seems like investors were always pretty happy with their the AI Cloud case that they made. Um so that being said. As far as I'm concerned an even bigger win for them was the ad business so so they generated 12 billion dollars in ad revenue for the quarter that's up 26 percent versus Q3 of last year. Year-to-date that means they're had businesses up 23% from the year before so you know we're comparing that to like the 11 or 12 percent growth they get on AWS. Um [16:02] The ad business grew 21 percent last year so it's grown 23 percent this year that impugns depending on how you factor in seasonality like a 46 to 50 billion dollar run rate for the ad business right now, so if you take a conservative estimate for the the the, margin rate on that business that's generating 2728 billion dollars worth of ibadah for Amazon which is a huge. Huge business and much more profitable than a WS by the way. So the ad business was very robust and a couple of injured interesting takeaways. Amazon is adding more and more video properties they have Thursday Night Football you know they announced that they're going to start embedding ads and Amazon Prime and they'll have a premium offering to bypass Those ads. So there's a lot of opportunity for. Kind of top of the funnel linear programming ads at Amazon none of that is in this. [17:09] 12 billion dollar number right now or very little like all of the potential they've they talked about for this for these non Commerce ads. Is all sort of incremental the weather getting right now. At the moment the vast majority of all Amazon's ads are bottom of the funnel the the sponsored product listing is by far the most. Popular ad that that's growing particularly well and with the particular mix of economic headwinds we have at the moment, a lot of advertising is Shifting to bottom of the funnel people are less interested in investing in awareness and more interested in investing in sales and Amazon turns out to be, the best destination to take that that those dollars to put them into digital ads that generate. Bottom of the funnel results so this quarter everyone was really interested to hear from the advertising companies, to see if advertisers were going to be cutting back right and so you know you mentioned meta had their their earnings call Google had their earnings call Facebook I'm sorry. [18:17] Snap had their their earnings call and ads were uniformly up across everyone's earning so metas ads were up 23%, Google's ads were up 11% Google broke out YouTube ads which were up 12% snap ads were at 5%. But nobody's ads were up as much the 26% that Amazon's were and nobody has had the consistently rapid add growth that Amazon's had the last three quarters. Um so the economic headwinds like do not appear to be. Putting a huge crimp in the the digital advertising business and they appear to be disproportionately benefiting, Amazon and so then you go wait next quarter they're going to be selling ads on all of their video programming and that could easily add another 5 billion dollars just for in to this this annual run rate so. A lot of green lights in the Amazon ad business. Scot: [19:21] The I'm not a huge Sports person but you mentioned Thursday night football and have you seen and kind of marrying this back today I think if you seem Prime Vision have you played with them. Jason: [19:31] I have yeah. Scot: [19:33] So for listeners what they do is on Thursday Night Football if you watch from actually I do it on my Apple TV and I'm in the Prime video app. And then you can it takes you to the standard broadcast just like every other thing but you can go in and then you hit down arrow and you can select a different broadcast which is, Prime vision and what it does they've added feature since they did it they started it they've added all these new AI features that are really amazing so during a pass play they'll show you the most likely Target they put like a Madden asked Circle in real time under the player and, he'll flash like green or something if he's a possible Target on the defense though they'll show a potential Blitzer. They'll show you fourth-down probabilities in real time you know and it's just amazing they've added tons of features of that since I've been watching it and I find it like really adds a ton to the game too. Kind of see you can see the strategy in real time mostly broadcasters you know they'll talk about it like Tony Rome or something but it's way after the play after they've had time to put together animation this is doing it all in real time it's just mind-blowing the amount of compute it must be thrown at that and you know I think it's a it could change the way you think about sports and in a really interesting way. Jason: [20:49] Oh yeah increasingly it's a better experience watching the game at home then you can get in the stadium. Scot: [20:54] Yeah the stadium doesn't do that. Jason: [20:56] They side note for soccer at the World Cup they actually did but you have to watch the whole game like through a are on your phone. Scot: [21:05] Let's see you at the stadium watching the game on your phone. Jason: [21:09] Yeah I mean and it was cool right like saying same sort of thing like it's overlaying all this real-time stats and probability was amazing. Like it's not a very good experience to like hold your phone up and have your camera on the whole time to sort of get all these stats and so. Yeah yeah side no Thursday Night Football is the bane of my existence because I do play Fantasy Football and I never have my act together to have my lineups all set before Thursday night so, usually the game starts and I have to pray that I don't have any super important players that I fail the start and then I can enjoy the game. Scot: [21:46] Okay understood anything else on Dad's. Jason: [21:53] No I think that covers it pretty well on ads you know just. We've we've talked about a lot on the show but the overwhelming success Amazon's having with ads has this of course trickle-down effect that every other player and commerce paste is trying to figure out how to monetize their their traffic and get their share and at the moment nobody's getting, anything like Amazon's add, Commerce ratio and of course the audience eyes is start dropping off really quick after Amazon right you know you get a lot less eyeballs at Walmart then you have it on Amazon and a lot less eyeballs it Target then you have it Walmart and you know once you get smarter than that it starts getting real fragmented real fast. Scot: [22:39] Yeah how do you were still there still even though that's a big number they're still like way far away from Facebook right so so number one is Google by a really big margin and number two is Facebook and then it's Amazon and they're like way ahead of everyone else but they have to even though they're outpacing them, a little bit it would be like decades before they caught up in my own remembering that right. Jason: [23:00] I'm not no I'm not going to say decades it's an order of magnitude it's like 102 million 100 to 200 billion dollar annual run rates for those other guys and. Scot: [23:13] But they're kind of getting to half right. Jason: [23:15] Yeah yeah they are like they there with like within 50 percent of Striking Distance of number two. Scot: [23:23] Yeah if you had said that to us five years ago we would not have believed it I would I would not have seen how I've been. Jason: [23:30] Yeah I've been playing that what would you have thought five years ago game a lot and you you know you talked about who all the winners are in AI if you said five years ago the AI is going to become a huge thing what company is going to win like you we would have all been on Google. Scot: [23:43] Yeah yeah or apple or it would not have been startup called open air that was nonprofit that flip to profit no one saw that coming including Elon Musk yeah. Jason: [23:55] And by opening I you mean Nvidia but yeah. Scot: [23:59] One tidbit I saw on ads I love the leak read the Wall Street reports and they largely talked about the same data but a lot of them are good at very good at modeling and they can when Amazon doesn't tell them something like they don't break out they break out the revenue for ads but they don't break out the profit so it kind of gets swept up into this larger number but then they give you enough pieces you can kind of back into it so one of my favorite analyst he's a friend of the show Scott Devitt he modeled back through there and to your point he basically said that the ad business has a 60%, EB de margin so net margin of 60 percent which is basically like just money raining at this like Google's business model which I guess makes sense because Bass. Jason: [24:46] Is it is good. Scot: [24:48] Yeah because it is Google's business model and this ties into you know you know more about this government stuff than I do but Google's in a pretty nasty fight with the FTC, or the DJ I can't remember some government Bureau important entity that that is claiming they have a monopoly on search and they're basically pointing over here and saying look at these Amazon guys they're closing in on us pretty quick and they always reference those stats that show you know like more than half the people start product searches and those online. Jason: [25:19] Yeah no it's super interesting I Scott Devin is way better at Financial models than me but I actually think he might be under estimating the profitability and part of it is. It's. There's a lot of room for gray area like if you think about the the Amazon business it's super fascinating you know the number one digital Advertiser in the United States of America is you know who buys more ads than anyone else. Amazon. 18 billion dollars a year of ads they buy just from Google so they buy 18 billion dollars worth of eyeballs from Google they use those eyeballs to sell a bunch of stuff that they make money on and then they sell 50 billion dollars are the pants to those eyeballs. Scot: [26:05] Ticket Arbitrage. Jason: [26:06] It's amazing eyeball Arbitrage and you know it's. So how much of that acquisition cost are you factoring into the profitability of the ad business versus the like I would argue that these are not separated bubble businesses as much as ever wants to talk about ads as a separate business to me it only exists because you have all this traffic for Commerce and it's it's a core part of the the Commerce math at this point but we shall. Scot: [26:39] Yeah when we did our instacart coverage of this one now instacart been public for a while and you look at their numbers they're basically only being the whole instacart business is being valued a zero except for that so they're basically trading like an ad company so all of Wall Street said okay that grocery part is kind of like that yeah is there we'll put it in like you know. [27:02] A hundred million dollars and then the ad business is like worth date hundred million dollar ad businesses where they gave it a really nice multiple of like 5x so that's interesting I'm sure, you're going to spoiler alert you're going to see a lot more ads on Insta guard the yeah a lot of people there is a negative and you know no one ever talks about this but a lot of people and this usually comes from a Amazon sellers and they always have kind of a love hate hate hate hate hate relationship with Amazon you know a lot of them would say and I hear this from consumers that the customer experience is the user experience is degraded on Amazon because there's just so many darn ads now you know the and I see it too if I'm looking for a specific thing I'm kind of like a dad at okay that's what I was looking for at some point there is cannibalization there and you know what we don't know is what did they lose from yeah doing this like was their product they didn't sell because people couldn't find it or we'll never really know that but you know kind of hope they're smart enough to figure that calculus Alden make it a huge net positive versus the cannibalization getting close to the ebitda contribution. Jason: [28:10] Oh yeah no I think two things like there definitely is an impact on customer experience and every retailer that gets into this space has a different philosophy about that and Amazon's appears to be the monetization is just worth it but you know you think about everyone other retailers that are not waiting and quite so hard, are trying to balance that and then the new interesting thing is if you're any retailer other than Amazon where all your eyeballs really are is not on your website it's in your store right and but you go we'll wait a minute, the these disruptions that people might tolerate as digital disruptions on a website they may not top you know nobody wants to junk a fi, um a physical store experience with a bunch of you know make it feel like you walked into Times Square every time you walk into, retail store so there's all this interesting calculus on where everyone should land on that the other interesting thing to me is for a while there was a. [29:13] An opportunity for the best practitioners to get outside return so there was a subset of all those Amazon sellers that were really good at the Amazon ad, execution right and they did their smart about where they put their bids they were smarter about the attributes they put in their ad there are smarter about the creative they made for their ad and they could get outside Returns versus other sellers on Amazon but the first Trends you mentioned the AI affectation of this whole business. [29:43] Has sort of made the best practices, dummy proof right and so now you know you just hand a product shot to Amazon and it makes the ad for you and you turn over the bidding strategy to Amazon and it optimizes your bidding for you and so it's squeezing more of the potential profit like out of all of these these other businesses that are built on top of Amazon because it's, kind of. Normalizing the the ad business to everyone and it just becomes a pure pay to pay like who's going to be the most for this eyeball. Scot: [30:21] Yeah kind of supports your theory that maybe the Madonna's higher because they don't have a lot of people sitting there at adding images or something like would they used to do back in the olden days. Jason: [30:31] Is that you used to need this thing called what is it called Ad Agency. Scot: [30:35] Yeah good cut the if you can just get one of those Bots I discussed or just like you have a some a I do it for him. Jason: [30:40] Yeah yeah that was a funny example a few minutes ago. Scot: [30:44] Unrelated news Jason is brushing up to c v so hit him up the so just to zoom out to the big picture so so we kind of dove into the to topical things A to B Us / Ai and adds, those together really causing Amazon to beat Revenue that they came in about one percent higher than Revenue so it was kind of like a slight beat / meat but where they really exceeded oh and revenue came in at 143 billion were they really crushed it was operating income and these two contributed to it but also retail did some interesting things that also yeah I think dramatically helped beat expectations operating income came in at eleven point two billion and expectations which is Wall Street consensus is what they say was seven point seven billion you know so that's like what let's like. Five per billion beat you know like a huge be compared to whatever. Jason: [31:49] 35%. Scot: [31:51] Yeah so that push the stock up 10% and then also we'll talk about guidance and that was positive so, it's been interesting Amazon stock has been kind of in a you know. Funk for lack of better words has been con rallying around at the same level and literally for quite a while like 18 months and this was the first Catalyst to cause a big move and that it's market cap a 10% move at Amazon Lester look we'll get one of our researchers here one of the interns I look okay. So you know they were like 1.2 trillion and now they're like 1.4 trillion so that's you know a move like that takes a lot of dollars when you're bigger than a trillion dollar business to move things it's like a lot of. A lot of value creation can happen in a 1.2 trillion dollar company when it shoots up ten percent in five trading days. Jason: [32:44] 10% 0 by a lot of rocket fuel. Scot: [32:46] It will yes a lot of dates with helicopter Pilots as well and a lot of cool new clothes, so there were some really interesting things you know we spend the bulk of our time here on the Pod talking about retail and e-commerce to our favorite topics so Jason there's a lot of really interesting stuff going on in there as well you want to fill us in on that. Jason: [33:08] Yeah everyone just wants to talk about ads and AI but it turns out that Amazon is actually a pretty good retailer. And so the the retail business also had a good quarter and to kind of set the table, every every listener the show knows I love my US Department of Commerce data so that came out last week 4. [33:31] September which gives us Q3 data for the industry so us retail data in September this was up one point year-to-date sales in the United States January through September we're at one point nine percent this year versus last year. It's a 35 percent versus before the pandemic in 2019 so 1.9% is not very good growth by historical standards we would normally expect about 4% growth. So if we just look at Q3 growth the industry was up 2% which again half of what you would typically expect. So Amazon's growth for Q3 is 11 percent versus that that industry number of 2% so 11% growth, is very robust the if you kind of, look at Amazon's growth since the pandemic that Q3 number means they're up 85 percent versus Q3 2019 and their year-to-date number is up 111 percent versus 2019. [34:33] So Amazon is a very large retailer arguably number one or number two retailer in the US now, and they're growing way faster than the industry average, and again depending on how you count Walmart would be the number two retailer which is also growing significantly faster than the industry average so that actually, tells you everything you need to know about the rest of the retail industry is that where you know we're having a significant bifurcation and with winners and losers in the space. [35:07] The other side of the retail business for Amazon is international and historically North America has been a very mature Market that has grown and generated profits, International has not made money for Amazon and I would say it was a mixed bag in terms of their International performance, on a constant currency basis International sales were up 11% which it's a smaller less mature business so you'd like to see it growing faster than the, the mature North American Market, um but they're operating loss is way smaller so last year this quarter they lost 2.5 billion dollars this year they only lost a hundred million dollars so nearly break it even for the quarter. Um the this did not come up in their their earnings and no one asked them about this but Marketplace pulse reported earlier this month. That appears Amazon has. Meaningfully curtailed their International expansion and a lot of markets they had announced they were expanding into they seem to have delayed. Postponed or canceled a lot of international market openings, so International definitely is not the start of the show it is also true of a lot of the other markets that say that Amazon's in still have more. [36:26] Just general macroeconomic headwinds than the United States does at the moment a lot of the world has a more severe version of the same macroeconomic problems that we have. In the US so a couple interesting tidbits. [36:44] But in the discussion about the retail business that you know the CFO Bryant. [36:54] Scot I always pronounce his name wrong alsop ski, um brett-brett else got a soft ski talked about how despite the fact that their they had nice growth in retail that they are seeing a cautious consumer who's generally trading down and more Deal seeking, then usual and that's consistent with, cautions that we've heard from other retailers that actually gives me some significant pause for Holiday which we'll talk about later, the the thing that that Amazon was really touting in the retail business is that they dramatically improve their cost to serve, and their speed of delivery in Q3 and that largely was thanks to an initiative they started a couple of quarters ago, this transition from a single National fulfillment Network. To a regional fulfillment Network where they have eight distinct District regions in the United States, that each sort of operate independently in the goal is to have all the the inventory that that Scot Wingo wants to buy, in his region so the goods have to travel less far are less expensive to get to him, and get to him faster and what they announced in the earnings was that the transition to this this. [38:19] Regional model has gone better and exceeded their expectations they're getting more. Incremental profit and faster speed of delivery than they even projected, um out of transitioning to that so this is. [38:37] I know we talked a lot about how big and what a huge moat Amazon would just accept our but I still feel like this is under appreciated by most Amazon's competitors and their there. They're just opening a bigger Gap in speed of service and one of the things they mentioned is that they see a direct correlation between consumable sales and speed of service when they promised that they can get them there faster they sell more paper towels, so I think it's very clear that that consumers want speed of service, and Amazon has a huge advantage and it appears to be getting even bigger so that's interesting another thing I talk about a lot. [39:20] Um is there's a few new retailers that are also stealing significant share, um very quickly and they're primarily Chinese companies so it's she in and most notably Tim oh, and so well like they certainly didn't come up in the Amazon earnings a lot of the analysts started looking at the the, rapid growth that Tim is getting and trying to figure out if they're stealing share from Amazon and evercore did a big consumer survey, and the results of their survey was that Tim ooh is mostly not stealing share from Amazon that most of its shares coming from, other retailers and in many cases coming from brick-and-mortar value retailers in the US so the dollar stores and it appears that that Amazon is more insulated from the. The growth and profit that they're getting so all of that you know rolls up to be a pretty impressive. Quarter I you've talked about it a lot but it kind of feels like Amazon's got a bunch of knobs that they can turn whenever they want to improve profitability and it feels like, they both added more knobs that can turn this quarter and they turn some of them. Scot: [40:37] Yeah the other thing that's really interesting is if you look at. Amazon and you can't really read because they have so many employees in the Fulfillment centers you can't really tell their employee growth and it's surging right now is they prefer prepare for holiday but another really interesting trend is Google meta and there's one of the other ones Microsoft their revenue per employee is surging so they're they're actually not hiring many people right now and, the assumption is these companies are leveraging AI internally and becoming exceedingly efficient and you kind of wonder. Is Amazon doing the same thing I hear inklings we have kids that are not so far out of college they don't know folks looking for jobs and things I hear inklings that Amazon is not really hiring that much as they kind of were at one point so I kind of wonder, are they also hiding behind that that have like a million employees and it surges like 200,000 for holiday so it doesn't look like they're being more productive but what they don't do is put out corporate versus fulfillment center. Have to have an idea that if we looked at corporate there also. [41:48] One dial they've turned its new is I think they're not hiring as me folk because people are getting a lot of efficiencies from these AI. Systems that these companies are dogfooding internally. And because they're they're a little bit further ahead than kind of like what we see out of the lme's I think they're doing some really interesting things that they will productized and we will we will see what they're doing in a lot of it can be this like really focused you know create an ad you know a lot of the stuff that used to be, kind of out sourced or you would have to throw a bunch of bodies at it I think there's LMS doing a lot of that you know customer support Bots think things like that that you know I think there's a lot of efficiencies going on inside of their that's helping these guys really beat their earnings numbers. Jason: [42:38] Yeah I do think that's true it's not lost on me that just as the retailgeek bought is gonna replace me at poobah says all the other places that might have hired me are also not so my fallback is that I may be washing cars at spiffy so we'll see how that. That all plays out but I promise to work hard of it if it comes to that Scott. Scot: [42:58] Absolutely it also we could just turn this podcast into the entire ads so that could be could be here our second asked yeah. Jason: [43:04] We can monetize the podcast I'm not I'm not doing that to the listeners they advertisers would make us make a shorter podcast Scott. Scot: [43:13] Yeah yeah. Jason: [43:14] I'm not down for that I'm not down for it. Even if I have to wash cars the I think you're certainly right like a lot of these companies and Amazon very overtly has has put some more barriers and in place in terms of corporate hires. The one notable exception being the AI space they're hiring pretty rapidly. Um but I also think in addition anything you mentioned that Amazon's actually finally like really leaning into the Fulfillment center automation so while they've always. Been a leader in in having fulfillment center, not all their fulfillment centers in a big chunk of their fulfillment centers were not highly automated and so I think they're now automating all of them and they're rapidly moving to sort of next-gen automation. Um you know where everyone else is kind of putting their first robots and you know moving things around the warehouse more efficiently. Amazon is like rolling out new technology that's a lot more. Seamless in how the people and the automation work together in a in a safe cohesive way so I do think one of the levers Amazon has is. You know to really add more Automation in those in those fulfillment centers and in that cost to serve. Scot: [44:39] Absolutely it's kind of interesting because we started spiffy, which is my on-demand car care company where you're going to come wash cars people are like AI is you know they'll be a robot that can do this in five years I was like I don't know like you know the Boston Dynamics robots are cool but they're not. Let's just programmed well I don't think it's like that you know it's not thinking and who would have guessed that a I would replace you know the digital retail Talking Heads first and and not. Not the physical things I think the physical stuff is going to take a lot longer but who knows once these a eyes you have there's Tesla has that that demonstration of theirs was The Optimist that you know it kind of is learning things as it goes and making inference in real time so that is kind of you know we who knows where all this is going to go. If we back to it now and not science fiction but your term science fiction so. [45:37] Looking forward for fourth quarter they put guidance out that they're going to see growth in the fourth quarter of 7 to 12% the midpoint of that range which let's see would be 9 and change itself was five and a half percent above the consensus midpoint so this is what we would call A Classic. Meet Top Line Crush bottom line on the current quarter and then raised the next quarter both top and bottom line pretty substantially so that you know. This is an important data point when we kind of swirl it together with your Department of Commerce data it does seem like Amazon signaling they're feeling pretty good about the fourth quarter and everyone felt like this was kind of conservative given I didn't put the bottom line number but they felt like that was pretty conservative given what they just did and you know they felt like dad a lot of room to kind of beat that number and maybe it's going to be more like 14 15 percent growth which would be you have a new post covid reversion hi I guess you would look at it where do you did you leave this feeling more optimistic about Q4 or we are your classic Jason curmudgeon myself. Jason: [46:54] Yeah no I think I'm mostly curmudgeon e not for Amazon I actually I think their guidance seems realistic to me. [47:06] On the top line I think the bottom line is just totally up to their whims like if they want to blow away the bottom line they can if they want to invest at all in you know new. [47:18] New AI capabilities and and keep the bottom line constrain they can do that too but the that, Top Line I think they're likely to hit their guidance and again you know one or two other big retailers might you know have a pretty robust holiday as well but I actually think that that sucks all the, the potential growth out of the market for holiday and so I actually think. That sort of signifies potentially Bleak holiday season for a lot of other traditional retailers so I guess it's a. Little bifurcated it's good news for Amazon will see what a Walmart's Q3 earnings look like they announced on November 16th, but I do feel like endemic lie Amazon and Walmart have some, some inherent advantages that are insulating them from some of the economic headwinds and I think that that really just makes things, that much more difficult for the the rest of retail and so I desperately want to be wrong but I think it's going to be, I kind of disappointing holiday for a bunch of folks there also was sort of some if you really listen to the Q&A portion of the investor call, there. [48:45] The the CFO in particular had some concerns about capacity around Q4 and one of the things he called that was carrier capacity which is interesting because Amazon does so much. Of their own fulfillment now that they're just way less dependent on third-party carriers but if he's worried about carrier capacity for Q4 you can bet that means that every other retailer ought to be really concerned, about carrier capacity for cube Q4, and so we you know we feel like we talked about that every holiday season but Amazon's got a lot of. New fulfillment center capacity that's coming online in Q3 of this year and will even in Q4 and so I guess. If there's one thing that could glitch it Amazon if there's not enough delivery capacity if some of these new fulfillment centers have any, any sort of glitches or delays and coming online that you know that that could be the constraining factor for their Q4 growth. Scot: [49:50] There's so sprinkle of curmudgeon e speaking of holiday where can listeners go if they want to get the best holiday news even though we haven't been potting as much as we want to because our day jobs have been absorbing a fair amount of time this year we are going to have some killer content around this holiday and kicking it off we have our very own jacent live not an AI and you're going to do a little webinar for Commerce next what's that all about and when is it. Jason: [50:22] Yeah yeah so on Monday November 6 which I think is a week from now if I'm not mistaken we're doing a Commerce next webinar where we'll sort of preview the holiday season so you heard the very early preview just now but we'll go into more detail share some of the third-party forecast for Holiday Good News, all the other predictors are much more optimistic than I am so so we'll hit that on November 6 and then of course there will be all the good real time holiday news that will be will be hitting pretty hot and heavy here on the podcast so we'll we'll have some of the best data sources, right before and after the holiday to kind of talk about where things are going and what actually. [51:15] And with that I think it is happen again we've used up all our allotted time as always if this deep dive in Amazon's earnings was valuable for you the way you can repay that value is to jump on iTunes and give us that five-star review. Scot: [51:31] Thanks everyone and Jason until next time. Jason: [51:34] Happy conversing.

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EP311 - Video Commerce with Qurate's Brian Beitler

Brian Beitler is the Founder and General Manager of Live Shop Ventures, a video commerce initiative within the Qurate Retail Group, which is the parent company of HSN and QVC. Brian has also served as the CMO of Qurate Retail Group, in addition to many other interesting marketing roles in the retail world.

We met Brian at Etail Boston and arranged this interview. We cover video commerce, differences in adoption between Western and Eastern Markets. The role of livestreaming, and the benefits of being a "commerce platform with video" vs. "a video platform with commerce." We also explore the origin on Live ShopVentures, it's first video marketplace on a mobile app, Sune, and the benefits on incubating a start-up within an established company.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 311 of the Jason & Scot show was recorded on Thursday, August 31th.

http://jasonandscot.com

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

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

Sabrina Callahan is the VP of E-Commerce at Sam's Club. She participated on a panel at E-Tail Boston entitled "Humanizing your brand through effective storytelling".

After her panel, she sat down with Jason to discuss all things digital commerce at Sam's Club. This broad ranging discussion included:

Mobile's impact on shopping
Challenges and opportunities of membership clubs (and their unique access to data)
Role of omni channel
Connecting digital marketing channels to digital experience
Building a brand for Sam’s Club in the digital era

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 310 of the Jason & Scot show was recorded on live from e-Tail Boston on Tuesday, August 22, 2023.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this episode is being recorded live from e-tail Boston Trade Show on Tuesday August 22nd 20:23 I'm your host Jason retailgeek Goldberg and unfortunately Scott wasn't able to join us so you're getting twice the Jason for the same great price which if you think about it is double the value.
And while I know it's disappointing to miss Scott we're making up for it by having a way better guest I'd like to welcome to the show Sabrina Callahan who's the VP of e-commerce at Sam's Club.
Sabrina just completed a panel here at retail and titled humanizing your brand through effective storytelling Sabrina welcome to the show.

Sabrina:
[1:04] Thanks for having me Jason.

Jason:
[1:06] We are so excited and I'm hoping this ends up being a permanent replacement for Scott.

Sabrina:
[1:09] I think I'm up for it I've heard him so I think I could do it.

Jason:
[1:12] I feel like in the first five minutes you're way more interesting and pleasant than he then he he's kind of a curmudgeon.

Sabrina:
[1:18] I'm not I'm just not even going to say anything but just know that I'm ready.

Jason:
[1:20] Smart so before we get into all the meaty topics I always like to let listeners kind of get to know the background of the guests a little bit so did you work for Sam's Club straight out of the Cradle how did you come to Sam's Club.

Sabrina:
[1:34] Surprisingly no not right out of the Cradle.
I've been here for the last four and a half years and Jamie rule mark my five year so I'll get the coveted 5-year badge but kind of backing up all the way to, my background I was born and raised on a small farm in Kansas.

Jason:
[1:53] And in Kansas a small farm is like 100 acres right.

Sabrina:
[1:57] Yeah exactly so I grew up on the farm grew out in the field by somebody dad does all of the crops and my uncle has the dairy so I was out on the tractors driving the semis trying to not get myself.
Killed you know all of the fun things that come along with Farm life and left went to University of Kansas.
Chuck that's exactly right that's Rock Chalk.
And then graduated in journalism and then made my way down to Dallas so as much as I love Kansas and small-town farm and and everything I wanted to kind of experience, bigger city and been in Dallas ever since and we love it there so worked at a start-up in the beginning my entire career has been in digital and marketing and brand and social media and everything that goes kind of along with that storytelling and driving digital performance so I was a star but at startup and then I went over to Hilton corporate and was there for about seven years loved it there I think I.

Jason:
[3:00] Are you okay this event is a tan on Hilton property.

Sabrina:
[3:03] I know listen you're not supposed to say it don't say it.

Jason:
[3:07] To our loyal Hilton listeners were sorry.

Sabrina:
[3:10] But what if he found out I was staying at the Hilton and walking all the way over.
True loyalty rate my shoes weren't word up for it today but no I was at Hilton for about seven years I loved it there and really grew up there and they took a they took a lot of.

[3:28] You know bets on me and allowed me to thrive I was there in the e-commerce space really when they launched the pilot of e-commerce, and and got to work with some of the biggest hotels, in the world with them and a lot of great opportunity got to start managing people you know they kept growing me and investing in Me And It ultimately LED I was in the e-commerce space for the majority of the time and then It ultimately LED to driving and leading the social media strategy and Innovation for Hilton so it was across all 15 Brands and at the time.
There was a lot of opportunity to kind of pull it together and say what's the role of social media, for a for a big company right not just hey we're going to go post but how do we think about the tech stack how do we think about the member feedback to drive business impact how do we think about, content and how do you think about influencers in the role of influencers in the partnership and understanding the rules of the Ft c-- all of the fun things that come along with that and then how do you make sure that, the Brand's all understand the value of it and lean in the right way so I got to present Hilton's first Evers social center of excellence and then that led to, a lot of opportunity that opened me up in the social space and I was on maternity leave with my third baby, when Walmart came knocking.

Jason:
[4:50] Wow congratulations on that by the way.

Sabrina:
[4:52] Yeah three babies is a lot especially we're in August right now and school starting so it's slightly chaotic around my house but still good so.
No so then Walmart and Sam's Club came knocking and I didn't think I would leave Helton but I really had some fantastic conversations during my interview day and a lot one of the last ones with was with mr. Tony Rogers and have you met him before he's.
Yes so you know you know.

Jason:
[5:26] Put my life in his hands on an airplane before.

Sabrina:
[5:29] Oh yes good luck yeah.
That's good you're here to talk about it so that's good no and so we.
We hit it off and they offered me the job and and four and a half years later it was a big giant move in a bet for me but it was obviously well worth.

Jason:
[5:49] Very cool and you've actually had some really interesting responsibilities at Sam's waiting up to your your turn responsibilities briefly talk about some of the projects you've been in.

Sabrina:
[6:00] Absolutely so his pitch if he will at the time was come build a 60 billion dollar brand with me.
Now how can you say no to that so that was a fantastic first start and so coming in really we built the brand together I learned I think about 10 years worth of information from him about Brandon, three short years but we developed the brand so the look and feel the tone of voice the target audience we revamped all of the marketing channels including you know site email everything digitally and then really launched social media right so Facebook Instagram Pinterest, YouTube you name it all the things that have to do with social media including the influencer strategy again and and moderation and care so.
We did some really fun things I think it was a bit of a whirlwind so our first brand campaigns got to do you know the Super Bowl with Kevin Hart all of the the fun things that come along with leading you know a pretty awesome brand.

Jason:
[7:09] That is very cool and for listeners that might not be familiar Tony was the former CMO at Walmart and Sam's and the next time he calls you I have a feeling free jewelry is going to be part of the offer because he.

Sabrina:
[7:21] Yeah I should make a list of things that I want.

Jason:
[7:26] It should be a long list but be my suggestion that he's at signature Georgia.
Shout out to tell me I know he listens every week very willingly and so in the current role you are responsible for All Digital at Sam's Club and is that a thing is digital a fad at Sam's Club or.

Sabrina:
[7:44] We just a Fab yeah who probably probably gone.
Yeah no big deal yeah is super super fat yeah so I along with two of my peers we lead the e-commerce business and so I'm basically the upper funnel piece, so working really closely on the traffic strategy so what types of traffic re driving in and then how are we actually moving that traffic down the funnel so you can think about that of all of the Cross category, you know Stories the homepage anything that really allows us to show the breadth of what Sam's club offers so not just the categories and Merchandising but also the membership the Sam's cash that we offer the Travel and entertainment all of the things that come along with an actual full membership not just retail only.

Jason:
[8:32] Yeah and there's all kinds of interesting Dynamics to me it seems about marketing em in a membership environment versus a.
Traditional, wide open and retail business so I assume you're trying to get people in the funnel for membership and at the same time you're trying to get members in the funnel for individual transactions.

Sabrina:
[8:54] Absolutely right the bigger the base the more sales you can expect so it's a balancing act right in terms of we need them to be purchasing things but ultimately we need more members and we need them to renew right so at the end of the year would it becomes renewal time we want them to see have seen the value throughout the year that they say oh this is a no-brainer when we're on the brand side or I was on the brand side a lot of it was we're trying to build brand Advocates because there's nothing more powerful than someone saying you've got to join Sam's Club I joined and I love it, so that was the the sole purpose of we're building Advocates we're building brand passion we're getting them excited and every piece that we're pushing you should be pushing our value prop of the overall membership.

Jason:
[9:35] Awesome so before we dive any deeper in that I need to know what your favorite Members Mark product is.

Sabrina:
[9:39] Oh okay it's really hard to just pick one so I think I'm actually gonna pick two.
One of them because one of them is very seasonally relevant and one of them something we do all year long so the seasonally relevant one I'm going to say.
There's so many things I would say probably the members Mark beach towels and or pool towels I've had some of the same ones.
For since I started working there they are thick their giant and big and they have a fantastic value to Market and we just keep I keep adding every year this year they didn't kid towels to with awesome designs on them so I'm a big fan of mild that's you know anything about you're advocating for something I advocate for a lot of things there and not because I work there but because I genuinely like them and then the other one that I love that I try to get everyone to do is we have these Members Mark southern style chicken bites.
And you just pop them in the airfryer and sad sad to say is good and bad it's sad to say I give my kids then like once a week but they're addicting some always like well they're just for the kids and then I end up eating them all for dinner to they're just really good.

Jason:
[10:43] I'm well familiar with all those phenomenons and I'm going through an airfryer phase right.

Sabrina:
[10:48] Few are so easy.

Jason:
[10:49] I'm I gotcha yeah it seems and I thought you were going to go with salty snacks I mean that's the easy answer and then you curveball Benny with the beach towels which as a parent I have learned you need way more beach towel.

Sabrina:
[11:03] It's important we've got a pool and we always have kids coming over and using all the beach towels so it feels like it becomes a full-time job and then you can't find them all and I don't want to go spend a ton of money to replace them, and so we either have them on hand or they're not that expensive to go by Exo.

Jason:
[11:19] Now I don't know if you checked with the home this week but your pool has probably evaporated it is hot in Dallas.

Sabrina:
[11:23] Oh my gosh it is hot I think it was like 109 on Sunday.

Jason:
[11:28] Yeah good call to come to Boston.

Sabrina:
[11:29] Yeah yeah I walked around this morning it was so nice you Dallas is brutal yeah I did you ever see the thing that went viral with the guy who he was pointing out the temperatures and then he showed McKenney and it was like a hundred thousand degrees he's like everyone in McKinney's dead.
That's how it really feels.

Jason:
[11:46] It does and pro tip is someone that does a lot of business travel we probably don't want to mention to our family that it's more comfortable here than it is at home.

Sabrina:
[11:55] I already texted them like sorry.

Jason:
[11:58] Just saying be careful so I have a new and it's so Members Mark is a of course the famous owned brand for Sam's Club.
And I won't put you on the spot with any proprietary information but it's a on its own a very large brand I think Walmart in the past has disclosed that it's over a 10 billion dollar a year brand so so remarkable the Walmart, there's a number of own Brands but of course the one most associated with Walmart in my mind is great value, and so I'm now in a murdered with a new Great Value product that's only available in Canada.

Sabrina:
[12:32] And it'll only available in Canada what is it.

Jason:
[12:34] And I just imported two cases of them to my home in Chicago Great Value ketchup flavored potato chips.

Sabrina:
[12:43] Oh my gosh things are off we got two cases.

Jason:
[12:48] Do not recommend you you try them but here's the thing there was you guys just had your earnings call congratulations it was a very very successful quarter.
And Doug mcmillon to see ya.
I don't know if he did it on purpose or on accident but in the investor car he talked about a trip to Canada where they made him try catch, potato chips and he kind of said it's the only Walmart owned brand products that he doesn't want so now my thing is I show up at every meeting.
With a bag of these potato chips.

Sabrina:
[13:22] I don't see him in here.

Jason:
[13:24] I did not I didn't think about bringing him to Boston and you have to like it's a pain too.

Sabrina:
[13:28] Okay packing with potato chips in an airplane.

Jason:
[13:32] Chick early well.

Sabrina:
[13:33] Get interesting yeah well now I'm intrigued yeah so I'm gonna have to drive it.

Jason:
[13:37] Procure some.

Sabrina:
[13:37] Yeah I can't wait to try them yeah.

Jason:
[13:40] Come away if Doug comes for a visit just saying.

Sabrina:
[13:42] Yeah perfect you don't as much as I'd like to be picking my kids will probably even like two.

Jason:
[13:46] Oh my God my son my son would definitely the more like something's unappealing to my palate the more likely.

Sabrina:
[13:53] I'm a to be fair I've seen my kids dip potato chips in ketchup.

Jason:
[13:56] Yeah of course.

Sabrina:
[13:57] So it seems to actually make a little bit of sense yeah.

Jason:
[14:01] Um so zooming into Sam's a little bit like obviously in this last decade one of the huge changes is this whole mobile, um and I imagine it's fundamentally changed how people shop, the you know you hear a lot of stats about even how much people are using mobile in the store in the club so like I'm somewhat curious I don't think please don't be offended, don't think of Club as the earliest adopter of digital not saying specifically but all club like.
Hilton was impacted by digital before Club was right and Circuit City was probably impacted by a digital a little before.

Sabrina:
[14:44] Sir.

Jason:
[14:45] Of our club was so that being said like, is like how has the Advent of mobile changed how you think about marketing and customer experience at Sam's today.

Sabrina:
[14:55] I mean it's extremely important so you're absolutely right at Sam's Club when we look at that the performance and understand where people are headed that's where we focus our time and energy Ray where do they want to be where they going how do we get ahead of it and provide a good experience which requires us to know where they're spending their time and we've seen a pretty significant shift.
Into Mobile and app experience specifically and so what we've what we've done is try to get a better understanding of what's the data and the behavior that they're taking within the app so let's just focus on specifically app right because there's desktop there's mobile web and then there's a and if you think about it there's trial barriers to downloading an app on your phone right you don't just immediately say yes I'm going to put the app on my phone so there has to be a reason and a journey to move them from mobile web into actually you know committing and putting the app on their phone.

[15:51] So I think there's different ways to say well what's a trigger to get them to download but we know one of those giant triggers is this can I go I so everyone loves scan ago if you've done it you know and and you have to download the app and actually.
You know use it in the club to be able to make the purchase through scan and go what's interesting that you might not know is if you hope if you've got scan and go and overall digital and you're looking at it the numbers are pretty strong if you take out scan ago and you just look at online digital penetration only about a third of our members or shopping online so so to me I'm like well hang on a minute they have the app on their phone so we broke through a massive barrier already of loyalty they're purchasing with us but they don't see the value of shopping online.

[16:41] Unless they are shopping on the app in the club so the opportunity becomes massive I got two thirds of our own member base for good acquisition and new members coming in if I just even start with our member base how can I give them a reason to see the value of pulling up the phone and building a relationship through digital when they're not in our clubs and I think that's what we've been trying to focus on and get to so really then it becomes the traffic drivers.

[17:07] Right so how are they coming and how do we get them to ultimately make that decision to move from Google to the app or to mobile web to add to cart and ultimately ultimately make that conversion and we're really taking a lot of time and focus around the data so for instance they come in on the homepage did they come in on a category shelf page that has a bunch of items did they come in on a specific product page did they come in because they wanted to check their Sam's cash total what drove them in how much time are they spending did they bounce or did they stay did they look at things what was their scroll rate did they spend a lot of time we really focus on what it is they're doing what types of things are finding worth adding to their carts and then we start figuring out okay how can we drive bigger baskets your category penetration or introduce new member benefits like we were talking about earlier rate so if I've seen that you know Jason's come in and he comes every five weeks and he buys the same 15 things to stock up as house well how do I show him the amount of Sam's cash he's earned.

[18:15] In between that five to six weeks to get in to come in and then give them things to potentially you know get them excited to purchase through digital using that hands cash or whatever it is that that you can create those triggers using the data so ultimately focus on on driving more app frequency and.

[18:33] Also say as we continue to see the shift to mobile and to app I think members are at the center of everything we do so remember obsessed and as we see what's working and not working with what's working we can lean in, great okay they love it keep doing it if it's not working we know about it so every week we start off the week of one of the members saying what do they not like about us last week right so we look at not only the MPS but we look specifically at the word for word feedback so through member surveys the customer call center the social media I mean we're all pulling it up looking at the Facebook groups and looking at the comments and saying hey we could have done better here and so as you think about that and you put that lens of app and digital this is working this is not working how do we think about our roadmap and our prioritization to provide a better experience to remove, the things that are giving them reasons to not want to shop online with us and pick the big ones and and start to move the needle which ultimately is part of the reason we saw an 18% complex you too.

Jason:
[19:37] That's amazing and I do I want to double click on the data but before I do I just want to stay in the app thing for one more SEC because I couldn't agree more, people way underestimate the difficulty of getting customers just to download the stupid app.
And in many cases I have a lot of clients that like don't have quite the, Market awareness of Sam's and they'll ask about building an app in before I let any of my clients build an app I take them to an Apple store and we sit down and Apple Store and.
Talking thing you'll notice about half the people in an Apple Store are men and women that are my age or older and they're in line at the Genius Bar because they do not know their iTunes password.
And guess what you can't do if you don't know your iTunes password and download an app.
And so there is just this this huge barrier and the.
For normal retailers the mortality of apps is huge two people download it only use it once like the abandonment rates are super depressing so for a lot of people like you go like.
Explicitly focusing on app downloads is often a mistake.
Um I don't actually see Sam's heavily promoting the act of downloading the app what I see you guys promoting are the.
Benefits and the problems that are solved with the app is that I'm assuming that's an intentional decision.

Sabrina:
[21:00] 100% right because I think if you go into the club which I think is again, the true power and value of a true end-to-end Omni retailer right and and that's our challenge always is when you go into the club you feel the club, right the the first experience coming in like you're like this is awesome and where do I start right and it's a full brand experience and you feel the I feel you see you touch you experience the items.
And digital you don't necessarily have the ability to do that so the challenge becomes how do you bring your brand to life, through digital and you have to know those touch points and I would say.
You're exactly right is is it's really hard to do say go download our app it's another thing to say hey do you want to get out the door quicker.

Jason:
[21:47] Get this line.

Sabrina:
[21:48] And I would tell you I would say 10 out of 10 people are like yeah they're not going to say no I'd like to stay in touch in line the waste my time no they want out and it's actually really yeah.

Jason:
[21:57] Desert home with the with their their their significant other.

Sabrina:
[22:01] That's very true like listen okay we'll say nine out of ten, 10th person's a sad sad person but either way the the opportunity becomes okay we'll give them a reason valuable enough for their time and attention that it's worth downloading that app on their phone I think what's been interesting to is navigating the conversations rate because when you see the value of app and you see the growth and app me like yes app app and everything is focused on app you tend to forget the actual member journey to get to the app right so they may have started on desktop, when you know they were sitting at work and me and they were trying to figure out where to start for dinner that night that desktop Behavior may have said okay actually I was looking at something at work today and now I'm pull it up on my phone and they went through mobile web and then ultimately they shop with us a couple times and now all of a sudden oh I didn't realize they had an app that app would be easier right so there's a journey and you can't forget everyone else that that is experiencing it before they made the decision to put that app on their phone and so you it's hard to prioritize and forget about about everyone else you have to understand there's a journey in between.

Jason:
[23:08] No I couldn't agree more in before I go on I do want to just one shout out to scan and go because it's amongst my favorite digital experiences because unfortunate truth of many digital experiences is, they're awesome and members our customers love them but they often are problematic for us as retailers IE often, it's taking something that the customer used to do and shifting it to something we have to do right so you think about online grocery, the customer used to get the bananas now we're getting the bananas right if those are home delivery the customer used to drive those home now we're driving those home scan and go is one of those rare things where it both increases customer satisfaction or NPS score, and the member is doing something that we used to have to do for them so I feel like that just amazing, on the data side like obviously one reason a lot of people like to get people in the digital echo system and using the app is because you do get all that wonderful data that, describe activating that's one of the areas where I feel like clubs have an unfair advantage because of the membership structure right like most of my retail clients they talked about this capture rate and what they mean is what percentage of my customers do I have any idea what they bought.

[24:25] Right right because a lot of people buy with cash or they shop anonymously or, they pre-shop digital and then they you know paid on a different credit card and there's this whole, you know family amalgamation all these complications which is why if you walk out of this room right now there's 47 CD P vendors all trying to help retailers, solve this data Quagmire and I'm not saying it's not still hard at membership-based retailers but you do kind of have an unfair built-in Advantage like you pretty much know.
What and how much each members fans and on what.

Sabrina:
[25:00] And I know they're out there I might just stay in this room and close the door.
No but there's a reason why they're booming right because it's a it's a lot of work to figure out I would say yes coming into the membership space I was, very excited and shocked by how much data we really truly had every time you know member makes a purchase we see it so it allows you to kind of.
Really understand what it is that's driving their trips how often they're coming where they're shopping what are they buying you can also start to understand their typical journey and behavior, so I'll give you two examples of the way we're kind of leveraging data I know I already talked about app but let me kind of put it into real life for a second.

[25:46] One of those is and I'm talking specifically to like end-to-end experience so one of those I'll start with on, specific promotion or sales or event right what gets exciting is you can put this money into Market you can understand where they're coming in so first of all to drive the traffic and you're looking at a year-over-year confer a marketing campaign okay great so the traffic was there and hit the pages you needed it to hit well now you can say okay what they do next right and you can start to say all right did they move from that page to the next page and so you can see the analytics team has done fantastic jobs not only of having the data but making the data.

[26:30] Readable digestible and actionable is a completely separate, right so there's a lot of work that happens behind the scenes of late great I'm looking at a table of a massive amount of data but what am I supposed to do with this to make a business decision and what they can do is they can take that and they can build it out for me across the funnel so they'll say okay traffic was up well and then it moved to the next page to it so it actually moved from let's say the home page or landing page we built to the Shelf page with all of the categories and then it moved from that category page to the product page and you can see all the product pages that were tagged with in that event in that campaign, then you can and it has your year-over-year growth of each so you can see the continued strength in growth throughout the funnel and then it moved to check out and ultimately her to cart and ultimately to check out and so you can see okay but you can also see when it's off right what happened okay so something's off you can say oh well that's because X percent of our items ran out of inventory in the first two hours because maybe we didn't estimate, demand properly right and so now all of a sudden okay we'll stop marketing that so go back up to your upper funnel and stop talking about those because you're making some angry members because they're falling off here and not because there's not strength in the funnel, it's because it's not actually available when they tried to go add it to their car so we got them all the way to the PDP and then something breaks.
Right so it makes it makes it really easy to be able to do that in a way that allows us to actually pinpoint the issue.

Jason:
[27:57] Side note that used to be way harder to do in the store circular let's hard to erase the printing when you run out of.

Sabrina:
[28:04] Yeah it's not it's not exactly it's not exactly possible okay so and then other than the the funnel I think the other thing is understanding kind of their behavior on the pages, so if you think about let's just take the types of traffic coming in where they going and is it working raise so if they're coming in through paid marketing or if they're coming in through CRM or they're coming in through SEO where are they going and is it actually doing its job, right and then once it lands how to use the data up to optimize the right message you're putting in front of them at the right time so, not only just on personalization right so let's take our home page you have, frequently ordered items you have no inspired by a recent views things like that but you also think about well where is it they're clicking on that page the most and how do you take that that, that knowledge and that data and say okay here are the things we need to be putting in front of them based on that traffic driver that came in so we can connect the message, and make sure that we're taking advantage of that quality traffic so that we can actually move them down that funnel.

Jason:
[29:08] Yeah that's amazing and hearing those two examples it makes me think and hope that we both have kids in school hopefully they become data analysts because.
Seems like there's an ever-increasing problem with processing all this data I heard a rumor that Walmart has like seven petrol bytes of data and I don't actually know what a petrol B is, but my seven-year-old tells me it's a big number.

Sabrina:
[29:33] I don't know what that is either but I'm not doubting it.
And you're absolutely right like I think it becomes a if you have so much data right at your hands how do you make sense of it how do you organize it and again make it actionable because otherwise it's just a bunch of days that you're just sitting on and you're not actually doing anything with it to improve the experience, Sokka.

Jason:
[29:53] Compounding that data problem even longer we have the whole omni-channel, right and you know we used to talk about what percentage of our sales were digital and you know try to get that digital percentage up but increasingly, every customer using digital tools somewhere on the path to purchase and very often they're using physical stuff so how do you guys think about that at Sam's eye.
That seems like it makes that whole analytics problem even more.

Sabrina:
[30:18] Of those it does but it's good right like you don't want them necessarily only shopping in the cupboard only shopping online you want them to think about it and we try to put ourselves, through this Member First mindset.
Approach right so what is it that's driving that that needs data that purchase intent so are they just looking for inspiration right they're building their patio where there's getting ready for tailgating so they need a full solution or you know is it they just needed their paper towels or their bananas or their bottled water and on top of that you think about what what's the most convenient way for them to shop at the moment maybe they're on their way home from work and Sam's Club is right there five minutes from their house will they can.

[31:00] Hop in because they know that they had a list of they can't remember what was on their list and they're already here so they're just going to do it maybe while they're in there they don't want to deal with the line so we give them another convenient option of scan ago okay well maybe they head home and then all of a sudden that night after Sam's Club is closed they realize they forgot all of the Lunchables for school tomorrow, bummer yeah been there multiple times and also big bummer or you're out of milk and you know your kids are going to cry because they have cereal every morning and now you've got an issue or whatever it is and I think based on whatever situation there and we want to make it convenient for them to be able to choose Sam's Club so you've given them the two options in the club will now you've got multiple options from an online purchase perspective you've got curbside so I'm going to put in my curbside order and I'm going to be able to go get it in the morning when it's ready and it'll be ready just in time or you're going to go you know put in a same-day delivery the next morning and you know you're going to get it really quickly or you can order on you no shipping and get it there in 23 days and you can wait a little bit because you can get free shipping as a plus member so you kind of see the opportunities for us to build around you you remember us have told us was most important to you and what you need so you know what the quality you want a great value you want it conveniently we know that about you so how do we think about all of the different scenarios you might be in and make it as easy as possible for you to choose Sam's.

Jason:
[32:26] Yeah and I'm assuming those successes and near-misses come up a lot and all that qualitative data on your.

Sabrina:
[32:34] They tell us yes they tell us they're like you know know but also a lot of times yes it worked.

Jason:
[32:39] Yeah I worked with a retard once they said there's two outcomes successes and learnings.

Sabrina:
[32:43] That's exactly right that's exactly right.

Jason:
[32:46] If that were true I would be a lot smarter than I am so.

Sabrina:
[32:48] So yeah it's a it's interesting because you see you know from one member of might have been a great experience and the same exact experience didn't work for the next member and it's because it's like well how do we put how do we let them know of all the options that they actually have to shop with us and let them choose the right Journey for them so a lot of it also is an opportunity around awareness right so do they know we have a curbside we just launched delivery not that long ago right so do they even know we have same day delivery I think you then get to the point of in the funnel again is this a conversion issue or is it just an adoption issue or is this an actual awareness issue, right so being able to kind of pinpoint where those opportunities are and the funnel I think is just just as equally important.

Jason:
[33:31] You know at the beginning of the show you mentioned that earlier in your exams career one of the projects you worked on was the actual Sam's brand which a would be terrifying to me because it's I mean.
Is always Gary but then when the blank brand quite literally is the name of an American icon is kind of more.

Sabrina:
[33:51] Little bit little intimidating.

Jason:
[33:53] You don't want to screw that one up but when I think of, the sort of original Sam's brand right it was a lot about the store experience right and we've just spent 45 minutes talking about, all the cool new paths to Sam's and a lot of them are digital like do you guys have to think about.
What the Sam's Club brand even means to members today in a different way than maybe you you were able to five years ago or ten years ago.

Sabrina:
[34:23] A hundred percent and I think you know we have continued to evolve with the members to to be able to say hey these are the most important things for them so let's continue to evolve the brand I would say yeah like starting out in the beginning it was really clear and again we used the member feedback to say like if we look at our brand passion index well here are the things that they're talking about and it's not driving a ton of volume and they don't really like it or they're rather neutral okay well when they are talking what are they talking about right both negative and positive and when you've got the - address it and when you've got the positive lean in right and the way you can lean in is on digital, so they not only from all of the marketing channels whether we know we talked about earlier marketing the social media all of those things but it's also on digital in the experience so if you know they like something how do you make it easy for them and bring the brand to life and tell the story so it's not just about again items are merchandising but it's the full membership experience and the ability to say hey like welcome to the club, right I think when we we've identified some of those opportunities when we think about their full Journey so the first year is extremely important to us they become a member.

[35:31] If they didn't join in the club how do you make them feel like they're part of the club if they didn't come to a membership desk and say Hey I want to be part of this you might have gotten them through something a non-digital, well we also know that that first 90 days is extremely important and how do you get in front of them and say okay this is awesome welcome to the club and you should be shopping with us digital did you know our Omni proposition did you know the value and convenience that we provide and the team looks at those ways I think one of the things we did was build.

[36:03] A digital membership booklet that's like okay we don't really talk about anywhere all of the things that the membership has to offer any more digitally we usually relied on the Associates at the membership desk to do that for us as they're like hey now welcome to the club here's everything you have well when you join digitally you're kind of Flying Blind right so okay I'm here now what do I do right what do I even get and if they don't want to spend a ton of time looking around and or it's not easy for them to find it then how do you introduce the journey that says welcome, look at all this stuff that you now have access to as a member of our club and and really kind of bring that brand to life and feel it even if you can't have your foot in the club so there's opportunities like that where we look for for bringing it to life and I think there's probably many more to go but we use the data and the members to say hey this feels like a gap let's figure out how to address it.

Jason:
[36:55] I'm in is that the big filter because I.
Follow-up question is going to be what are the things that we could expect to see evolve over the next five years and you know we're at a trade show where there's a bunch of vendors that each have a interesting widget that.
They want to sell and you every one of them you could imagine use case where that would be really cool and I imagine for someone in your shoes one of the challenges is which of these three hundred things is actually.
Going to add the most value to to our members lives right and.

Sabrina:
[37:27] You're a hundred percent right and which way is the right path and I would say when I talk about Sam's something that I love is that it feels like we run, like an 84 billion dollar startup, and it truly feels that way and one of the reasons it feels that way is because of how quickly we test and learn and you know we work really closely with product and Tech and Engineering with a problem what's the problem we're trying to solve for the number that's what everything starts with right so again back to the member Obsession hey they're saying this is an issue and I think if we could solve it for them it could be really impactful so we give that problem to the product Tech and Engineering teams and they come back with like I think this could be it let's go test, we don't know it might crash and burn but we think this could be a potential path and they do a lot of customer surveys research to say, feels like it's down the right path and could solve for this problem and then they go out and they if it does well great let's try to scale a little bit more maybe move it across some of the platforms and see if it works across desktop mobile web and app maybe IOS and Android different behaviors right and then once they say oh okay no this is actually going to work and they're telling us they really like it we run, and I think that's the way we've done we've always done it is what the members tell us their problems in their pain points it's our job to go solve them for them and then run as quickly as possible and let them tell us whether we figured it out or not.

Jason:
[38:49] That sounds like a totally sound approach and I know I can't put my thumb on the scale but I hope one of those problems ends up being that I never have to run out of Lunchables again.

Sabrina:
[38:59] Yeah me too that could be really nice.

Jason:
[39:02] Significant quality of life.

Sabrina:
[39:04] My kids would appreciate it.

Jason:
[39:05] Exactly and sadly Sabrina that is going to be a great place to end it because it's happened again we've used up all our allotted time there are 45 CDP vendors waiting outside this podcasting studio and I've promised them all the time.

Sabrina:
[39:15] So excited yeah I'll thank you I appreciate it yeah nice of you.

Jason:
[39:21] But it's been a real Joy chatting with you and we appreciate you sharing a peek inside the covers with all our listeners I hope you'll come back.

Sabrina:
[39:29] Thank you guys for having me this has been awesome and I've Loved listening to your podcast you guys are extremely entertaining and I'm excited and honored that you guys had me here today.

Jason:
[39:38] Scot and I both agree that one of us is funny we just don't agree on.

Sabrina:
[39:41] It's clearly you because I'm replacing him so it's obvious who it is but we won't tell him he'll have to just hear it let he'll have to listen to the his own podcast so he decided not to come to ya.

Jason:
[39:51] Yeah he definitely does not listen to the show he's like the one person in e-commerce that doesn't listen.

Sabrina:
[39:54] Perfect yeah oh great.

Jason:
[39:58] It's been great thanks again and until next time happy commercing!

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EP309 - Instacart IPO Filing

Warning: Given the complexity and breadth of topics, this is a longer than usual episode with a runtime of 90 minutes (if we had more time, we'd produce a shorter podcast).

On Friday, August 25th 2023 Instacart filled its S-1 IPO form with the SEC, in advance of its intention to make an initial public offering. The complete filing is almost 400 pages. In this episode we summarize all the key points, including a number of surprises, in the filing.

If you want to follow along with the actual S-1, you can download it here. Scot suggests you focus on pages 101-124.

Topics Covered:

Cover Page and Entry Level Items
Overall Growth Trends 25:50
Unit economics 42:90
Cohort Analysis 48:10
Instacart Ads 56:30
The Big Risk/Concern 1:00:11
Other observations (Instacart+, Carrot Services, Generative AI) 1:22:50

Other episodes mentioned: Episode 255 - Instacart Chief Revenue Officer Seth Dallaire and Episode 224 Customer Cohort Analysis and CLV with Dr. Daniel McCarthy.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 309 of the Jason & Scot show was recorded on Tuesday, August 29, 2023.

http://jasonandscot.com

Jason:
[0:23] Welcome to the Jason and Scot show this is episode 309 being recorded on Tuesday August 29th I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason and Scot show listeners.
We are going to jump into the talk tonight because one of our most popular shows as you know Jason the format is a deep dive and we have got a great Deep dive for you guys this episode.
Last Friday August 25th there was a very big event not only in our favorite world's grocery which is Jason's favorite world and my favorite world of e-commerce and then Jason's favorite world of.
But also in my favorite world of startups so this is this is a pretty big event and we wanted to dedicate a complete episode to it.
I mean it is the filing of the S14 instacart.

[1:24] And just to set it up the you know in my world of start-up land it has been very hard to get an IPO done so there's been a couple post coated and like late 2020.
And then summon 21 and then there's been a dry spell there's been something called a dese back so you have this spec which is this.

[1:44] Special-purpose acquisition thing and you can kind of go public through this kind of complicated convoluted thing.
Tends not to go very well so there's been some of that like in My World Mobility there is one called get around and there's been a couple others and those typically have not.
Gone so well they're down like 95% bird the scooter company did this as well.
So it's been a very dry IPO market for startups and thus of interior backed investors.
So there has been a lot of anticipation around when is that a PO when they're going to open who's going to be brave enough to kind of stick their foot out there first.
And you know a lot of people have been rooming that instacart would be out there there's a couple other companies in this kind of unicorn Stratosphere stripe is another one that we cover a lot on the show from the payments world.
There's also the others you can think of Jason there's this one.
There's a software one that is just doing really well in AI that's been mentioned a lot not not open AI it'll come to me in a minute.
So you know so this is kind of the real.
Bang the Big Bang of here's a company that is being brave enough they're gonna go first and we're going to see what happens so it's going to be really interesting and we thought because it hits this Venn diagram of all of our favorite things that we would spend a fair amount of time on.

[3:10] So first of all this is a 400 page document so our value add to the listeners is we have distilled it down into what we think are the most interesting little tidbits and some of the things we've learned from instacart it is nice because there's been a lot of rumors about how instacart Economics work and Jason has been tracking their ad piece which is you know cpgs have really seen some really nice results from that so we know that's been active and the areas we picked apart we thought we would cover tonight is I wanted to kind of give you a quick and dirty Scott's guide to reading an s-1 and we'll start at the cover page that's there's actually a lot that happens on the cover page so I want to spend a little time there and kind of give you a little I haven't taken a company poet behind the scenes of what's going on on there and then we're going to talk about some of the overall growth things that just kind of help you understand.

[4:07] How to think about instacart how they're growing and what they do and what role they play and then unit economics one of the things that is happening more and more in these s1's is they're doing a more comprehensive cohort analysis and this is basically showing hey if if I car to a customer in a certain period how are they doing now and what are those Trends so that this this had a lot going on there of course we want to talk about the ad business and then little bit of a catch-all for other observations, Jason anything I missed before we jump into the cover page.

Jason:
[4:42] No I think you mostly covered it just one slight correction it's four of our five favorite things for those listeners that tuned in to hear us talk about Ahsoka we're going to do that on an upcoming episode so that Star Wars would be our fifth.

Scot:
[4:56] Yes sadly there was no Star Wars in this one so it's that one little part of the over the Venn diagram was left is its own little circle out in space.

Jason:
[5:06] That's a we call that a teaser for a future episode.

Scot:
[5:09] Yeah yeah we're we're Pros were 300-plus episodes into this thing and this is the kind of you know Pro level that we deliver on the pod.
So you guys missed it Jason forgot to plug in his microphone earlier so that's a yeah we're still still learning every day, so when you open an s-1 the first thing you see is the cover page and it you know a lot of people just Breeze by it because it's a cover page but it has a lot of really valuable information so first of all the first thing that I noticed is I was searching for this on Edgar and I kept typing in instacart and it wouldn't show up and I was like WTH I know this s1's out there why can I not find it and then I saw an article and it said oh the company's real name is maple bear so that's the first thing you see on the cover is the company we all refer to as instacart its actual Corporation name is maple bear and it does business as instacart so I thought I did not know that prior so that was the first thing I learned right there on the cover so that's interesting so if you do go to the will put a link to the s-1 in the show notes but if you do Brave the Edgar SEC database yourself throwing a little Maple bear there and not instacart.

Jason:
[6:22] Not to be confused with Amazon's house brand Mama Bear.

Scot:
[6:26] Yeah yeah and I'm sure there's a honey bear and brown bears there's a there's a lot of a lot of bear things going on.
The other thing that I was like to see is what symbol are they using I think it's fun to kind of you know as an entrepreneur to kind of think about what symbol you're going to use that best personifies your brand Channel Bowser we had ecom's so that was an exciting one so we captured e-commerce Shopify go.

Jason:
[6:52] The best ticker symbol of all times by the way.

Scot:
[6:55] Thank you thanks thanks I appreciate it.
Shopify head shop and that was a good one and instacart / Maple bear is going with cart so I think that's a that's a that's a pretty nice one you know it kind of there a multi grocer chart cart and we all think about instacart I'm sure they hate being called Instagram so this kind of like really punches on the cart so maybe they get away from everyone mistakenly calm Instagram.

Jason:
[7:19] I think it's solid.

Scot:
[7:20] Yeah A-Plus on the symbol and then in the you'll notice that a lot of the evaluations and how many shares they're selling are blank and that's you know in this draft of this one which is the first kind of public one that they're dropping out there they'll they'll iterate a couple more times they'll do their Roadshow and then write one that, it prices they'll update the S12 include all that information so they'll make kind of literally a game day decision the night before IPO of how much based on the order book how much they want to sell and at what price so that, that's going to be blank through probably several more iterations as we go on then this is did you want to do something in.

Jason:
[8:04] No I was just I was just thinking that they I assume they left it blank because the underwriters were out of practice.

Scot:
[8:10] Yeah no no they they are there waiting and that's a good point because when you go public the the companies that take you public in this context they're all investment banks on Wall Street.
But they they filled this role of Underwriters and basically what they're doing is they're acting as market makers they're going to cover your stock when it's public and they're also going to be basically pounding the pavement to sell your stock to buy side by side analysts and firms on Wall Street.
Which there's two buckets of there's mutual funds and hedge funds there's also retail that I guess there's three buckets, retail would be you log into Schwab or Robin Hood and the diet of the IPO you try to buy some chairs that's retail and they all allocate a little bit of that for the IPO so they like retail to come in and get a little taste.

[9:04] A lot of folks that if you're an accredited investor at an institution and you have a wealth manager, sometimes you can get a little bit of access to an IPO before it prices you don't get a special price or anything but you can if you're really excited and you're a retail customer you and you're in this kind of wealthy bucket then you can you can get some allocated shares I think is what they call it these call this friends and family they don't call that, that anymore that's called a allocated shares but what's important about the underwriters is there's actually a signal there several signals here and I didn't know this time went through the process.
First of all they have lined up a who's who of investors so even before you get to Underwriters they have this really interesting note right before right underneath before they get in the underwriters and they say oh by the way we have lined up these investors already that have committed to buying and they have committed Asterix and then they kind of like take away the committed but.

[10:05] I think that's a legality I think I think it's a pretty hard commitment is my reading of them and they basically say these guys are already these guys have lined up to buy at least 400 million in this offering.
Regardless of the price and there's some big names in there there what I would call.
Public-private so they have invested in instacart already as a private entity and then they have another side of there.
Firm that invest in public entities and they have said that side is going to support the private side and that's nor just Bank tcv.

[10:38] Sequoia and a couple others this is very unusual but I think it's an interesting play because it basically says to the market.
Hey you don't have to worry about this thing you know taking on the first day because we're going to were signaling to you we're going to place a chunk of this with these folks that are long-term holders and they're going to backstop this thing I think of it as a adding a floor to the IPO basically saying we know it's been a while we know there's risk out there we're going to have a floor on this so so there's built-in demand for this IPO so that's quite unusual and this is the first time I've ever seen anything like that sometimes you'll see tiro price is a big one a big mutual fund that likes to do this or they'll have a private-public and they'll say you know they'll kind of suggests that, they're interested in buying more and they'll come out and say they don't plan to sell or they've accepted a lock up for a year or something like that I've never seen such a strong message as this one so I thought that was interesting.
Okay then we move to the bottom of the cover and that's where you have the list of the underwriters and what's really interesting is the way this works is the bigger your font the bigger a role you play in the IPO so on this one the biggest font is Goldman Sachs and JP Morgan and you know they have I don't know what would you say Jason like a 40 Point font.
Your.

Jason:
[12:03] Yeah I had to read it with my my PDF zoomed way up so I feel like I yeah but it was a big font.

Scot:
[12:11] Yeah yeah so those guys get like a you know they're kind of really big and then what's also interesting is where you show up on the page is important so your importance starts at the left and goes down to the right so the most important what we would call the vernacular is the lead left which is the biggest font on the left side of the cover is the lead Investment Bank and as Goldman Sachs and they're they're The Bluest of Blue Chips everyone wants Goldman Sachs if they come out.

[12:37] And then usually you want either JP Morgan or Morgan Stanley now JPMorgan has increased greatly and stature over the last three years because they have weathered coded and they have basically absorbed most of Silicon Valley Bank's deposits and a lot of these other riskier Banks and their CEO is pretty famous Jamie dimon so they've this is kind of you know two blue tips on the top of the book here which is pretty interesting and then, then you kind of go down a bit and you end up with 18 more Underwriters and there's like three levels of them there's like the font gets smaller so you go from 40 point to 20 point then you go to like kind of like 15 point and you go to seven point and you know what's interesting is I have never seen this many Underwriters either so they basically have said we want everyone on Wall Street lined to go and help us sell this we will turn no Rock no Rock will be unturned looking for buyers of instacart stock with the institutional investors.
There's some International Players so they've basically if you kind of said if you if you.

[13:53] Few War Room doubt what are some things a company could do 2D risk an IPO they have done things I've never seen before times like three and then the last thing that's interesting is the economics each of these Banks gets kind of depends on where they are on the page so you know if it all this gets him to like, there's all this Machinery but these guys do it because they make money so Goldman will make their kind of highest percentage and then JPMorgan and so on and so on based on how much they contribute to the book and all this kind of calculus that goes on behind the scenes so I thought that was kind of a really interesting just on the cover some things that were very unusual from other IPOs I've seen Jason anything that you found on the cover that was riveting.

Jason:
[14:43] We'll know I did.
I have a question for you though I got I guess I when I saw all of those Underwriters I kind of and perhaps erroneously assumed that part of what was going on here is, it's been a while since there were in any IPOs that went through an underwriter and that all of the underwriters are out there.
Desperate for four deals and that therefore.
Instacart had more more leverage to get more Underwriters like is it.
Is it literally instacart just agreed to pay more for these two more Underwriters 2D risk the IPO is that.

Scot:
[15:23] Yeah I think.
So human nature is that the lead laughed and Lead right want to absorb a lot of the deal and don't want to share too much so so typically there's some friction there right so they'll be like yeah you could add a couple and they use this tearing language I don't you know this is just kind of how I don't know who how they know what who's what dear, but tier one is Goldman Morgan and JP Morgan Morgan Stanley and then tier 2 is you get kind of Stiefel, a couple others in there then you go tier 3 and then you kind of have like an international kind of tearing as well so usually you get like two from Tier 1 Maybe two or three from tier 2 and then that's kind of it and then if you've if the company feels strongly like another consideration is when you go public one of the things that helps you long term is to have analysts that follow your stock and we've had many of these analysts on our show Mark mahaney Collin Sebastian these are and then Scott Devitt he was at stifel and he's moved on to another shop these are these are famous people in the internet marketing world so you want take Mark sets, I wasn't even as Fern was he ever green but that's not it.

[16:40] Ever Quorum so so you as the company can say the Goldman hey I know you guys want to keep a lot of Economics but I want mahaney on this and we got to get ever Cora so some of those on the bottom are probably International distribution retail or something the company wanted kind of specific to add them on and you know that was all pre-negotiated with Goldman getting lead left they had they kind of had to acquiesce to having a bit of a large number of Underwriters on there so I don't yeah I don't think I'm sure they all wanted to be to your point like there certainly wasn't even saying no to being invited to this and they probably you know you just bake off in this was I came to imagine if they ended up with 18 like, mr. started with 80 I don't know it's crazy that was probably like a.
Six week bake off just to hear from all the bankers so yes I think there's more around the analyst going on with with the large number on some of those.

Jason:
[17:39] Got it and then I want to hear your speculation about where the price might come in but I'm trying to remember the details there's been a lot of interesting things going on with the private placements before we got to this point right so I think the some of the valuations of the private placements were at some point disclosed and then I want to say instacart reset there.
Their valuation at a lower number while they were still private like presumably to make the equity appealing for employees.

Scot:
[18:17] Yeah the sequence of events and this is all you know they don't disclose all this in this one because it's kind of like.

Jason:
[18:25] Sure I'm just trying to get the the Run.

Scot:
[18:27] The Whispers And if you read some of these you know I subscribe to a lot of things that talk about some of this kind of rumors and so take it with a grain of salt but there was some sequins like they were chugging along and then Covent hit and it was like Off to the Races vertical and I think the wheels kind of came off the bus and they started to lose money because the unit economics weren't weren't ready for for like a surge like that and then right around 21 they replace the CEO and they had to kind of emergency raise some Capital which is kind of like one of the worst times to do it because even though their revenue was surging the rest of the market was in the toilet basically so I think they had to do a Down Round And what I've heard is their bed raised money as high as 39 billion and then they took this haircut at with this new CEO in this kind of re leaning down the company at about 13 billion so.

[19:19] So I think that's kind of like the watermark is kind of where they've last raised money and if you look at their revenue that's actually not that's a very reasonable Place given where you know they've grown since then but now what's the revenue like four billion ish yeah so they're like 3 billion and 22 in revs so that's like a four times Revenue which is pretty reasonable for a company growing the way they are with with good profitability so I would be I would not be surprised we don't we won't know this per share price until we see the denominator and they didn't have the denominator which is market cap divided by number of shares equals share price we don't know the number of shares so I would I would suspect.
I'll guess, four billion I'm gonna guess 20 billion would be a low like I think it will price they're on the low end and it could go as high as 25 30 depends on you know.
Retail and how much momentum it gets with with buyers.

Jason:
[20:26] And part of the art here is you don't you don't want to price it too low because that means you you have money on the table when you sold your Equity but you also don't want to price too high and have the, the stock like go down from the offering price and get below water right away right so.

Scot:
[20:49] Yeah it's very common we kind of had this situation at Channel visor we went public right after you know cortical right after in a longer time window of 08 09 and you know they strongly we had golden lead left and they strongly encouraged us to think long-term and not get obsessed about that pricing and leave a little bit of money on the table and yeah and then over time you could do a secondary at a higher price and you really want to you don't want to tank especially in a tepid market so I'm sure this was all part of the um you know Goldman would counter negotiate this to be lead left and say look we we need your commitment that your yep part of the pitch is they give you what they think it's worth and how it's going to price and they also discuss the strategy and that's part of the selection processes and you would think it would be.
Okay whoever says they're gonna give me the highest price but you actually kind of they really stand out a lot because the Goldman people can talk about Dave, they've got like a lot of data to back up their strategy and you know there's like Watson there that that are.
It would make your head spin and so they do a really good job of talking about why it makes sense to price the way they think and how how they see it over a longer Arc of time.

Jason:
[22:12] Gotcha so the guys with all the money have really good justification for why you shouldn't worry so much about the money.

Scot:
[22:18] And then the other thing to know though is what typically happens is you are not sharing you're not selling any one shares so the company so as part of this IPO the company will issue new shares so so you as the founder and the other investors you still have your shares you're not actually selling them at this moment so you know in a way now you get diluted right so the flip of that is your percent ownership goes down but you know it's kind of the would you take a little bit smaller.
Of that and long term when you can sell your shares as the investor and the founder and the team and the people that bet on you now you know can you execute and deliver and then earn your way into a higher price and then that's when you can kind of like get some equipment sir.

Jason:
[23:08] Do you want a little bit of a grapefruit or all of a grape.

Scot:
[23:11] Yes exactly yep that is a good description.

[23:17] Okay so here's here's the other part of the quick and dirty guide to reading the S1 you can take so that's cover is really good and then you take the literally the next let's see what is it.
100 pages and you can toss them so this is where the lawyers come in and they love to make sure you understand all the risk factors you know a meteor could hit the Earth people could stop needing groceries cybersecurity I could be no one wants to shop for them it could be they'll compete with a bunch of people Amazon is always a risk factor Google Microsoft.
So all that really doesn't add value and then there's a little bit of financial stuff but it's it's pretty dry and it's kind of like from the Auditors almost so it's like super drive so it always do is you skip to the part of this one we're finally the lawyers have earned their large fees and they vomited forth 100 pages of risk you know stuff.
And then you get to write your story and that's called the Management's discussion and Analysis in the industry it's called the md&a.

[24:27] It's confusing I thought for a long time it was md&a because Aaron says mdna really fast and they're saying the word A and D and it sounds like an end to me and I kept saying what the heck does md&a stand for they're like what do you mean what's up what are you saying.
It's like a who's I first got a thing but it's md&a so Management's discussion and Analysis and this is where you.

Jason:
[24:49] Because I read all 100 pages and and I'm super depressed and one of the risk factors is the way I could become sentient and take over the Earth.

Scot:
[25:00] Mmm yep that is a risk factor and then it will bring our groceries to us I guess as we are batteries for its consumption.

Jason:
[25:08] The computers won't eat.

Scot:
[25:10] So if you really want you know so what you can do is you can get the gist of 95% of this by printing out the s-1 pages 1012 124 that's it's only 23 pages and it's really dense but it is actually this is actually a very good read they did a very good job of making this so you know.
It's very approachable and they go into a level of detail that's really handy into problem so we're going to give you some of the highlights from that but if you want to go deep on your own we will give you all you need to go to the next level just by looking at those 23 pages.
Okay so what did you see and them DNA and that got your attention.

Jason:
[25:55] Well I mean a number of things so maybe just super high level what's exciting to me like obviously a lot of this information about the business was not, publicly available so in the process of going public in issuing S1 they suddenly reveal a lot of things and they reveal things about.
Their own business but they also have to paint a pretty good picture of what they think is happening and could happen in the digital grocery business so it's kind of like getting a whole class of really smart people to sort of, write a thesis about the the digital grocery business that we get to read and interpret and you know we they reveal things that we didn't know like how valuable customers are over time and how much consumers spend on a given order at instacart and what percent share of wallet they think digital gets versus brick and mortar and all these sorts of things and we'll get into a bunch of them in the in the individual sessions but my my takeaway from the beginning of that management discussion was that it's a.

[27:08] A pretty robust business that the aggregate amount of.
GTV that they that they have is pretty significant its twenty eight point eight billion dollars in groceries that they sold in 2022.

Scot:
[27:27] Yeah and GTV is gross transaction volume so instacart it's basically a Marketplace like eBay or Amazon where parts of parts of Amazon all of you back where you have in the marketplace of product Marketplace use GMB a lot of payment systems like PayPal use tpv gross merchandising value total payment volume they have chosen to use this term for the gross figure of GTV and at first I thought it was going to be groceries to do but it's gross transaction value I thought for sure it was like grocery, I was trying to decode it without looking it up and I was like that can't be grocery because then I don't know what a TV is doing there and you know so then their revenue is a derivative of that meaning of some percentage then of that big number Falls to them as Revenue after they pay the grocer The Shopper and then instacart the business has the leftovers and which ends up, we'll go through the unique and I'll mix it ends up being being pretty small because the grocery business does not have huge merchants.

Jason:
[28:26] Yeah so kind of looking at those business fundamentals that you know in 2022 they sold 28.8, billion dollars worth of stuff which for them generated 2.5 billion dollars in revenue and they were profitable on that Revenue they they net 428.
Million dollars which like back in the a couple years ago when there were more IPOs happening there were there were IPOs in the space they were happening with companies that still weren't profitable so so that was interesting that they they were meaningfully profitable and then the, you know you're super interested in what the growth trajectory is and.

[29:13] 20:19 was a very small year so going from 2019 to 2020 you know and then the pandemic app in the middle 2020 and urban was ordering groceries from, from instacart so the growth in 2020 was astronomical like 300% or something like that.
But then the growth in 2021 over 2020 was 24%.
On revenue and the growth in 2022 over 2021 was 39% in Revenue so.
The revenue growth is Meaningful and accelerating.
Which would be exciting they were not profitable in 2020 or 2021 so 2022 is the First full year that they were profitable.
The GTD is a little different though they had significant growth three hundred percent in 2020 20 percent in 20 21 and 16 percent in 2022 so, well they have a track record of growth it's the top on GTV growth is decelerating.
And then of course we're halfway through 2023 so they have to disclose.

[30:23] How the well they've done in the first six months of this year and they compared to that to last year and the revenue and GTV are both essentially flat in the first six months of this year.
Versus last year so I don't know you'll have to tell me but I look at that and you go man there's some robust stuff here there's a great growth story.
I should have mentioned that that's on an annual basis on a quarterly basis they have five consecutive quarters of profitability which also seems.
Impressive him pretty favorable but it's probably a slight worry that the.
A lot of that growth seems like it's it's leveling off in 2023 I don't know if.
That the most recent performance gets gets over weighted or underweighted and sort of evaluating the the prospects for the company.

Scot:
[31:19] Yeah the buyers will you know what every everyone has a different way they value things and they they're going to build their own models and the company will give them some guidance that's some of the stuff we did it we're not going to go over and but you have to be careful because you don't want to make forward-looking statements so this is this weird dance you do of you.
You try to get people excited by not saying anything about the future which is which is a little tricky so you know what I imagine instacart s' just reading the tea leaves again they talked a lot about how they don't really do much sales and marketing which I kind of read to say, look we really hunkered down on our unique economic sand we've got it dialed in right now and spoiler will get to adds a lot of a lot of that has come from this ad piece.
And I think now.

[32:07] Because investor and I was the bullish scenario is you know they're going to raise at least 400 million they'll probably raise a lot of money from this they could start doing some advertising and you pick up some new customers that again I'm going to kind of hope they look at the cohorts those cohorts look like with what this in the here and they have at least the same unique anomic so if not better and I'm going to look at this growth accelerating wow what Wall Street loves their favorite favorite favorite kind of the top quadrant is accelerating Revenue growth an accelerating profitability and you know I could see a scenario the light has to go their way but I could see a scenario where that works here you know if they could if they could start spending some really careful sales and marketing dollars building the brand where they've been kind of under the radar for the most part and then.
That works those cohorts stick and then they can work on the economics because that's gonna bring more advertisers per order because the more average more orders and more.
GTV is going to bring more cpgs in that want to advertise against that then you could argue accelerating Revenue growth accelerating profitable unit economics.
So I think that's the bull case the bear case is they've hit saturation they've got all the stores.
4% is anemic and nowhere to go but down.
So that's the end of it is it is going to be interesting to see there's a little bit of A Tale of Two Cities in those possible outcomes.

Jason:
[33:36] Yeah what else jumped out at you in the management discussion.

Scot:
[33:43] They made a big point of talking about they have 7.7 million monthly active users which is a good number but they point out that in the u.s. there's 330 million consumers or I guess population so they use that and this is kind of one of those hints I was talking about the basically said hey we're.
We've done good to get here but these are like the early adopters we still have a long way to go there's a lot of people you know I don't think they'll get all of them and I'll talk about that in a second but there's a lot more people that you should be using our service that aren't is so they kind of paint that 7.7 million and say that's teeny tiny compared to where we should be.
And then you know the other thing they talked about that I thought was interesting I wanted to get your opinion on is they talk about, per user per month they get three hundred and Seventeen dollars and I was wondering I know you probably know this off the top of your head.
What is if you look at the average US consumer and you probably look at the.
Population of the convenience store that's like a kind of probably like that 100K and up household you know what is their monthly and is this like half of it a quarter what is your spidey sense tells you on that.

Jason:
[35:00] Yeah so real rough numbers the average American family and you know people shop for groceries in households versus people so it's almost better to talk in household so there's like 131 million households in the US and sin they've got.
Seven million of them as customers the average household shops for groceries 1.6 times a week and they spend a hundred dollars per visit so you kind of you know rough that up and you get.
Get what is that I'll have the intern do in turn do the math one point six times.
100 times, 4.5 is 720 total grocery spin which I don't have the census numbers in front of me but but that passes the smell test that so.
Households are spending six seven hundred bucks a month and instacart saying that they're getting less than half of that.

Scot:
[36:12] Yeah and I saw some people speculate on this that, what their inferring is Davin they have an average order of 110 so this is like 2.6 instacart some month instacart orders per user per month that's another kind of interesting metric and then people are speculating in the saying the pattern is probably people are doing a big shop once a month and they're kind of going and getting you know, a lot of like maybe canned goods and things like that and then they supplement it with two or three instacart has to bring maybe a refresh of the the replenishable is like the cheese the milk the veggies and the fruits kind of thing.
Again this is everyone just kind of like taking data and kind of going out for data point so the cone of uncertainty is pretty big out there but it kind of passed my sniff test that's how we've used it before, at our house with exception of wizard a lot at work to fill our snack area at work and we're probably like we're probably like top one quartile of this whole thing that's the number of snacks we get from Instagram.
There's a deep does that that analysis of the one big shop yourself and then supplement does that.

Jason:
[37:26] No exact yeah I mean I think the Grocer's talk and I hesitate to bring this up because I don't think I remember I'll for off the top my head but there's like four typical types of shopping missions right so there is that like Pantry stocking shop there's like a weekly shop there's a.
Occasion Bay shop where your your it's date night or it's Christmas or whatever and you make a special shop and then there's those, top off shops and I think it's generally agreed like there's not a big cohort of consumers that have just said I'm never using a grocery store again then I'm exclusive we gonna, I have all of my my calories show up at my doorstep so digital grocery ends up being one of the tools in the family's tool kit for, procuring their their calories and so it makes.
Total sense that they would have a share that one of the ways they could grow is to increase that share presumably by.
Being the best choice for more of those different kinds of missions.

Scot:
[38:34] Yeah and then the md&a they talk a lot about how they have these new offerings where you can get a weekly Monday thing and they're definitely poking around at this experimenting on how to grow the sand again they're kind of signaling we think we've got some room to go on this we can get that.

[38:51] Bridge order up and we can get the ma use way up the second thing I noticed was you know they use this they use this phrase, several times you can tell it's kind of like must be tied to company values and they talk about we believe people want selection quality value and convenience if that sounds familiar to you the this is infamously brought up in the Amazon Jeff Bezos first shareholder letter in 1997 where he talks about the mark you know what Amazon believes and they believe that a multi-decade trend is people will not get tired of selection quality value and when value he uses kind of free shipping like versus product value is pretty specific on it and then convenience and then what got me thinking about this is.

[39:38] Value inconvenience her you know they're often in conflict and this is the whole point of we've had, Casey on the show from the Lloyd there bifurcation kind of model which shows this was this I think a lot about this because this is the whole one of the whole reasons I started spiffy and we decided early on if we're going to be convenient we can't be the cheapest and I don't think people look at instacart as the cheapest you know whenever we use it it's kind of like, holy cow this is this is a pretty expensive treat in you know I really kind of need to be able to justify this to myself that I can't just pop over the grocery store and do this myself it needs to be yeah some some reason I'm going to miss a kid event or something that I'm getting a really good bang for the buck here so I thought that was interesting that at some point I wonder do they value part kind of struggle with you know how.

Jason:
[40:31] I think they have to have a.
A more liberal definition of value because I think you're exactly right right and obviously you know value means different things to different people like they disclosed later in the S1 that they not surprisingly that they skew disproportionately to households that make over 100,000 a year compared to a traditional retail and particularly a traditional grocer like give I've no idea what it looked like when they actually did it but when Kroger went public or certainly when Walmart went public they would have talked about the top of their tree that we think the consumer really values price and and Walmart probably said price not value and you know they built a business around very aggressively maintaining those low prices because they thought that was the beginning of their flywheel and and you know Amazon talked about value but they when they said value a lot of what they meant was and we're going to you know have the very competitive or the lowest price on a lot of these goods and, the the business model of instacart makes it unlikely that that can be their positioning so they have to kind of, find a a valid but alternative definition of value to hang their hat on.

Scot:
[41:50] Yeah and I thought was interesting they put convenience a lot you know last you may say oh you're reading too much into it but you know I've been in rooms you spend so much time on every word there's a purpose to this order of selection quality value and convenience and and they mentioned this exact phrase like several times so this is a this seems to be an yeah a pretty important phrase in their their world to I just thought that was I want to get your take on you know at some point they may cross this road where they have to pick a lane and it'll be if it ain't going to be the value late you know I don't see a path there but you know maybe they think they can and you know they also talked about selling to the grocer some software so maybe that's kind of like how they're squeaking that in I don't know.

Jason:
[42:36] Yeah yeah and there's I think we'll talk about this and in our final conclusion but the there's multiple ways you could see this going over time and depending on which path it took like value could mean something different.
So what will come back to that.
I heard you like dissected all of the the disclose data and put together unit economic model for for instacart.

Scot:
[43:07] Yeah so it starts at the top so the GTV per order so every order that comes in they get the GTV as $110 and then there here's how they slice the onion so the biggest chunk goes to the grocer for the groceries and they get 83 percent which is $91 so right off the top we're left with $19 but now the grocer they have to go make all their money so instacart is that's what you would basically get I think if you and I went to the grocery store you know maybe they're getting a little bit of a discount but they're they're taking that $91 and they're adding $19 on top of it and this is all X tip there's a there's there is a delivery fee and what not so then the Shopper gets 8.2% or nine dollars in order and that's in that delivery fee and then they get the tips.

Jason:
[43:58] Clarification on shopper because like in most contact Shopper would mean the consumer that's buying the goods The Shopper in this case is is a instacart gig worker that goes to the store and gets Aggregates the order for the customer.

Scot:
[44:14] Exactly the gig worker is the Shopper so they get nine dollars and they get 100% of the tip so whenever you you know whenever you what what they don't say some of these gay places in this bothers me because we fell out on this they say the gig worker gets 100% but then they take a transaction fee of 3%, now I can't find they say 100% I can't see any little asterisks that says there's going to skim 3% or something so.

[44:44] So to the hopefully they're being super up front and they the gig worker does get 100% of the tips but the tips aren't in the economic the kind of sit over on the side to go to kind of bypass instacart all together and they go straight to the shopper.
Who also gets nine dollars from instacart so if you gave a 20 dollar tip the the Shoppers going to get 20 plus 9 or 22, then at this point we are finally at instacart Revenue which is ten dollars and that's into pieces seven dollars is the transaction revenue and three is ads.
So almost half their margin you know so 30% I guess yeah.
I say half because the line is going so fast it will become half probably by 2024 you know half the.
Profit the margin the revenue that they get and probably disproportionate part of margin is from the ad piece which we're going to talk about in detail so that is.
That's pretty important to this whole enchilada and until they figure that out this didn't really work I do.

[45:48] So they get so 110 dollar order $91 goes the grocer that leaves us with 19 Shopper gets nine we're left with 10 7 of that, is the transaction Revenue three is ADS then their costs come out they have three dollars of cost per order.
And this is this is things like you know their entire some allocation of all their website hosting the engineering team developed the app.
I don't know if they would put sales and marketing in there and they weren't very specific about what they do and don't put in cogs so that was a question mark.
And they're left with seven dollars of gross profit for that order.
My bet is marketing is not in there and they kind of take that up later but again the didn't really.
Disclose that I saw what all was and not in Cox so basically that 110 boils down to seven dollars a profit from them and if we looked at it you know.
I bet that three of that seven is basically from the ads and you know because there's almost no cost to serve an ad and so so I thought that was pretty interesting that like you know around half of the Prophet basically is from the ad system.

Jason:
[47:00] Yeah I think I think it's for sure interesting and like you know two possibilities there there there, average value of an order is 110 bucks traditional brick-and-mortar grocer is a hundred bucks and so one question like did instacart wasn't totally clear I mean they tried to take credit for having a higher order value but it wasn't clear like do we think.
There's something unique about our experience that causes people to spend more or.
Is our service just more expensive and so therefore you know if I got the same 60 items from from Walmart it would cost me $100 but if I got it from instacart Cassandra and ten dollars.
But if it's the latter and I'm sure the real answer somewhere in between but but if it's the latter then you go you know all of the, The Profit that instacart is potentially taking is kind of from the.
The convenient spread where they're you know getting consumers to pay more for the extra convenience of this grocery delivery.

Scot:
[48:08] So that was the unique nanak's what did you discover from the cohorts.

Jason:
[48:12] Yeah well I think we both we both noticed that they had a pretty detailed cohort analysis in the s-1 and by cohort analysis what we mean is they.
They break down all the revenue they get from every.
Group of customers on the first year they acquire those customers and then they track the spending for that group of customers in each, subsequent year and so you have a cohort that you acquired in 2017 you have a cohort you acquired in 2018, so on and so forth through this 20:22 cohort and there's.
Other dimensions you could do Court analysis on but this this tenure cohort is most common and loyal listeners of the show will know we've certainly talked about it before no most notably with a guest Professor Dan McCarthy.
From Emory University who spends a lot of time.

[49:13] Talking about and thinking about cohort analysis so I my first thought when I saw this cohort analysis is I'll bet you Dan McCarthy's really happy right now and is probably.
Deep deep into these numbers and he has a phrase that he calls a super annuities which is for the circumstances.
The older cohorts get more valuable over time and keep contributing more Revenue to your business which is, you know that if you think about it that's that's the ideal state right you want those kind of six-year-old cohorts to be.

[49:51] Growing and be your most valuable and if they're you know significantly tailing off over time then like you know you start to question the core value proposition of the business like maybe customers get fatigued with your business or decide it's not a good value in the long run or something else so um the the big takeaway for me of the cohort analysis is the cohorts grow over time the if you look at like the year one value of this cohort it averages $226 and then it goes up 33 percent in year two to three hundred dollars and then up 16%, to 350 dollars in year three and then another up another 16% to 4:00 in your for and then up 10% $445 in year 5 and up another 8% to 480 dollars in year 6 and so like fundamentally.
That is a very good picture of.
The value of the cohorts and I'm certain why they chose to include the cohort analysis in there as one because I don't believe there's any.
Any filing requirement to do that and certainly lots of companies don't include any cohort cohort analysis but then my kind of secondary take is.

[51:12] You know not every year is the same and so some of those cohorts like started before Cove it and then they're their behavior, was slightly impacted by their maturity but also impacted by covet and some of these cohorts started after Cove ID and so one of the things you would look for in that cohort analysis is did these guys just get a big spike from Cova da, when people are afraid to go to grocery stores and you know has that worn off right and that's kind of a comment common narrative out there like I argue.

[51:45] It's mostly misunderstood when people give that narrative about digital but it's.
It's even more likely that is misunderstood if you have that narrative and grocery because grocery appears like on the surface to be the one category where hey we're at three percent e-commerce penetration before covet and now we're 12% e-commerce penetration and so this, these cohort analysis if if there was a spike that dip back down you would expect to see some of the later cohorts underperforming versus the the precoded cohorts and we don't see that right that like all the cohorts grow and they grow over time the rate of growth slows down over time which is like I think pretty pretty typical and not surprising um so all that was super favorable the one thing and one will have to have Dan on the show but the one thing that I think wasn't in here that you'd really want to understand how valuable the customer bases and and again guys like Dan kind of pioneered this idea of how you value a company based on their customer base.

[52:53] And kind of set the price based on on this type of data but I think they would also want to see some churn data and understand.
How many people are each in each of these cohorts and whether there's the same people or lots of defectors and new people coming and all those sorts of things and none of that was was disclosed and assess.

Scot:
[53:22] Yeah you're right the I think they're making the argument that the swamps turn but because they don't disclose it you kind of.
You have to trust him and he would he would want that data because you know the whole Begin Again the the bull case here is all right if you got super annuities than spending ad dollars to bring super annuities in this smart right because everyone you bring in the door is going to follow this cohort and start of it you know you and I looking at a table that the says you're one they start at 2:26 and then by year 60 at 500 bucks so they they double over their life cycle in their GTV so over six years so if you know if you can go buy them for a hundred bucks a pop then you would just go and, and spend all that money in it should be we have a super annuity on one side you can spend a lot of money acquiring customers on the other.

Jason:
[54:15] For sure true what.

Scot:
[54:17] You turn there's something that they could hide in there.

Jason:
[54:19] Yeah so you have to worry about that you also side note like a thing that drives CFOs crazy about marketers is you also have to have this argument about correlation and causation right that like if I went out and bought a bunch of customers would they maintain this the same level of performance or with those those.
Purchase customers through higher advertising and through greater sales and marketing a activities be less oil less valuable customers by.
The answer varies depending on the business.

Scot:
[54:53] Yeah that's where I this kind of come back to that bifurcation thinks I think would you say 120 million households.

Jason:
[54:59] Yeah 131.

Scot:
[55:00] Yeah so there's probably I think it's probably a pretty evenly split between convenience and value so call it 60 and they've got 7.7 so there's actually good I think they've got a 10% share of, what does the actual dress for Market because I don't think they're going to get any of the value or in a consumers because yeah the valuing consumer does not pay for convenience they'll just go to grocery store.

Jason:
[55:23] Yeah and again in the bottom quartile a lot of people are shopping for for groceries with government assistance and I don't actually think instacart should double-check this but I don't believe instacart has a way to accept Snap payments.

Scot:
[55:36] Yeah I don't think the government is going to subsidize the food delivered.

Jason:
[55:39] Well they just you know they do in other great white white guy like you can order groceries online from Walmart and pay with SNAP but I don't think you can with instacart.

Scot:
[55:49] Yes that's another factor and then at some point yeah I'm sure you'll bring this up but the.
The if you're if you're a grocer you know a lot of ours opt out of the sand to themselves and they like we have a Harris Teeter that they don't accept instacart yeah they're not on there and they want to do their own they want to own the customer themselves.

Jason:
[56:12] Yeah I save that discussion for other but I think that's a super important one.

Scot:
[56:16] Forget I said that that's a teaser that's it's a teaser was what we call a tease.

Jason:
[56:19] Excellent teaser yeah because I feel like we've gone to the add segment of the breakdown of is there anything else you wanted to cover before that Scott.

Scot:
[56:28] No I'm on the edge of my seat to hear what you thought about that specific.

Jason:
[56:31] Yeah so it turns out instacart sanad Essence and probably shouldn't surprise anyone you know Scott you alluded to the change in CEO the the current CEO for this IPO is fidge Asuma Seema who formerly was VP of advertising at Facebook so they brought in a Facebook.
Exact to run this business and shoot I should have looked up what episode he was on but Seth Dallaire was a past guest on this show when he was the chief Revenue officer.
For instacart which was right around the time that that fidget joined.

[57:19] Instacart so we actually had a discussion about their aspirations to become an advertising business and spoiler alert, it worked at instacart which we're going to break into and that guess set the layer subsequently was hired as the chief Revenue officer at Walmart where he's.
Building Walmart connect which is also working so turns out ads are becoming an increasingly important part of the ecosystem for retailers but the basic ad math at instacart is that in 2022 the last full year of data instacart generated 470 million dollars in ads so 470 million on 28 billion in GTV, means that that's about 2.6 percent of the spin.
That went to ads it's thirty percent of their revenue today and.

[58:20] It's growing at 29 percent so it went up 29% from 2022 to from 21 to 20 22.
Um it's grown another twenty four percent in the first months of six months of 2023 so, a lot of the unit economics of their transactions have kind of stabilized and are flat the one thing that's still growing at a very fast double-digit pace, is the ad business and at seven and twenty million dollars it's already reasonably robust and they don't.
Ads are not a line item on the income statement that they included like you know and presumably like it's not.
You could argue it's not Material against the three billion in in Revenue.
But the so we don't we don't really know exactly how profitable, Those ads are but in general we would call these ads or retail media Network and the you know people argue about how profitable these retail media networks are people particularly argue about Amazon's but kind of the middle of the range when people estimate how what how profitable these things are is that they're about 75 percent gross right so in theory they should be near 99% gross margin because like you don't have to make anything to sell an ad.

[59:46] You know you do need some technology you need an ad server you need Administration and salespeople you need brand safety people you know there is.
Some infrastructure some of which has to scale with the ad business and so the the kind of.
Most common estimate that that I see out there is like 75% of that revenue from ad business is profit.
So that implies that the ad business contributed seven 555 million to the.
To the income statement for 2022.
Um and they were only profitable 428 million in 2022 so that the ad business contribute like by that sort of slice the ad business contributed.

[1:00:33] You know covered all of their losses and and was essentially all of their their profit.
In in 2022 and it's growing faster than anything else so it's very clear that the ad business is a key.
Tenant of this instacart model and they in the management can section they it was kind of funny working for a big, advertising agency because they had to spend a fair amount of time like justifying that ads are valuable good thing and that people are spending money on ads so they kind of you know paint paint this picture that consumer packaged Goods companies which are you know most of the goods that instacart cells that.

[1:01:20] Cpgs in the u.s. spend about 200 billion dollars a year on advertising and currently about a quarter of that is digital.
And so the.
The you know a typical cpg spends like about thirty percent of their gross sales on advertising and you know at the moment instacart is collecting about less than three percent of its sales in advertising so I think they're saying like hey.
Advertising is super effective it's an important part of our economic model and there's a ton of.
Of potential growth for us in this market and that cpgs need us and they amongst their claims about the size of their business, there are 50 500 brands that are advertising on instacart today and those are.
At the moment all brands that sell.

[1:02:18] Whose Goods get sold on instacart so we call that endemic advertisers right so it's it's Mondelez selling cookies and folks like that a lot of advertising companies.
Sell ads to people that aren't necessarily selling through the.
The the platform we call those non-endemic advertisers and we I don't think there are any non-endemic advertisers on instacart as of yet.
But so at the Top Line like these are these are solid fundamentals for an ad business you like.

[1:02:54] From my perspective retail media networks are super important evolution in the space they are very important I actually think for a lot of smaller retailers they get overhyped and that there's a problem with scale with a lot of these but instacart appears to be one of the companies.
That has enough scale to build a real.
A real business around this there is a unique problem that instacart has with ads that you know I think they've only been partially able to remediate so far who's paying for the ads.

[1:03:25] Right so they talked about the brands paying for the ad right it's Procter & Gamble about the ad but there's a lot of stakeholders with budgets at Procter & Gamble, there's Mark Pritchard that buys Super Bowl ads and tries to build the brand and make people love tied but there are also account teams, that are trying to Goose the sales at their account so there's a Walmart account team and a Kroger account team and an Albertsons account team and all of those guys have an ad budget, that they want to use to sell more stuff at Walmart Kroger and Albertsons respectively.
And so the big problem you have with instacart is you spend that ad dollar with instacart and you don't actually know.
Which retailer it's going to impact.
Right and so it's kind of like it has to come out of the top of funnel ad budget but it's bottom of the funnel Performance Marketing, type ads mostly search ads and so not saying that model can't work but it's.

[1:04:33] The the guys with budgets that are used to buying ads are used to a slightly different structure so I will say that at the moment instacart causes a lot of consternation because it's a it's an unusual Beast that people don't exactly know how to budget for or how to spend their money on and you know I would assume if instacart wants to grow a lot they have to make that, easier for for the brands to do.

Scot:
[1:05:00] Yeah so what do you think.
They're so this is a relatively good chunk of Revenue where do you think they're getting it from is it online going offline I mean offline going online are they taking it from Google are they taking it from couponing or.
Two Brands even do like newspaper inserts are still a thing like I know that back in the day.

Jason:
[1:05:22] So I know I yeah I think.
Brands are pretty pretty rapidly shifting their their dollars to digital vehicles and so two things like there's you know traditional kind of, newspaper magazine advertising that's atrophying and and the brands are replacing that with digital there's a slight misnomer the whole privacy thing and Facebook is a real thing but you know who wasn't buying a huge amounts of Facebook ads are like National cpgs with huge brand recall so so you know those tended to be smaller Brands and longer tail things so it's less like oh.

[1:06:05] The these guys are shifting from Facebook it's more they're shifting from old-school marketing and over are television to to these digital vehicles but a big chunk of it is still coming out of these trade budgets right and so there may have been a pool of money that was allocated to spend at Kroger and it used to get spend on newspaper circulars that were like Kroger ads that fell out of the newspaper and that's an increasingly ineffective vehicle or maybe they even got spent on floor decals in the aisle at Kroger right you know like Shopper marketing tactics or trade tactics and so increasingly the retail media networks are getting a chunk of those trade dollars and I do think instacart is getting some of those even though it's trickier to do because you know it's not allocated exactly 21 specific retailer at the moment.

Scot:
[1:07:07] Yeah the so what did the ad formats I've seen is I always get this one that's like you through some Quaker Oats granola bars in there if you add these six things will give you a five bucks or something I've seen a coupon and I've seen a you know an upsell hey you've previously bought this or you may like this are there those are the three main add units or am I missing something.

Jason:
[1:07:33] Yeah so I am not going to speak specifically about the variation in ad units but as a general rule like probably I'm assuming the most predominant ads on the platform are search ads right so people search for products like always and you know above all the organic results are a bunch of sponsored ads right and so off very often those don't have a special offer in them they're just premium.

[1:08:00] And so a big chunk is probably those those search ads you know then they're there are like Banner type ads that that land either on like the homepage of a particular retailer or on a category page or subcategory page and more often those are likely to have some call-to-action offer in them so they might have a promotion or a discount of some kind and then in the digital space um there's a lot of what we call like top off and impulse ads which are what you were just talking about right and you know one of the big problems we have with digital grocery is when you go shopping at the grocery store your wife sends you to the store with a list of 10 items and you buy all those 10 items but then you walk by the ice cream aisle on your way to the cash wrap and you add ice cream even though you didn't plan to buy ice cream and then when you're standing in the cash wrap, you're sneering at that Snickers bar or that Wrigley gum and you add that to the car and maybe a cold Coke to drink on the way home from the grocery store so a big chunk of a traditional grocer sales are all these unplanned impulse purchases and that.

[1:09:16] By default happens a lot less in digital Grocery and so a lot of these ad formats are kind of are, our Industries early efforts to try to reinvent digital impulse and I would I would call it pretty imperfect at the moment.

Scot:
[1:09:35] Don't you get a nursing inside about gum or something like because self-checkout smelled the gum that serendipity.

Jason:
[1:09:42] Yeah the the that that cash wrap used to be the most valuable real estate in a grocery store like the most Revenue per square foot was that what we call the cash wrap which is the.
The conveyor belt that you stand in line and actually the first thing that killed the cash wrap was not any of this digital shopping or any of these things it was.
Facebook and the mobile phone and simply because you now had something else to do when you are standing in line so you were paying attention to your phone and back then you are on Facebook today you'd probably be on tick tock but you're doing that instead of being forced to stare at the gum or the the coke with a suspiciously intentional you know Sheen of dew on it.
And so just impulse buys went down just because the darn phones were distracting people that were standing in line and now that you don't even walk in the store or stand in line you know of course we lose.
A lot of our our impulse juice so I think you know if we we went from three percent online sales to 12 percent online sales if we get in those twenty or thirty percent it's it's.
Like the economics are only going to work if Grocers figure out how to replace those lost Sample Sales.

Scot:
[1:10:55] At some point does this create channel conflict if I'm Kroger I want to these a dollars in their kind of happening.
Or the order gets to me and your skin you're skimming them away from me like do you think Grocers wake up and say sorry if this is something on discuss later.

Jason:
[1:11:12] No let's pivot to that because I think that was the end of my ads section is there anything that you want to ask her missed about her noticed about ads that.

Scot:
[1:11:21] No I already said it just kind of reminds me Amazon so I did you know.

Jason:
[1:11:25] Yeah.

Scot:
[1:11:26] So Channel conflict what's going to happen there.

Jason:
[1:11:28] Yeah so there's some other interesting tidbits that will come to but like the the big concern about this whole thing is this is a Marketplace to me that has some unique characteristics that are distinct from most other marketplaces so you're obviously the marketplace Guru on our show if you think about a Marketplace like Amazon there's nearly an.
In endless supply of potential sellers that could sell on Amazon right so you know Amazon treats them well enough, but if they have some churn and sellers if people feel like they're not making enough money selling Goods on Amazon Amazon doesn't sweat that too much because if they leave the platform some other seller is likely right behind them to win that by box there that is not the case in grocery because these Goods aren't coming from a warehouse they're not coming from a factory in China most of these goods are coming from the perishable shelves of a local grocer and there's only a finite number of those grocers in the United States of America so we're you know you could have kind of all these.

[1:12:35] Arbitrageurs like becoming sellers on Amazon and you know any college kid could decide to start selling on Amazon tomorrow.
You kind of have to already be a traditional grocer to become a seller on instacart and so the the pool of potential sellers is way more constrained and.
Um I would argue that many of those sellers should not be on the instacart marketplace right because.
In the early days of digital grocery you go oh man this is just a distraction we don't have a queer a good grocer but we don't have expertise in digital now we've got a few eating customers that want to order online but just Outsource this whole thing to instacart, and see if customers even want it and that that was a perfectly reasonable strategy and a lot of Grocers have obviously done that.
But once you start seeing that oh my God customers really do want this and now it's 12 percent of our sales and it's trending towards twenty percent of our sales and it's more than half of their their total visits to our brand are now happening on that platform.

[1:13:42] Do you want that to be a platform you out sourced that also any of your competitors can Outsource or do you want that to be some sort of.
Owned competitive Advantage right and, I tell the story all the time so people are their eyes are probably rolling in the back of their head but this all played out in e-commerce right when, bookstores first started hearing about the people on to buy books online they said that's a distraction we should Outsource it what about that company in Seattle that's outsourced it to them.

[1:14:11] And when they suddenly realize oh Outsourcing our book business dams on probably doesn't make a lot of sense.
Which if you're a younger listener that really did happen toys Toys R Us and and Borders books like.
Gave gave their their e-commerce businesses to Amazon, when you realize Amazon was a direct competitor then you found another service provider to Outsource it to and the outsourced provider that everyone found in the e-commerce industry was this company called GSI Commerce and they became.
A very high valued fast running business founded by this guy Mark Rubin and you've probably heard of him because.
He owns the Philadelphia 76ers on with the money he made from from GSI and he started in another very successful business fanatics but GSI was a tremendously.
Successful business that kind of doesn't exist today because over time Toys R Us said you know we better learn how to, run our own e-commerce site and Dick's Sporting Goods said we need to learn how to run our own e-commerce site and targets that we need to learn how to run her own e-commerce site and so as that market matured, all those people that were happy to Outsource this nascent business to GSI fire GSI and brought that that.
Function in-house and to me instacart feels a lot like the grocery version of GSI now.

[1:15:39] One reason this isn't necessarily a doom story is GSI actually does still exist they've rebranded and they're called the radial and what they do today is they provide a lot of the backend services.
That businesses use for e-commerce but they no longer provide the front end and they no longer provided under their own brand so they're sort of a white label service provider.
And we haven't talked about it yet but but instacart actually has an extra Revenue stream that they talk about in their S1 that just isn't economically material yet which is, they're selling a bunch of services to retailers that want to do some or all of this, themselves and they white label a lot of the services and instacart is, trying to invest in making good versions of those services that they might be able to sell to a retailer that does decide, to bring the website in house or the picking in fulfillment in house.
But so to me when I look at this business I go the number one risk is.

[1:16:39] In the long run can they maintain the sellers that they have and if they can't it's not like there's an unlimited Supply to replace the current ones which is a very different Dynamic than.
Then like the Amazon Marketplace and so one of the things you see that you know they claim they're very proud of in there.
There s one is and I should have found this but what's the count of retailers they say.

Scot:
[1:17:09] 5700 it's just kind of pop that's the number two spot.

Jason:
[1:17:12] We'll call that the right number unless I find that number but that but that number of that's the number of resellers and those resellers have 80,000 stores in the US and represent 85% of all Grocers right so you look at that and go oh good news bad news.
They've saturated the market they are they already have 85% of all grocers on their platform so they're not going to add a bunch of sellers but the seller but all the sellers will love them right that would be the.
The favorable interpretation but the wrinkle here is.
A bunch of the sellers that they're claiming have kind of already moved away from instacart right so included in the list of sellers on this Marketplace our Walmart.
Kroger and Albertsons which cumulatively are the top three grocers in the market and I think together the three of them are over 50 percent of the market the.
It's 1,400 retail banners.

Scot:
[1:18:14] For 200 yeah 5500 advertisers house I've got those.

Jason:
[1:18:17] That's what I was worried about yeah so so 1400 retail banners representing 80 thousand stores representing 85% of the US grocery Market but again today Walmart Kroger and Albertsons are in that.
That list and those are all grocers that are investing huge amounts of money in building their own capability and today, that capability sits beside instacart or maybe in front of instacart and they're only using instacart as kind of overflow.
But it's it's way less certain to me and there was not a lot of like.

[1:18:54] You know confidence and stealing information in the s-1 to say oh we're going to be able to retain Kroger as a customer or we're going to be able to retain Albertsons as a customer and to me it's a big risk for their current business model.
If they can't and a huge percent of those of the a huge portion of the eighty-five percent of the market share they're saying they have.
Is those three companies and then after those three companies which have already expressed like clear intent to invest in their own capability there are other giant Grocers.
That haven't expressed an interest but they need to write and so you and I'm specifically thinking of like all the in Costco are two huge grocers in the US.
You know are not very digitally mature and have not seem to want to invest a lot of there.
Their own resources in digital but if they're going to be around in 20 years I'm pretty confident that they're going to have to figure it out and it's not just going to be Outsourcing it to instacart so I look at a big chunk of those.
Marketplace sellers on instacart and I go.
Um that that is a little risky and you know a lot of their volume is probably concentrated in those sellers that are at risk and you go, is there a business if all the big guys leave and it's just all the Independent Grocers there might be but the economics probably look a lot different than this.

Scot:
[1:20:19] Very cool so you're going to are you going to be a buyer.

Jason:
[1:20:23] I am.

[1:20:26] Yeah yeah yeah if I could have gotten in her like I would love to be at the 76 or games with my driven but I'm not sure that the retail price like has some risk cooked into it because of that that problem now again you know radials a decent little business and could could you know carrot services for instacart be a decent little business one day sure you know the counter argument if I'm trying to be fair here is.
What I think in instacart exec would say is hey Jason like we had two things we're the Outsource capability for some of these retailers that don't have that capability but we're also.
Marketplace with a bunch of loyal customers and we're bringing customers and visits to Kroger which is why Kroger isn't gonna fire us.

[1:21:20] Right but prettier Point like.
Really where are they getting those customers right like they're not you know they're not making huge investment in sales and marketing they haven't like you know demonstrated some magical top of funnel capability to acquire, in consumers like I would argue they're acquiring most of their primary acquisition strategy is to acquire great sellers that already have consumers and take over the that business for those those, those banners so that that to me puts this this whole thing at risk like is there something I'm missing about that Scott or does that at least.

Scot:
[1:21:56] It's a risk you know they would probably argue they have data that says they're largely in criminal and my guess is the Grocer's aren't sophisticated enough to be able to run an analysis on that so yeah, Walmart certainly is but not yeah you know gross has been right.

Jason:
[1:22:14] The long tail of.
Pretty pretty pretty thin and pretty like grocery is a super hard business that requires a lot of unique capabilities and the people that you know, acquired those capabilities over 60 years are not necessarily the people you're going to expect to be the first fastest digital adopters and like side note in favor of all the hard-working Grocers out there I mean.
It's the one business that Amazon has invested billions in and can't figure out how to do properly right so so it is what gentlemanly hard.
I do, I did have a couple other tidbits on the if we're done talking about the giant elephant in the room that is their their seller concentration there were a couple other tidbits that jumped out at me in the ass one do you want to should we run down those real quick.

Scot:
[1:23:04] Yeah far away.

Jason:
[1:23:06] Yeah so there is another interesting part of the thing that I was surprised by which is instacart membership program so instacart has a membership program called instacart + and it turns out all this revenue is coming from members.
Which again is another favorable Trend we saw that the cohort analysis was pretty favorable but.
57% of instacart Revenue comes from people that pay a monthly or annual fee to get free.
Shipping from instacart so that are members of this instacart plus program and 5.1 million of the 7.7 million active Shoppers are in the program.

[1:23:46] And those those members spend disproportionately more like over 6X more than non-members spend so this is like.
You spend your your monthly fee or I think it's like a hundred dollars annually and for that you get unlimited Fleet free delivery.
You get reduced service fees you get credit back on eligible pick up orders like if you if you do curbside pickup and you get some other exclusive benefits so.
They have kind of monetized a membership program so you could think of this as a very baby Costco but that.
If this all scales that's another potential interesting Revenue scheme.
I did mention I was pretty excited they had to kind of make the pitch for digital Grocery and so.
You know they do talk a lot about a groceries accelerated to 12%.
Digital groceries accelerated 12 percent penetration that.

[1:24:44] That has accelerated a lot in the last three years as a result of Cove Ed and they spend a lot of time talking about the distinction between.
Delivery of groceries and pick up of groceries and instacart plays in both but here's kind of an interesting thing.

[1:25:01] About it's a it's near 50/50 split right now the.
Grab the delivery orders instacart is primarily competing with other digitally native digital Grocers so they're competing with.
Um shipped which is owned by Target they're competing with doordash and ubereats which if you haven't been following it both have pivoted into grocery they're competing with go Puff.
And so these are other like digitally native companies that kind of didn't exist in the space until until digital came along but the other half of the business is pick up.
And 95% of all the pickup business is getting fulfilled by a traditional brick-and-mortar Grocery Store where the parking lot.
And so like there is you know there are these like interesting bifurcated segments where.
You know some of instacart Revenue they're competing against you know Amazon Uber and doordash and other parts of their business there.
They're competing for customers against Walmart Kroger and Albertsons so I found that kind of a interesting evaluation.

[1:26:13] You know again I think a lot of people might have been surprised and asked someone to see that they're competing with with Uber and doordash.

[1:26:22] And then the other thing that I found interesting and this might be obligatory now but I think in instacart is case is kind of true they spent a fair amount of time talking about how they're leaning into a.
And so they both you know we're very early adopters of like.
Licensing open a eyes large language model to have a.
In a i chat assistant on instacart app and website they were one of the they were launched partner that had a plug-in on opening eyes website to let you order order groceries from Chad CPT and they've done at least like for Acquisitions in the like AI in ableman space so they've acquired companies.
Like Rosie which is AI pricing and dynamic pricing they acquired ever site which is a promotion engine the Caper food storm is a software company that.
Doesn't like kiosk software that they can sell to retailers as part of their carrot services so.
That I don't know you tell me why like I suspect that every S1 we do see for the next 18 months is going to have to have an AI section and it was interesting to read about like what they've done in the AI space.

Scot:
[1:27:47] Oh yeah everyone like yeah salesforce's spending all their time with this giant Matrix of how AI is getting integrated into every product everyone is trying to ride the wave but video is making all the money it's a they is off topic but they printed just incredible quarter of just nothing but.

Jason:
[1:28:04] Yeah way more valuable than Intel.

Scot:
[1:28:06] Billion of profit that just showed up at the door is crazy.

Jason:
[1:28:11] Yeah yeah that's a great story for another episode but Scott anything else that we want to cover in this first look at instacart S1.

Scot:
[1:28:22] Know our brand promise is to bring the heat on these and a deep dive this I lost track when we started but this is a very deep dive so we appreciate you guys sticking with us to the end there there was a lot of good stuff on here and we really only got to the tip of the iceberg.
I do encourage you to print out the those relevant pages of this one we talked about 10 12 12 24 or 25 that's the really good stuff and it's worth a read if you're in the space into this Market as we are which I I'm going to guess a lot of you are also pretty geeky about this stuff.

Jason:
[1:28:57] Yeah yeah and so I will definitely put a link to the s-1 in there and until next time happy commercing.

View Details

EP308 - Amazon Q2 Earnings

http://jasonandscot.com

Amazon reported a strong quarter across the board for Q2, soundly exceeding analyst expectations and retail industry averages. In this episode we break down the 1p and 3p retail performance, AWS, and the Ads. We go into depth around Amazon disruption reorganization (to a regional model), Amazon's newest efforts in grocery, and health care.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 308 of the Jason & Scot show was recorded on Thursday, August 4, 2023.

Transcript
Jason:
[0:23] Welcome to the Jason and Scot show this is episode a 308 being recorded on Thursday August 3rd 2023 that's a lot of Threes I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:40] Hey Jason and welcome back Jason and Scott showed listeners well Jason today is one of my four favorite days of the year it is Amazon earnings day.

Jason:
[0:51] I was going to guess it's the 4th Halloween okay.

Scot:
[0:54] Nope good guess and today was a real doozy so we have a lot to talk about and of course it wouldn't be a Jason and Scot show without.

Jason:
[1:05] Amazon news your margin is there opportunity.

Scot:
[1:18] That's right sometimes I hear from listeners why do you guys spend so much time talking about Amazon well my rationale is a it's one of my favorite subjects did be not only is Amazon the biggest retailer but it represents over half of e-commerce and for our listeners I think their data is pretty much the standard compared to even anything like comscore or adobe, just by definition of them having so much data that it is the basically the best source for what's going on and then given our macro environment we're at the tail end of the last show you were talking about how it's setting up for kind of a bad holiday so we're heading into this it's a critical quarter and for me Q to see what Amazon is done really sets us up for the back half of the year.
And especially holiday.
So kind of a canary in the coal mine and right now there's all this confusing data coming out about the consumer you see things that sentiment is down travel to starting to tip over housing is slowing so there's some negative but yet credit card spend is going pretty well and so this is probably the best read we're going to get on the consumer heading into holiday.

[2:39] So I think of it as Scott foreshadowing the whole industry that's why we like to spend a lot of time on it, so the other thing I'll point out is it's been kind of a rough period for Amazon the last, probably 6/4 a day that things have slowed down post covid they've struggled they've done some layoffs but having watched Amazon if we zoom zoom out having followed them since 97 they're really good at reading the room and if the market and the externalities are saying you're free to invest they will invest like crazy and you know and by saying that I mean they'll focus on Revenue growth implementing infrastructure but then when the macro turns - and they can move to harvest pretty quickly so, a lot of that kind of goes as good as Wall Street so Wall Street will love them and give them a lot of rope and they'll invest invest invest and then while she starts to worry they're like oh my gosh this is scary your spending so much things are doing this and then they will turn very quickly and can then get into Harvest mode and produce results that's a really a big theme for this quarter so that's part of the set of the other part of the setup is we have some eCommerce data coming into this what is that, what are those tea leaves tell us before we jump into Amazon.

Jason:
[4:00] Yeah so we have data from the US Department of Commerce through June and it is a really complicated story so that the top line is a little bit of a worrisome sign so year-to-date January through June of this year retail sales are 1.9 percent higher than they were during that same period last year so time now to put that in perspective in the 10 years leading up to covid we average retail growth of 4% a year so so far this year the growth is less than half of the industry average and then the last three years of growth the last 3 years of Cook post covid were the biggest three years of retail growth in the history of retail so we had these three monster years and now for the first time we have a six month period That's, well off the average and, Q2 was worse than q1 now you know people always say well what about inflation in these numbers if you adjust all these numbers back to 2019 dollars to sort of take inflation out of it, retail sales this year are actually down 2.8 percent from last year so so.

[5:15] All of the Mir growth we have this year is really due to its unusually high inflation now big caveat there, the information news is actually pretty solid in inflation in June is only up three percent year over year which.

[5:32] You know before all this inflation stuff started the Fed was always trying to keep inflation between two point two and three percent so.

[5:39] Information down and three percent if it if it stays down there is pretty encouraging but from a retail standpoint, you have this weird thing you have the macroeconomics getting better there's a lot more economists saying we're not going into a recession we somehow managed a soft Landing you've got the inflation numbers coming way down all the wages and employment numbers have continued to be robust so you're all these favorable macroeconomics and now the consumer has stopped spending and you hear every retail are talking about how, consumers are trading down a cheaper Goods they're buying more needs and less wants and all of these sorts of things and so.
If you if you kind of look at the retail industry average.
There are two retailers that have hit consistently been outperforming the industry average and those two retailers are Walmart and Amazon which are the two, largest retailers in the United States of America.
Um there's some controversy over who's actually bigger but we'll leave that for another show if the bottom line is if the two biggest retailers in the market are both outperforming the industry average.
That's a bad sign for the rest of the retailers.

Scot:
[6:54] Someone's losing share.

Jason:
[6:55] Exactly exactly and I would note we don't talk about it a ton on the show but then there's two Chinese companies that are.
Dramatically grabbing share really quick so she and and and Tim ooh so you know outside of those four.
It's not looking super up to Mystic for, for retail so I was super curious to hear not only how Amazon did but what they're what guidance they gave for Q3 and what they were seeing in terms of consumer spending because we do have this weird paradox.
Macroeconomics getting better, but retail spending getting worse so that being said like what what did Amazon report Scott.

Scot:
[7:40] Well it's an interesting quarter because again for like the last six quarters are 18 months it's been kind of using Wall Street language Wall Street always comes in with expectations and then you either meet those beat them or miss them and or sometimes I'll call it in line if you meet their expectations well this was this was pretty much an unprecedented four-way beat with a raise and that's that last part is what about next quarter so the current quarter is did you how did you do and then did you for future Revenue expectations did you stay in line with those or did you raise them so this was kind of like one of the best quarters you can have using all the Wall Street language and I say a four way beat so number one is earnings per share, while she was expecting 35 cents and they handily beat that at 65 cents so that's the first one the second one is revenue revenue came in at 134 billion versus 131a clear beat.

[8:41] AWS Revenue there was a lot of worry around this because Microsoft was really showing their first of all Microsoft had to break out as your separately for the first time and it used to be all clumped in together in this kind of cloud bucket, where they could kind of have office they're hiding what was going on with Azure so now that Microsoft had to call, carve out Azure it has been slowing down very dramatically so everyone was very worried about that a WS beat the expectation was 21.8 and they came in at 22.
I will talk a little bit more about the growth things and some other color there third-party exceeded expectation the only thing that was really kind of in line is online store Revenue but the margin improvements if you can't go back to that EPS were so dramatic that everyone was fine with Alan being I think it was like.

[9:30] Point two percent miss or something it was like basically in line so that was the only piece that didn't beat and everyone was fine with that because all these other things really swamped the outcome there and then to cap that off the midpoint we'll talk about it but this represents about 11% growth all in for this quarter and the next quarter they guide for growth for 11 to 13 so they're basically saying hey we beat your expectations this quarter and things are accelerating into Q3 so and then they also on the bottom line that guided up for next quarter as well so that went really really well um and that was a pretty amazing so let's peel the onion and see what we can learn you want to take us through the retail business.

Jason:
[10:18] Yeah for sure so the the retail business globally grew 11% so that last year this in this quarter they grew nine percent so accelerated growth, North America grew 11 per sent an international grew ten percent International really struggle this time last year they actually had a 12% decline last year and so so in general pretty robust growth now, these are the revenue numbers which returned mine everyone Amazons and Marketplace they don't report all of their sales as Revenue they only report, one piece sales and then the fees they earn on 3-piece sales so it's not it's not a perfect.

[11:09] Now match to to the sort of Industry retail data I said but it's a close approximation so, on average retail grows four percent a quarter the last two quarters retails grown you know less than half of that and Amazon comes in at 10 or 11 percent growth.
So that's you know a pretty healthy outperforming that the industry average is and, you're essentially taking share from the rest of retail now often just a side note.
Obviously the vast majority of Amazon sales are online traditionally online grows much faster than.

[11:48] Brick and mortar so historically we would see ten to fifteen percent online sales but post pandemic that's actually slowed down quite a bit and so, online sales this year are probably averaging around.
Seven and a half our eight percent and so Amazon's growth not only did it beat brick-and-mortar it actually beat the industry average, even for e-commerce so that that is very robust, they spent a lot of time both in their their press release and also in their earnings call talking about their focus on efficiencies, and you know the all the work and efficiencies reorganization of their supply chain you know changing of Labor models, that those others efficiencies are starting to bear fruit because, the profitability was significantly up for.

[12:52] For the retail business for this segment so I want to say no for North America they ended up earning like 3.2 billion and earn income.
So you know some quarters they don't learn any so 3.2 is a healthy number.

[13:10] For their growth and for people that aren't following it.
Part of these efficiencies is a super interesting story essentially what Amazon has decided and what they now seem to have successfully executed is that having a national Supply.

[13:27] Chain and a national order fulfillment network is not the right way to structure themselves so in the old world they had one order fulfillment system that covered the whole nation you could really want some, delicious Green Tea Oreos you know that are only in the warehouse in California and you order those and Amazon figures out had a, get those Oreos to you in 2 days from the warehouse in California, and increasingly what Amazon said is you know customers really want speed we have to get faster in most cases where promising next day or same day to day is.
Is you know a promise from 10 years ago and in order to do that efficiency efficiently and save money, we have to have those Green Tea Oreos really close to Scott to start things off and so we're going to drop a bomb on our own industry-leading fulfillment Network and we're going to redesign it as a set of regional networks so that the vast majority of good Scott orders come from a much shorter distance and so one of the, the impressive results of that effort today is this quarter Amazon said that like despite all this growth and increasing order volumes that they actually drove 20% less miles than they did this quarter last year.

[14:42] So they're very successfully getting the goods, closer to the consumer and to put you in put it in perspective how many Goods that is they announced that they now have over 300 million, items that are eligible for Amazon Prime and over fifty percent of those items get delivered same day or next day.

Scot:
[15:07] Yeah I thought that part was pretty amazing and what they've done is they've split the country into eight regions they actually were pretty and the call to get into some pretty interesting detail on this end and I thought that was interesting because I usually pretty pretty tight-lipped on this so then so they've taken their National optimization you talked about and they're almost running each region has its own country so they're doing more of the load balancing inside of there so in addition to the 20 percent fewer miles there touching the packages 20% less and you now get 76 percent of the units are in the union are in the region and just a while ago it was 66.

[15:50] And then what he's what he's basically saying is that's a big efficiency and then within there another efficiency is they're leveraging the same day where houses so things used to go from these really big distribution centers to the smaller ones and now we're going to these much smaller ones and they can now inject things in there and he said those are streamlined and they can get an item from the order coming in to delivery in as little as 11 minutes and those are even closer to the consumer so that it's almost he didn't say this but I kind of envisioned as eight regions are split up into eight more regions almost with these tiny you know within points being some of these other ones they basically said this is working so well we're going to double the number of these small last-mile fulfillment centers so that was I don't think Wall Street heard that because that's you know whenever Amazon says double that's a big number because they have like 200 ish of the big fulfillment centers I don't know how many small ones are but Amazon doubling anything is Nan.

[16:55] Trivial number of dollars they're going to invest you didn't say over what time period you want your when ordering covid they said they were double and they went from like 120 fulfillment centers took to actually literally doubled those pretty quickly so it's going to be interesting to watch that build-out I haven't seen one of those I've seen them Beck's I haven't been in one of been on the back end of one to watch the flex drivers that that's kind of what they used to do for Flex drivers so be interesting to see how they scale that and I would like to go got a visit one I don't I don't know if any of the dsps which spend a lot of time with dsps here at spiffy so I've got to see this side of the world a lot more than I did in the software e-commerce world and there at the big fulfillment centers at these delivery stations that are called bolted on the side haven't seen how they pick up from some of these but I'm making it a mission.
Learn more about this.

Jason:
[17:48] Dsps are the third party delivery services that Amazon uses yeah.

Scot:
[17:52] Delivery service professionals yeah so that was interesting.

Jason:
[17:57] And a reminder for the big fulfillment centers Amazon actually offers tours you can sign up and get a tour I don't think they haven't seen them ever offer tours on any of the other formats but there are some bootleg videos out on the internet if you know where to look I'll see if I can find some for the show notes that that show like like one of the general contractors that builds these facilities put some videos on their website of, of the finished facilities before they open.

Scot:
[18:28] Yep so that's kind of the retail business let's mix it up usually I cover third party but let's kick it over you to run through them.

Jason:
[18:37] Yeah are you okay with me talking about marketplaces I feel like as a Hall of Fame member you you this is like when mess a wet the other guy take the penalty kick.

Scot:
[18:45] I'm an auto guy now I don't know what this what is a 3 P3 what are the three p's.

Jason:
[18:51] Yeah so another milestone for Amazon's Marketplace.
They hit a new high for the percentage of their total sales that came from third parties so the mix is now 60% third parties 40% first party so that that's continuing along long-standing trend.
The third party is continuing to grow and being the most important part of the.
The assortment makes at Amazon I don't have the number in front of me but my memory is that the.
The growth in 3p Services was actually faster than the retail growth as well so sort of implies that the volume went up but also Amazons.
Doing even better at collecting more fees from all those three p providers so that the marketplace continues to be robust and important.
You know one that always gets a lot of the energy on these earnings calls is a WS and there's kind of an interesting story going going on so so first of all, the the Wall Street expectation was for AWS to grow eight percent this quarter and they announced that a WS grew 12% so.
Massive beat from that perspective.
Um and so then you go well is 12% good growth well a year ago they were growing at like 33 percent so twelve percent doesn't sound all that impressive compared to 33 percent.
But what you have to remember is.

[20:20] The rate of growth has been significantly slowing down quarter after quarter and last quarter q1.

[20:27] That growth was 16 percent and when they announced that growth was 16%, they really put dosed a bunch of cold water on investors because they said and we already have a month of data since the end of that quarter and it's slowed down more since then so I think that really is what spooked.
The the investor community and that's where that sort of 8% expectation came from so 12 percent growth is kind of an indication that the growth rate although you know swelling down is stabilizing.
Um and I think they're they don't give guidance on these individual segments but they.
Made a nod to the fact that we're probably not going to see the growth rate slowed down dramatically from this, they do pay a lot of lip service to the fact that, it's a very big number and you can't grow in double digits anymore by just getting organic growth that like in order to, continue to grow double digits you need to acquire a lot of net new customers and you need to acquire a lot of net new workloads, but the good news is you know they have a very robust narrative about why there are a lot of customers and additional workloads to acquire and spoiler alert.
You know a huge amount of them are related to generative Ai and a large language models where.

[21:54] Amazon is investing a lot in things a lot of the future is going to be in these these three hosted layers of AI services that companies use to build AI Solutions on top.

[22:06] So so you know I think their sales focus is going to be is less about getting more money from existing customers and more about getting.
New customers and new workloads on a go-forward basis for a WS, um I do want to say you add up the numbers for AWS and it's 88 billion dollar a year business that's the Run rate right now.
And they make about 25 percent gross margin on that business so that that 88 billion dollar business is spinning off 21 billion dollars a year in profit.
And everyone always talks about how AWS is by far the most profitable business at Amazon so keep that 21 billion dollar number in the back of your head because the next segment that Amazon talked about is ads, and while AWS is growing at 12% they announced that the ad business is growing at 22 percent.
Um so that puts, the the ad business at like a 41 42 billion dollar run rate.
And that the speculation is that the ad business is about a 75% gross margin.
Business and so if they're at a 41 billion dollar run rate that means they're spinning off 30 billion dollars in profit.

[23:25] For the ads business so Thirty 1 billion dollars in earning come from ads versus 22 billion dollars in.
Or 21 billion dollars in profit from AWS so.
Quit talking about a WS being the most profitable business than Amazon ads is the most profitable business and is growing almost twice as fast.
And there's another of my favorite facts about that ad business is.
You know so again they're selling 44 billion dollars worth of ads you know where they get all the eyeballs that they they have to sell those ads.

[24:03] Buy them from Google for 20 billion dollars.
So so here's like an awesome business, the Amazon is one of the largest advertisers in the world they spend twenty billion dollars I'm sorry 22 billion dollars on ads to get people to come to all their services, and consume them for profit right so, so you run ads and you get people to buy stuff on Amazon you run ads and you get people to sign up for AWS you run ads and you get people to sign up for Amazon Prime Those ads do all this heavy lifting for all these different business units and then after you've monetize that, that a dollar you then sell that ad dollar back for a profit through this ad business so you want to talk about the network effect and how powerful it is this to me is just an an awesome example of business engineering and you know I think.
Often misunderstood aspect of the Amazon profit machine.

Scot:
[25:01] Yes pretty amazing quarter for ads the they're just really Trout's snap used to be in the conversation and Twitter and it's really just Facebook Google and it was on it.

Jason:
[25:11] I mean Amazon's a much bigger ad business than Microsoft and Bing.

Scot:
[25:15] Absolutely another tidbit from the call we had talked about this and if you remember we had we had a guest on from Guardian baseball and he was talking about this was right one by with prime came out and you were super skeptical that anyone would adopt.

Jason:
[25:35] Yeah and what should you do anytime I'm skeptical about a new idea.

Scot:
[25:39] Go long on it go.

Jason:
[25:40] Invest in it.

Scot:
[25:41] Yeah.
So first of all I saw a tweet earlier and this is from everyone's favorite follow bearded egg F ba and a couple other people had similar tweets but he actually had used the software that scrapes all these websites, and he reported there's over 2,200 sites that now have by with Prime and then jassi's comments he said quote, merchants in early trials use by both Prime saw their Shopper conversion increased 25% on average which makes a real difference in their business Merchants who participated in Prime Day activities, experience 10x increase in Daily by with prime orders, so there was a knock on effect that if you had by the Prime on your website then people found you and and rattled over and you saw a really nice kind of ripple effect from the prime day efforts I thought that was an interesting tidbit so they're like like everything Amazon and I haven't followed the features but I'm sure if you remember Matt was complaining that you couldn't turn it on and off for certain excuse there was some feedback he had and maybe it didn't work with attributes like a parent-child skews I'm sure they fix all that or else it wouldn't be on this mini website so it sounds like that's really getting some some traction.

Jason:
[27:00] Yeah I do I still think.
To cite Lira but my double down on my earlier skepticism there still are some rough edges to the customer experience right so it still is a purse Q experience which is a little weird like you know some products on the on the website you can get fast shipping for and some, some products you can't and it's hard to know what they are until you put them in your cart so that's kind of the the old shop Runner.

[27:32] For if you will but I do want to say two things both Amazon and Shopify are leaning into these, conversion rates way better when you have by with Prime on your website or when you have shop pay on your website and you know you have to ask yourself what they're comparing that to write because, it should surprise no one that conversion rate when the customer has stored payment information available is much higher than when they don't have stored payment information so the magic question is if you already had shop, pay and PayPal on your site and then you added by with prime did by with prime perform 25% better than PayPal.
Um or are they only saying by with prime prefer performs better than nothing because performing better than nothing isn't, quite as impressive in my book and I do want to say well well they are making progress with by with Prime and the 2500, Merchants is impressive just a reminder there's 2.5 million merchants on Amazon so the fact that 2,500 of them are using it you know does not exactly mean it's caught fire.

Scot:
[28:44] So still skeptical.

Jason:
[28:46] Yes so again what should you do go double down on the go along.

Scot:
[28:49] Short Amazon Jason you short Amazon I'll go alone.

Jason:
[28:54] Yeah that.

Scot:
[28:55] Prime is not going to work thesis and I'll go on.

Jason:
[28:58] Yes I don't I don't think you're giving me helpful investment advice.
So that was all the main stuff I saw in the earnings calls was there anything else you wanted to cover because I think there is a few other tidbits of Amazon news.

Scot:
[29:15] I saw Grocery and I had a feeling that your ears were too perked up I I fell asleep during that part so I'll kick it over to you.

Jason:
[29:21] Oh my god do you not eat.

Scot:
[29:23] I do but groceries is everyone's least favorite chore.

Jason:
[29:28] Scot doesn't want to say it but he has people that get his groceries for him that's what's going on here he hasn't been to a grocery store in like 10 years.

Scot:
[29:35] Every every meal is from Chick-fil-A so I don't have to go through.

Jason:
[29:37] That seems like it would be a pretty fun for a little while but I have a feeling that the there would wear off, so yes Scott you are right I'm super interested in grocery groceries 25 percent of all retail spending it's the biggest category of spending that Amazon hasn't won, I think it was about 40 years ago that they acquired Whole Foods do I have that right was it 40 years ago.

Scot:
[30:03] 49

Jason:
[30:05] I'm exaggerating I was over 10 years ago now though.
That they bought at Whole Foods and hopefully just kind of flat since they acquired them it really hasn't you know turned in anything a reminder Whole Foods is very niche in the grocery space like Whole Foods doesn't sell Coke they don't sell Fritos, um and they're only in a handful of big cities so there the the industry leader in organic produce but they're not a mainstream.
And one of the things so Amazon made a bunch of announcements that they were retooling their grocery experience and changing some of their offerings.
Two days before the earnings call.
And I'll come back to what those announcements were but on the earnings call Andy answered some questions about Grocery and he kind of admitted something interesting, Amazon is doing very well at what Amazon usually calls everyday essentials.
And I think the Brian the CFO call that non-climate controlled Goods right so all these shelf-stable things that you tend to buy from a grocery store but you don't actually eat.
Um Amazon's pretty good at selling and growing fast and they have a big chunk of that business they are not good at selling.

[31:21] Perishables they're not good at Selling climate-controlled Stuff they're not good at selling fresh food online.
Um and what Andy said in answer to one of the analysts questions was, to really meaningfully capture sharing grocery you have to have a broad offering in all the areas of grocery not just the everyday essentials and we don't believe you can win.
With a broad assortment of groceries without a national footprint of stores.

[31:53] So you know he kind of conceded that the Fulfillment center model and the multi-tiered regional Warehouse model that Amazon is building out.
Is not particularly well suited for the grocery mix and so he said so you know we need to figure out a grocery, and we kind of concluded what we've rolled out over the last few years at Amazon Fresh is not a winning grocery concept so we put we put a hold on growth, we went back to the drawing board we invented a bunch of new experiences and now we're testing those new experiences to see if they are, more appealing to Consumers so the First Market to get these new experiences is Chicago so they just remodeled the the Amazon Fresh stores here in Chicago I'm going to go visit one soon.
But they've essentially they've changed the assortment quite a bit they've added more private label and they've added more National brands for a grocery store Amazon Fresh doors were really kind of a limited assortment grocery store and so it sounds like.

[32:56] They're moving they didn't say numbers but in my mind, they were like a twelve thousand SQ grocer and Kroger is like a 20,000 SQ grocer so they're there it sounds like they're moving up to that 20,000 skus.

[33:10] And they're testing a bunch of new amenities, and one of the big problems you have in grocery especially when consumers are being really cost-conscious is consumers walk into a grocery store with a budget and they want to make sure they don't overspend that budget.
And just walk out grocery stores you actually don't find out how much you spent until 15 minutes after you've left the store.

[33:35] Which is an awful experience if you're trying to make sure you stay under 100 dollars.
And so one of the amenities they've rolled out is on these Dash cards these digital cards that they let you use in the store they now have a real time running total of what's in your cart so for the first time you can see.

[33:53] You know how much you spent so there's a bunch of experiences like that I'll get a better feel for what the new ones are.
When I go visit but they're starting to Pilot new grocery Concepts and they're you know they've kind of conceded that they need to scale one of these brick-and-mortar Concepts nationally before they can really be a.
A meaningful winner in the digital grocery space.
But they made a couple other big changes in grocery to one of the biggest complaints and one of the stupidest things about Amazon's grocery is before you shop for groceries in Amazon you need to get an org chart and understand how Amazon's organized because, you have to decide in advance if you're shopping online at Whole Foods or Amazon Fresh and guess what most customers don't understand the distinction between those two things, and so they had separate carts you actually have three cards on the Amazon website you have a general merchandise Encarta gross Amazon Fresh cart and a Whole Foods car, and it can be really confusing because you just click add to cart on a bunch of stuff and then you go look at your cart and it's not there because it's in one of the other car.
So they announced that they're moving to a universal cart.
I haven't seen it yet so I can't speak to exactly what it looks like I have a few a name mean a universal grocery cart I don't think they're actually going to mix it in with general merchandise but.

[35:11] Will be eager to see that and then the other announcement they made that is I'm not I mean I just don't think it's as big a deal is, um they have opened up grocery delivery from Amazon Fresh to non-prime members so so prior to this week you had to be a prompt Amazon prime number to order from from Amazon Fresh.
And this is kind of interesting because this is a further erosion of Amazon Prime benefits you used to get free delivery, um with Amazon Prime for groceries and about a year ago Amazon caved to try to get more profit, and they added a delivery fee even if you're a Prime member but they said you can only get delivery of your Prime member now they're they're taking that benefit off the scale and I just point that out because.
Amazon's ordinarily so good at adding new benefits to Prime is kind of rare to see them taking benefits away from Prime so I think that's interesting in the.
The grocery space anything else that I missed or the jumped out at you about grocery Scott.

Scot:
[36:13] No I thought it was you know.
A lot of people would expect him to throw in the towel because they've closed some of these physical store experiments and Jesse did that but they still seem committed to grocery at least the four star or what was that start.

Jason:
[36:30] Yeah five star.

Scot:
[36:31] Faster that is the closed all those right.
And the trimming back the just walk out stores so it's interesting to see that there they they see something in grocery or it's just such a big tan they feel like they have to obviously they have Whole Foods but.

Jason:
[36:50] Yeah I do think it's one of one of their big bets and it was interesting like in some of the narrative Andy kind of he threw something at the grocery teams under the bus.
You know like a lot of his complaints about the Amazon Fresh stores is he's like we just weren't good grocery operators that like are.
Our inputs as he called it just weren't good like the the inventory turns the, you know the inventory waste the labor cost that you know all those things weren't where they needed to be to be a competitive grocery store and there's I'm sure a lot of traditional grocers that were listening to this call going amen Andy we told you groceries are really brutal, difficult Cutthroat business and you won't find it as easy as some of the other businesses you've dominated so, I still want to bet against Amazon I still think they're ultimately going to be a big player in grocery but.

[37:53] And then one other to me really interesting tidbit is Healthcare that Amazon announced last week a new National Healthcare offering which is telemedicine.
Um service and that's attached to Amazon Pharmacy.
Um so this used to be an in-house experiment that they use to provide health benefits to a bunch of Amazon employees but and then they started offering it to.
You know a few other employers that they had Healthcare agreements with, but now they've made it a national authoring that's available to everyone so you know if you if you need some prescription or you need some some medical advice and you don't want to go in and see a doctor you can't get an appointment.
You can you do now use this Amazon Health Service to get a fast and easy.
Um Health Care visit so you know we know Amazon has been kind of.
Kicking the tires on the healthcare industry and they've had a couple initiatives they had some Partnerships that they walked away from, but there's another one where it seems like they haven't given up on the space and they're still you know rolling out and trying new things.

Scot:
[39:08] Yeah and I hope they nail this because my my experience with the physical drugstores always terrible.

Jason:
[39:17] Yeah I am not bullish on physical drug stores so again.
You you know oil listeners now know what they should do for the investment there but like.
You know the drug business used to be a retail business you walked into a pharmacy and you got all your prescriptions today the insurance companies mostly try to force you to use mail order.
Pharmacy said the main reason people had to go to.
Pharmacies has kind of gone away and as a retailer if you don't have to go there to get a farm prescription filled.
The retail drug stores are awful retailers like they, you know they don't have a good assortment they don't have a good prize they're they're deficient in digital in and if you watch all the moves they're making, the thing that every retail drugstore is trying to do more than anything else is get out of retail and become a Healthcare company and own an insurance.
So you know a lot of the CEOs of these companies now come from the insurance sides of the business and it it just doesn't seem like.
The long-term future of us retail is to have you know multiple big National drug stores because the model is kind of waning.

Scot:
[40:28] Yeah yeah we'll I'll shut a small tear when they all go out of business and I can get things more efficient.

Jason:
[40:36] Yeah I think at least one is going to have to survive because there are a lot of impromptu emergency get it right now kind of kind of needs but you know maybe down the road we'll do a grocery in Pharmacy Deep dive.

Scot:
[40:50] Or Amazon will have things so close to you can get it in 15 minutes so you won't miss it.

Jason:
[40:55] Yeah you know one thing I will say like I thought you were going to say I won't feel bad if Amazon sells this because Healthcare in America.
Royally screwed and a lot of people you know don't have in can't afford access to it so certainly it would be good if they fix that I will say Amazon rule that a service similar to a Walmart service which is really beneficial, they're now offering generic versions of most chronic prescriptions for a flat five dollar fee and so one thing that has approved a lot in the United States in the last two years.
Between Walmart and Amazon and actually like a big startup that Mark Cuban is running is a lot of these.
You know prescriptions that were Out Of Reach for a lot of low-income people are becoming more affordable which is certainly a good thing.

Scot:
[41:40] Yeah yeah we'll take care of them but I'd need my experience you better too.

Jason:
[41:44] See how I found a way to end the show on a happy note.

Scot:
[41:47] Yeah World Peace.

Jason:
[41:50] Yeah and that you know last week we had a slightly shorter show and listeners told this they loved getting a little bit less of us and so miraculously we have done it again we brought in a voluminous Amazon earnings call in a pithy 41 minutes, so if you'd like to reward us for our brevity the best way to do that would be to jump on iTunes and give us that five-star review.

Scot:
[42:14] Thanks everyone we hope you enjoyed this Amazon Q2 earnings results and until next time.

Jason:
[42:21] Happy Commercing.

View Details

EP307 - PrimeDay, NRF Nexus, Commerce Next

http://jasonandscot.com

Amazon Prime Day 2023 occurred over June 11 and 12th. Adobe says total sales were up 6% over 2022. Discount levels were much more conservative than holiday. We give a complete breakdown.

Commerce Next 2023 was held in New York City June 20-21st.

NRF Nexus 2023 was held at the Terranea Resort in Southern California July 10-12.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 307 of the Jason & Scot show was recorded on Sunday, July 23rd 2023.

Transcript
Jason:
[0:23] Welcome to the Jason and Scot show this is episode 307 being recorded on Sunday July 23rd, 20:23 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:39] Hey Jason and welcome back Jason and Scot show listeners, Jason it's been a minute since we recorded a pod as the kids would say we've had a series of feels like the universe doesn't want us to podcast either I'm out of town or you're out of town in a place where we don't have Wi-Fi or a mic and then I had a little kid drama and we had to reboot and but here we are we're finally getting the pot in them.

Jason:
[1:07] Thank goodness and we're I think we're going to talk about this in a minute but I've been to several events and people are starting to get on me they're mad, that we fallen off of our regular recording.
Pace in so I feel like I hope we will get credit for recording a rare Sunday night show and I'm looking for even extra credit, I'm actually recording this on vacation at an upper Lake Michigan lake house sitting in my car stealing the neighbors Airbnb Wi-Fi.

Scot:
[1:42] Yeah I give you 100 extra points on that one yeah definitely definitely some kind of new Ninja level podcasting that you're doing there.

Jason:
[1:51] I feel like that alone deserves a five star review on iTunes.

Scot:
[1:55] Yeah I feel like at some point the police are going to tap on your window and it's going to be fun to listen to that when it happens here you hear you explaining what you're doing in that that foggy car there.

Jason:
[2:05] Exactly I promise to keep the bike running if that does happen.

Scot:
[2:09] Maybe some post-show editing we'll call you've been a busy on the road retailgeek so I know you went to Commerce next and NRF Nexus which sound kind of relatively somewhere they both got that NEX in there, I was not able to make those and we purposely haven't really talked about it so I'm excited to hear your take on the State of the Union that you've been at to trade shows.

Jason:
[2:36] Yeah yeah I think Commerce next might have been shortly after our last recorded show so it happened June 20th in New York City in Manhattan at the the Midtown Hilton and this is a show, I don't know what year it is it's been going for a while but this is put on Friends of the show Scot Silverman who's been on several episodes and his Partners Veronica and Alan, and you know they they sold the show so as to raise some money last year so the show is getting, more serious they're hiring more staff they hired another friend of the show Jill Dvorak from the in our EFT, to manage content and it was you know bigger and better than previous in our interests Commerce next shows which were already good so I thought it was a good show in New York.

[3:33] Two days one track of content for the most part on the main stage so you know you got to see most of the main speakers, there were like lunches and breakout sessions I did a session on sort of the evolving art of platform selection and you know this kind of shift from monoliths to, to these sort of mock based headless platforms and the pros and cons of, in picking the Best in Class vendors for each little Point solution versus all-in-one sweets from one vendor and, we had we had some good dialogue about the relative merits of all those approaches and sort of the evolution of the technology platform.

[4:19] Which I used to talk about and work with clients all the time and I feel like.
Kind of I've lost some of my muscle on that like it it comes up less often and I think part of the reason is all this stuff is getting, somewhat commoditized and it's just easier and safer to pick a solution and and you know get into the e-commerce business than it used to be.

Scot:
[4:43] Yeah the Pod we've talked a lot about headless and then there's that whole acronym of what they do which escaped to be just as internet yeah mock then you work on them and not the best branding is that this till the very much, you know what folks are looking at or are you just kind of walk them through the 30,000-foot layer of you know and on-prem open source SAS and then headless or her like what's.

Jason:
[5:13] Yeah so it's yeah so it's mostly Cloud it's headless it's it's you know multi-tenant Cloud headless.
You know what Gardner calls compostable Commerce so you know 8 micro services or you know efficient apis or however you want to look at it but often it's like.

[5:39] Rolling your own UI or buying a you I versus getting a you know pre can you I from.
What they the funny term for the old Legacy Solutions is monolith so I guess AP Oracle and IBM now HCL are these like mono.
Monolith Solutions and like Commerce next and fabric I'm Commerce tools are kind of the more modern architecture is for the actual platform.
You know once on an interesting you know Shopify there's headless version of Salesforce you know Bigcommerce they're all kind of playing in this space and the interesting thing is it used to be a huge game-changing decision what you picked and.
In many ways it just is less important it's a less critical decision to your overall business because they're all like pretty good and somewhat interchangeable today with any of them the sort of modern ones it's you know the folks that are.
Kind of still trying to feed the servers under their desk and keep the the you know sort of on-prem, proprietary Stacks going you know are the are the folks that are usually behind.

[6:57] Also and I know even, Wes about the specific nuances event of individual vendors but the there was a robust Exhibit Hall at Commerce next and by far the most common vendor is a all-in-one, AI based marketing Suite so you know all these tools that have like a CD P email server SMS server personalization engine like all of these sort of.
Out marketing Outreach Tools in a single vendor driven by Ai and I have great empathy for anyone that needs to buy one of these things because there's like, 30 of them and they all have the exact same words on their Booth the same same Basic Value prop so it's a crowded space right now.

Scot:
[7:46] Yeah yeah that was gonna be my next question the AI Buzz is sweeping through every company and I'm sure I'm sure our e-commerce vendors Are Not Alone.

Jason:
[7:54] Yeah yeah and there were a number of sessions at both shows, switching per second from Commerce next which was June in New York to Nexus which was July in California so interrupt Nexus is kind of the spiritual successor.
Before in a ref acquired shop dot-org we used to have this great shop dot-org show but we have another great show the shop dot-org merchandising Summit that was a smaller show in California there was a little more sort of tactical Hands-On type stuff, and in some ways this interact Nexus is the spiritual successor to that it's like four or five hundred person conference.
At beautiful Resort the Tara no resort in Southern California on the beach.

[8:47] One track of content great networking and just you know a nice week to spend with, many of your co-workers and, I was vastly Overexposed at this show I feel like they spent their whole Budget on the venue so so they had me do way too much content so the first night the big keynote was an interview with Kara Swisher so I got to interview.
Kara Swisher who you know famous Tech journalists started New York Times started the code conference so I interviewed Steve Jobs Mark Zuckerberg Jeff Bezos you on mosque like all those guys multiple times and so you know very famous interviewer, here's the brutal part of this the most common thing that happens to me at these shows is people recognize my voice from this podcast.
And they're super excited and then the first thing they say is oh it's great to meet you but where is Scott.
Because everyone is way more excited about you than me which kind of hurts so then like now I've made the big time I'm on the big stage interviewing Kara swisher and what do you think everyone says to me.

Scot:
[10:10] We're Scott.

Jason:
[10:12] Yeah because she does a podcast with Scott Galloway.

Scot:
[10:15] Galloway.

Jason:
[10:16] Exactly and so if they're not disappointed.

Scot:
[10:18] The big dog.

Jason:
[10:19] Yeah yeah that it's me instead of you they're disappointed that it's, it's a me instead of Scott Galloway and I did mention probably on stage that we both did podcast with egotistical co-host named Scott, but I also alleged that my Scott was way better than her Scott and she agreed even though I don't think she knows who you are.

Scot:
[10:43] No no lies detected.

Jason:
[10:45] No exactly.
Exactly no but we had a pretty good conversation she's.
David very opinionated and outspoken but she's also pretty well informed so we got pretty deep into Ai and some of the pros and cons and some of the, the near term and far term use cases around AI we talked a lot about social commerce and why it's, hasn't caught on here yet and it you know has has more legs in China she's very psyched and in favor of autonomous vehicles I thought you would.
You like that and so I feel like we had a pretty wide-ranging conversation that got pretty good reviews I got good feedback that I didn't blow it.

[11:32] And then we're that not enough I also had my own keynote onstage right kind of recap the state of Commerce and you know did one of my data pukes and I spent a fair amount of my keynote talking about the emergence of these Chinese juggernauts particularly Sheehan and Tim ooh, and I showed a chart that was pretty eye-opening to the audience of web traffic like a lot there's a lot of charts footing around about mobile app downloads particularly of ten Moon how quickly they've gotten, you know to be the top downloaded shopping app on the US app stores but I showed.
Amazon Walmart Target Tim ooh Incheon.
Monthly web visits and you know, for people that aren't following it closely she has been around for 10 years they've been kind of in the u.s. in their current form for at least five years Tim has brand-new just launching last November and.
Shion is.
Almost it is about 80% as much traffic as Target, Tim ooh past Target for when monthly web visitors in January of 2023 and is now sort of halfway between Target and Walmart.

Scot:
[12:56] Yeah it's amazing.
I spend a fair amount of time with 16 to 25 year old young ladies and it's all she and all the time they don't ever mention team and they call it Shy and I tell them retailgeek says it she in and they say they don't care.

Jason:
[13:13] Yeah she's an Insider.

Scot:
[13:14] Call It Shine they say everyone calls it Shine so sorry.

Jason:
[13:19] They started out selling wedding dresses.
And yeah the they also are doing well you know we haven't talked a lot about them lately but they've expanded from a apparel retailer to a broad set of categories including consumer electronics and they've launched a third-party Marketplace on the US.

Scot:
[13:37] Wow.

Jason:
[13:39] So both Tim ooh and she and are now third-party marketplaces kind of competing with a very similar assortment and yeah both both are capturing.
Pretty pretty significant attention of us consumers.

Scot:
[13:57] The did you get booed off the stage or they were like you.

Jason:
[14:03] No not theirs I think people are were I suspect people are slightly less informed than they should be on them and I feel like people are interested in we're taking note and then I did a third session for the CMO marketing Council on, generative AI there are a bunch of other sessions on AI as well but I kind of did a deep dive on some of the Commerce use cases and I'm, particularly interested there is a lot of new I mean there's new stuff every week and there's a general stuff that you can imagine, being applied to Commerce but like Google launched a new generative AI feature for apparel try on, that's remarkable like so you upload a picture of yourself and you pick any of these garments and it shows you that garment on you and it's not.

[14:58] Some stupid rendering where it's like you know a gif on top of you.
Or you know some distorted thing like the garments flow on your body type but in a very realistic way and this is a functionality that a few websites have offered for a while with really complicated 3D models and really expensive.
Product detail Pages because they have to scan all the apparel and have to get you to take a picture of your body to scan your body and it's like a cool experience but it's a lot of work to get there in this Google thing just does it with a couple of flat images and it's.

[15:35] It's really pretty remarkable so I you know I definitely think the the future of a Peril shopping and a bunch of visual categories.
Is going to be you know seeing this stuff on a realistic representation of you.
And they have another feature coming out soon that they call scene Explorer which is kind of the, the augmented reality hold your camera up to the Shelf at the store and overlay all the products it sees on the Shelf with all the digital product detail from, from the Google catalog which is interesting.

Scot:
[16:09] I was gonna ask you about the Google thing because when it was announced there was some confusion where it looks like you could say it had like somebody types some Matrix of 256 body types and you could say that's me and you could see the body type not you but you're saying you can actually upload your own picture.

Jason:
[16:27] Yeah so the the confusion is understandable because they launched a feature with a predetermined set of models.
There was kind of a proof of concept and so you could like pick a model and they had models with different body types and so you know and ethnicity so you could see kind of your ethnicity with your body shape and then three weeks later they said and here's how you upload your own picture.
And so they're technically two different products but they happen in such close proximity you're like I wonder why they launched the first one.
And In fairness the first one is a like in available to use API that Commerce sites can use now the second one is kind of a science.
Like proof of Technology concept that they've released to the academic Community but I don't think they've released it for commercial use yet.

Scot:
[17:21] Ian timing-wise I don't know if this was before after your show there but Shopify has their new kind of like co-pilot kind of like, a eyepiece it's really more at the store level though.
And you got a lot of buzz but I looked at it it just seemed like a fancier wizard for setting up stuff but God it didn't seem as game-changing as some of the Google stuff.

Jason:
[17:46] Yeah yeah although it is interesting that just everybody's building that Rai into every product right like you know I think someone said recently like.
Like every text box on the Internet is going to get a large language model.

Scot:
[18:02] Yep the expectation is you can just like talk to these things and having to do stuff for you so it's going to be.

Jason:
[18:06] Exactly yeah yeah so it's interesting and that was for sure a Commerce it interrupts Nexus that was probably like 80 or 90 percent of the conversation was AI base so it was kind of.
It was fun for me to talk about a few things that weren't a i based because it was getting getting a little tiresome and fun fact.
Nexus if you recognize those dates July 10th through the 12th it's because it was during Amazon Prime day.

Scot:
[18:33] Yeah yeah and anything else before I move on.

Jason:
[18:39] No I think those those were the big things you know two shows that are well worth attending for for folks that are looking for Commerce events and I'd say you know congratulations to both for.
For putting on a good growing robust events in a in a semi challenging climate to get people's attention.

Scot:
[19:01] So you know there's always the what you talked about in the front of the hall and then the back room chatter what's what's the back room chatter what's top of Mind are people worried about and by people I mean people in our industry are they worried about the recessionary headwinds and inflation or do they you know they feeling pretty good about.
Holiday this year what's kind of the scoop.

Jason:
[19:26] So I don't know I might even say there's two tears there's like what's the normal conversation in the hallway and I do think there's a lot of conversation about.
What's going on in the industry right now from a momentum standpoint and and I think that the.
The sort of Top Line there is it's complicated like it's really weird like there's, there's economic indexes that are becoming more favorable I mean we're seeing like the inflation numbers come down, you know there's still some data to suggest that the US consumer is in like pretty good Financial shape All Things Considered, but there's a lot of indications that consumer spending is slowing down and, you know we're just coming into kind of Q2 earnings season I think Amazon is going to report next week and so obviously we'll do a show about that but, you know a lot of retailers have kind of reported soft q2's and even more alarming they're lowering their guidance for the back half of the year so you kind of simultaneously have some like.

[20:31] Decent economic news and Pew no more economists are starting to say hey a soft Landing is possible and maybe we're going to avoid a recession which you know I feel like.
The majority of economists earlier in the year we're pretty convinced that we were going to end up in a recession and so that would feel favorable but then at the same time, customers feel like they're cutting back and you know a lot of growth indexes are kind of slowing so I feel like there are variations of what the heck is going on with all of that when I like privately talk to people and get into a lot more specifics, I have to say I am not optimistic for a robust holiday I feel like a lot of people.
Are gearing up for a pretty challenging holiday with pretty deep discounts, like there already is a Slowdown in sales and so people are worried that they're going to be in a bad inventory position for holiday and they're just seeing.
Consumers in continue to trade down there seeing, sort of elective category product categories really start to take a dip and you know more consumer budget going to Necessities versus wants and so.
It is increasingly sounding like it's going to be a challenging holiday especially from a margin.
But I hope we're all wrong.

Scot:
[21:57] Is that shared by folks or that's kind of like what the big gun on the elephant in the room is base.

Jason:
[22:03] No that's I when I talk to retailers about like what they're bracing for and you know what their their Play books are for holiday and you know people are talking about expecting to see deeper discounts.
More competition on discounts which than roads margins and you know some some traditionally stalwart categories being soft and stuff like that.

Scot:
[22:26] Cool well you mentioned primeday and it wouldn't be a Jason and Scot show without some.

[22:46] That's right so unfortunately Amazon doesn't announce their second quarter results until Q3 and then we'll get the real well July they won't really talk about primeday but we do have some Amazon news coming and we'll do you doing a show if the universe aligns for us around those results but until then we can talk about primeday first of all did you end up buying anything this year.

Jason:
[23:10] I did I feel like I talked in the show every year about, over buying on like cables and chargers and I did do all of that again, the other I bought some I think I mentioned on the show before that I moved from a condo to a house in the last year and so we have this new thing that we didn't use to have called patio furniture so I bought some.
Like Furniture to hold the covers when it rains in Chicago some weird weird outdoor stuff.

Scot:
[23:45] Up getting some accessories one of my anchor multi-headed.
Octopus things died and this is frustrating I thought I was buying another one and I specifically was searching on anchor I was on my phone and I was having to go fast and the thing showed up and it was like a no-name it wasn't an anchor device and it's already acting wonky so kind of.
You know how they can advertise and like really get this is kind of the negative side of some of the Amazon experience these days I was pretty sure I was in an anchor only mode but but a non anchor product snuck into my cart I end up getting up.
But it was cheap so there you and it doesn't work so yeah that was a bummer.

Jason:
[24:29] Yeah if you want to buy like cheap no-name stuff you should buy it from Tim oh it'll be like 99 cents.

Scot:
[24:36] Yeah no like wish does it take six months to show up her.

Jason:
[24:39] No it's you know so Tim who is seven to ten days and they offer you a shipping guarantee so you get like store credit if it doesn't arrive in 10 days.

Scot:
[24:54] That's good cool well what did you see on Amazon Prime day I'll do a little Wall Street piece but I thought you may hit some of the high notes.

Jason:
[25:04] Yeah so a you know primeday is important just because it's primeday but also a lot of people use it as sort of kind of a first indicator of what the second half of the year is going to look like so this year was on the 11th and 12th it's been 2 days for, for a number of years now and you know Amazon doesn't really report anything very useful about primeday it's everything's a record.

[25:29] They did more than they did last year which they're always going to do more than they were last year, but they don't give you any real numbers so Adobe is the most commonly cited, some estimate of primeday an adobe estimates twelve point seven billion dollars were sold on primeday which is up 6.1 percent year over year, now A Wrinkle In These third-party estimates is none of them are just estimates of Amazon.
They all you know talk about this phenomenon of other retailers doing sales on primeday and so they're actually measuring, e-commerce sales on the primeday is not just Amazon sales so they're saying industry-wide, 12 point 7 billion in sales up 6.1 percent year over year, which is robust there were people that were forecasting would be bigger than that the other forecast I've seen was emarketer emarketer with same ballpark they estimated thirteen point five billion, they said about eight of the billion would happen on Amazon and 5.5 billion of that was going to happen off Amazon, both of those are us estimates so that would you know be decent growth it would be a deceleration from, from the last few years of primeday growth.

Scot:
[26:50] Yeah the so one of my favorite reports was from Colin Sebastian who's a friend of the Pod and he's from Baird and he basically said that they thought it was an acceleration so meaningful, so Amazon reports items sold and then they take that and some proprietary data and they're saying it was a 20 to 25% you're over your rent increase and they ended up increasing Q 3 is estimates based on them so it'll be interesting to see you know, where it's going to fall on that so that seems like the bookends we're hearing are six percent and 25% that's a pretty big big range to see where it's going to fall into the will never disclose, Axel primeday results but, we'll know when they announce Q3 if they beat her exceed that that it was kind of towards the high end and if they come in on the lower end of the range well no it's more like that six percent.

Jason:
[27:51] Yeah yeah and that'll be interesting 25% in the current climate would be pretty darn impressive not saying it's not true but you know you look at like the last couple quarters of Amazon's growth they weren't that high you know you look at the end retail Industries growth, not near that I so like if they're driving 20-25 percent that would be big, yeah and I guess we'll never win we'll never know for sure did anything else jump out at you in The Baird report.

Scot:
[28:20] That was the meat of it they were just really focused on that a little little things in there like last year there was a lot of supply chain issues and lot of reports product not getting to people it does seem like this year they things work a little bit more flawlessly so there was some, some just Optical stuff like that.

Jason:
[28:39] Yeah I really didn't hear the many glitches in this year's primeday which you know it's one of the sort of like highest demand is the year so you know it is a day when you would uncover glitches I saw a bunch of other a smattering of other interesting data points about Prime from various folks Adobe and it is in addition estimating sales they showed category growth and so they call that out like appliances was the big category growth with 45%.
Up year-over-year household products were up 28 percent year-over-year Electronics were up 18% year-over-year apparel up 17% and then the big winner is Office Products which is up 76 percent, and at first that might surprise people but one thing to know about Office Products is they always do phenomenally well on primeday because primeday tends to fall right at the beginning of back-to-school shopping.

[29:35] So it's kind of a perfect perfect storm there, yeah and then they also Adobe reports discount rates and here's where it starts getting interesting they said that on average Electronics were 14 percent off, apparel and toys were twelve percent off and that those were the deepest discounts and to put that in perspective on holiday of 2022, toys were 22% off consumer electronics were twenty-three percent off and a pair of was 14 percent off so that data would imply that the discounts have Prime were.
Not as significant as the discounts, that we you know Tennessee over holiday period another does that surprise you at all.

Scot:
[30:24] No I dunno you know so since we're in the this kind of economic situation I think the consumer is really.
Not getting off the dime unless they have deeper discounts and I think they probably had a pretty good data science reason for the.

Jason:
[30:43] Yeah so then one interesting thing which also says something about the consumers Health the.
Buy now pay later use was up 20% on primeday and represented 6.5 percent of all sales.
So that you know quite that's been a growing payment type for a while but I would argue it's kind of plateaued and so it's interesting to see that big big step up on prey.

Scot:
[31:08] That's a firm right there married to a firm set.

Jason:
[31:12] Well so on Amazon but again all these debts are this kind of like, everybody is primeday and so I think that does include like Target and Walmart sales which are not a firm so so it's all those guys karna and affirm and, and there's too many to name these days but then to me some of the interesting things were like who participated in primeday and so you know a.
A digital marketing agency Acadia that tracks this stuff pretty close and that Q Masters works for who who I think is one of the really smart voices on Amazon sellers they reported, this year eighty percent of all Amazon sellers participated in primeday in some way and from their methodology last year 69 percent participated so it's.

[32:12] The participation levels continuing to increase in its nearing 100 percent of all Amazon sellers participating in primeday which, isn't super surprising it seems like primeday is a pretty successful important thing to participate in, they also said in general that primeday that's ours had to spend fourteen percent of their total revenue on primeday on Amazon digital marketing so that came from momentum Commerce that estimated that so that's a, pretty high, on top of the take right you know that's that's just all the Amazon marketing services and then a particularly interesting take was from our friends Joe it Marketplace pulse he reported that, 150 Brands were promoting by with Prime on their own websites, on primeday which would be up 10x from last year where there were like 15 Brands using by with primeday.

[33:17] So you know just interesting how it's all playing out with kind of Amazon expanding off-site like all these other retailers getting in the market I feel like the vibe, there have been other years when a lot of other retailers more directly counter programmed against primeday in this year.
There were a lot of sales on primeday for sure but it almost felt like more retailers did like Fourth of July sales and almost tried to.
Preamp primed a little bit as opposed to completely focus on.

Scot:
[33:48] Yeah I guess we won't know until the data comes out windows so we won't have that.

Jason:
[33:55] Yeah so the.

Scot:
[33:56] While.

Jason:
[33:56] The Debbie Downer.

Scot:
[33:58] Anyone.

Jason:
[33:59] This is you know primeday is actually in Q3 right so we're we're just going to start getting cute to data here like the US Department of Commerce Q2 data for e-commerce will come out in mid August, Amazon report Q2 next week and then a bunch of other retailers in the next couple of weeks but that'll all be Q2 data in this primeday stuff is all cute 3 so it's it's going to be you know four months down the road before we have.
Have more clarity on that and will be you know well into holiday when we get that clarity.

Scot:
[34:32] Yeah well speaking of data I saw you had a tweet where you went through some of the new Commerce data what are you seeing there.

Jason:
[34:41] Yeah so obviously we talked about the US Commerce data every month so last week just after interrupt Nexus on July 18th there's Department of Commerce released its June data and, this is one of those it's complicated these results don't seem that that favorable kind of stories June retail sales overall were up six percent from June of last year which is a pretty meager, growth rate and a significant deceleration so if you go year to date January through June sales this year are only up 1.9 percent, versus last year and again like normal retail years sales tend to go up about 4% a year the last three years you know largely impacted by the pandemic we've had the three highest growth rates in the history of retail so they're all much higher than four percent so only being up 1.9 percent year-to-date is a, pretty disappointing place to be it's still.
Healthy amount from before the pandemic so year-to-date we're up bike 35% from before the pandemic, you know what everyone immediately asks when you talk about these numbers is well what does inflation due to them and if you adjust those numbers from PlayStation year-to-date we're down 2.8% and we're only up 14% from before the pandemic so.

[36:10] You know that reflects you know a consumer that's being pretty conservative with their spending.
And that you know is a worried sign going in a holiday if we only grew you know less than 2% or you know on a real adjusted basis We Shrunk three percent from last year.
We don't get great monthly data for e-commerce we get better quarterly data so the monthly data we get is this thing called non-store sales which is kind of like.
Cattle catalogs and e-commerce and it's a little bit of a broader catalog but it was up.

[36:46] Nine point nine percent in June which means year-to-date we are up 7.9% for, non store sales and so that's reflecting kind of a return to typical e-commerce growth rates like before the pandemic e-commerce would grow 10 to 15 percent.
Year-over-year in brick-and-mortar with grow 4 percent.
At one point during the pandemic we had an inversion where retail is actually growing faster than brick-and-mortar than e-commerce and e-commerce has over the last couple quarters been kind of, flipping the script and kind of going back to normal and so at the moment we have this thing where e-commerce growth is back to its normal, eight to ten percent level and brick-and-mortar is well under it's normal for percent level.
Um so that's kind of the Commerce story and again will get better e-commerce data because will get the Q 2.
E-commerce data next month.
I did have one funny story I didn't mention when we're talking about the Tim ooh and she in stuff Tim ooh and she and are now suing each other.

Scot:
[37:59] They're in their Chinese companies room.

Jason:
[38:01] Yeah so Bo for Chinese companies Sheehan has a US headquarters in Boston I don't think Tim who has a US headquarters that I'm aware of, so she in which again has been around for a while is suing newcomer Tim ooh, by saying that Tim has been impersonating Sheehan on social commerce platforms including Twitter, where you know of course the verified system has been kind of, put in flocks and so Tim who is accusing Sheehan of creating a bunch of fake social media accounts to undermine.

[38:42] She in and, Tim ooh is counter sewer not countersuing their separate suits Tim who sued Sheehan in US court for violating us antitrust laws because what Tim who is saying is that she and is trying to walk up all the factories in China and get all these factories to sign exclusive trade agreements to only sell products through Sheehan and explicitly to not sell through Tim ooh, and so Tim was trying to use us us antitrust wada sort of, who have all the playing field so you know and it just addition to being too fast growing sites that are winning winning consumers and and you know taking as a meaningful share of retail sales there now both be coming, jobs programs for lawyers just like every other retailer in America.

Scot:
[39:34] Yeah the I just don't think that's going to work I don't think the US courts are really going to find you like.

Jason:
[39:41] Yeah so definitely not it.

Scot:
[39:43] Hi going to say your evil Chinese company.

Jason:
[39:46] Yeah so I don't know I doubt it I doubt know so I think they all have standing to Sue and they're all obligated to follow us law so I think the suits will go through I do think there is a.
All right Leah wrong there is a sort of anti-chinese sentiment in the US but I doubt that carries through to the courts I think that's a lot bigger deal for.
Potential regulation against some of the things these companies are doing and there is a.

[40:14] There's a complicated thing that both TNT Moon she and her getting partly accused of violating like, there's a a a cap, on Customs that shipments have to be worth over 800 dollars in order order for you to have to pay tariffs and you know meet all these import obligations so if you ship a container of clothes from China to the US you're going to pay tariffs on the import of those clothes and you're gonna have to comply with a bunch of laws like that the, clothes were made at a factory you know in a region of China that's known to violate human rights and all these things and there's this loophole that if your sale if your shipment is under 8:00 in value.

[41:04] You don't have to do any of that and so when she and started they were shipping a lot of stuff straight from China and and it was all under this 800 our threshold and timbu is still shipping everything straight from China XI and has built a few warehouses in the u.s. so there, probably Blended but like there's a lot of talk on Washington about changing our trade treaties and lowering that minimum, to because there's a significant amount of shipments coming from China to the us that are.
They're now under that threshold and taking advantage of that to not not be you know incur all these costs that the bigger companies are having to do.

Scot:
[41:46] Michael we will see it'll be funny to watch that one rattle through the courts and see who wins.

Jason:
[41:51] Yeah yeah yeah it's a you know it's all if you don't have a huge financial interest in it it's fun to grab some popcorn and just just follow the drama of all of it.

Scot:
[42:02] Cool any other exciting news you want to go into.

Jason:
[42:05] No I think that is everything on my list for for the this month I'm going to be, interested to see how Amazon earnings play out next year again there's a weird thing like, you know in general growth is decelerating the industry average is decelerating and our friends at Amazon and Walmart which are the two largest retailers in the US by a significant margin, Arbor of grow have historically been growing faster than the industry average which kind of means.
There's not a lot of growth for the rest of the industry and so it'll be interesting to see whether that Trend continues, in with this Q2 data or whether you know the law of large numbers starts to kick in with these guys.

Scot:
[42:53] Yeah and if you have these fast Growers out here like these upstarts the Sheehan and the team is who are they taken care from that's that's always the ultimate question that we ask.

Jason:
[43:04] Yeah absolutely so we're going to have to continue watch and more data becomes available.

Scot:
[43:10] Cool so do you have any trips coming up that people need to be worth any appearance.

Jason:
[43:14] I'm all vacations all the time now so.

Scot:
[43:17] Having done three Keynotes you're burned out.

Jason:
[43:20] I am not of course I'll be at every show so I think next up for me is eat a least in Boston so if any talks are planning on attending that or in the Boston area, drop me a line and we can meet for a Starbucks coffee and you can give me a hard time about why you wish Scott was there and not me.

Scot:
[43:40] Cool and then on our docket we have August 3rd as Amazon earnings will try to get a show out pretty close to that one and then we've been promising folks a deep dive I get notes all the time and now that you've done a talk on one that will that should be helpful because now you've hopefully got some slides that we can use as an anchor it so we'll have to get that in the can once we get back to a more normal schedule here.

Jason:
[44:04] Yeah and that's a deep dive on generative a I assume you're talking about.

Scot:
[44:07] Yeah yeah yeah I do too cool.

Jason:
[44:10] I love it well we'll give back some time to users so if you appreciate this nominally shorter episode feel free to give us a five star review and encourage us to be briefed more often.

Scot:
[44:24] And until next time.

Jason:
[44:26] Happy commercing.

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

Apple previewed a new mixed reality headset called the Apple Vision Pro at it's Worldwide Developers Conference (WWDC) this month. Apple calls the new category spatial computing and we speculate about how it may or may not be a big deal.

We also discuss the latest Echo hardware from Amazon, which is mostly disappointing.

We discuss the rapidly evolving generative AI space and some of the commerce use-cases.

And we take a first look at Holiday 2023.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 306 of the Jason & Scot show was recorded on Thursday, June 8th 2023.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 306 being recorded on Thursday June 8 2023 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason Scott show listeners well it's been about a month our weekly pot has become a monthly cut pod because our lives have gotten pretty busy here in this postcode world I know you've been traveling a lot what else is new with you.

Jason:
[0:57] Yeah yeah it's finally feels like summer which I'm very grateful for, a lot of interesting stuff going on in the world of Commerce that keeps me engaged but I feel like the main reason our podcast is slow down is because you are an entrepreneurial mogul.

Scot:
[1:15] I don't know about mobile but I'll take the entrepreneur piece yeah the day job is a occupying 100 or 99 point, eight percent of my time and I used to be able to use speed like 97 and I could squeeze in more time so I podcast start button but got a there's a lot of cars out there to take care of and we're doing our best to get to all of them.

Jason:
[1:35] And we are grateful for it I feel like I'm I'm going back in time about six months because we've been on such a leg but I feel remiss.
There was a huge accomplishment like six months ago you were named one of the founding members of the.
Marketplace Hall of Fame.

Scot:
[1:57] I saw that yeah yeah.

Jason:
[2:01] Here's the thing I'm going to say about that I didn't know that much about it and I don't think anyone would be surprised to hear you're a founding member but like.
Don't like five names and it was like Jeff Bezos Mar Quarry.
And you and Jack Ma I'm like I'm like man you are going to be the best looking dude on that Mount Rushmore.

Scot:
[2:24] Yeah usually I'm I'm kind of Groucho Marx not sure I want to be in the club but this is one I was very happy to be being is like me and like three or four other billionaires all I'll take I'll take being included in that group.

Jason:
[2:39] Yeah yeah you don't want to be the fanciest house on the Block so.

Scot:
[2:42] Yeah I got a yeah I'm I'm excited I'm punching way above my weight on that list for sure.

Jason:
[2:48] Yeah well so anyway congratulations on that for sure I know and westerners would appreciate it and then while I'm thrilled for summer I've been a little down about one bit of news.

Scot:
[3:00] What is it Jason.

Jason:
[3:01] Disney click closed the Star Wars Hotel before you and I got to go there.

Scot:
[3:08] Yeah I know we could have done a live stream when this thing was announced I was excited and then I saw the price and then I saw the promo video and then I saw the reviews and you could just tell they had totally the totally whiffed on the whole thing it was.
It was it wasn't just kind of a hotel you stayed at you had to just do that thing alone you didn't have to but it was so expensive.
You're paying like two or three thousand dollars a night which I don't know this gonna be some.
Someone in California makes these decisions I guess I don't understand the the tolls of the everyday American or even the higher in Star Wars hand that's a that's a big ask and you know I'm not in the cosplay so I think they had this if we kind of put on our marketing hats they had death by a Thousand Cuts so you had to be a Star Wars fan number one number two you had to be willing to spend 5K on this fancy hotel experience number three had to be in the cause playing and then number for the experiences that people that try to gave it you know at best a.

Jason:
[4:11] Yeah mediocre.

Scot:
[4:12] Yeah it felt very Star Trek e which is definitely a problem for Star Wars fans and you know it had a lot of kind of fun Spacey kind of vibe but like not enough Star Wars so yeah but you know.
I'll say kudos to them for trying but it was an expensive mistake and I'm sure they can repurpose the real estate it's not like they're gonna I'm not shedding a tear.

Jason:
[4:36] Real estate has been depreciated I'm sure.

Scot:
[4:38] I think they'll be okay but yeah you know it is bummer because I was kind of hoping it would work, I've done some other Star Wars experience you'll stuff that was really fun there was there's this group in the UK and they go create movie scenes and industrial areas it's really weird the way it's described is called like underground movies or something like that they did a Star Wars experience that was like amazing where they had a Cantina I guess galaxies Edge is kind of like yeah.
As when I mean I haven't been yet but I'm actually going to go this summer so I'm excited about that all.

Jason:
[5:11] Yeah it's really good you should.

Scot:
[5:12] Yeah everyone says it's good so that's on my list.

Jason:
[5:15] Yeah I'm in the same boat like it I don't feel like I'm disappointed that I missed it because I feel like.
It sounds poorly executed in poorly conceived but the high-level concept of a.
Experiential Star Wars Hotel experience I was super excited about and I hope the fact that this does didn't work isn't going.
Like slow down future future ideas on that space because it could have been cool if they did it really well.

Scot:
[5:44] Yeah yeah I don't put salt down.

Jason:
[5:47] Onto something more reliable Apple announcements.

Scot:
[5:51] Yeah this was exciting so I'd love to get your take on the Apple Vision Pro so first of all the the earlier announcements I was kind of like I was getting a little concerned because they're like you know coming up the biggest new feature in Mac OS is a really cool screen saver and then the phone had a new sleep display mode I'm like, we've kind of jumped the shark if this is the big new OS features there were some other ones and I'm being a little bit facetious but there were there were to say there were minor tweaks which is kind of a Fair assessment I think.

[6:24] And then they finally gave us that one more thing that we've been waiting for and I went and our crack staff of interns went into the Jason and Scot show vault and you and I and 2016 gave a talk at an in our F / shop dot-org event where we were asked to talk about the future of retail and in there I remember I pulled up the presentation we talked about drones and 3D printing and then we talk about a rvr and at that point in time Facebook they're used to this company called Facebook now you may know them as meta they they had just acquired Oculus and we were speculating would Apple enter the game and turns out we were right but like many of our predictions we were maybe a little early if I've done the math on this right we were about seven years ahead, but I think the wait has been worth it because they definitely swung for the fences on this one and you know the the feature sets and the user interface no one none of us have experience to have read the reviews of folks that have sounds like it I can't wait to get my hands on one and I'm definitely ordering one so excited to hear what you think.

Jason:
[7:37] Yeah yeah so maybe half a step back Apple tends to do two big events a year they and they do as software announcement and they do a hardware announcement this is normally the software announcement where they detail all the.
New releases of the various operating systems for all the devices and they do sometimes, launch devices at this which they did again they launched a number of new configurations of Max and then in like September they announced.
The hardware which is up you know generally includes a new phone for October.
So you don't necessarily expect a huge new hardware product at this announcement and I was I was kind of with you most of the OS and announcements were very incremental the new.
Computers were all like like very very incremental there is like.

[8:35] The new 15-inch the the MacBook Air is now a 15 inch.
So that's maybe going to be an appealing laptop for people that want to pretty powerful laptop that's super light.
But I will say there's a number of small enhancements in the OS has that I'm looking forward to like they their incremental but they did you know call out a number of sort of pain points where like.
The autocorrect on the keyboard can often be very annoying and they're going to use a large language model too.
Um what you keep your curse words and proprietary language a lot easier and, a few little bits like that and then yeah to your point like at the end they go and one more thing and as I assume most of our listeners know that's magic language at Apple, that's that's the language Steve Jobs used before he pulled the first iPhone out of his jeans pocket or the first MacBook Air out of the manila envelope and you know that language has been used to introduce a lot of apples game-changing products and it frankly hasn't been used very much.
In the in the modern era so the mere fact that they started the innocent reduction with an one more thing tells you that Apple thinks this is a.
In extra big deal and.
I'm with you like I will I'm embarrassed to say somewhere in some ways I will probably buy one I think there's a bunch of.

[10:03] Cool things about it like the the hardware achievement is is pretty impressive so this is a.
They would be pissed at me describing it this way they invented a new term they call this spatial Computing but it's a it's an AR VR headset and it kind of looks like ski goggles.
And you know a lot of people had predicted this and their renderings that weren't too far off but the hardware is beautiful as you would expect from Apple it has a bunch of Premium finishes it is not an accessory that talks to a computer a phone it's a.
Computer that you wear in your face and in fact I think it has to M2 chips in it.
And in the specs are really high each eye has more than a 4K screen so very high resolution VR headset and the latency, it has this Mode called pass-through mode which means there's cameras in front of it and it can feel like a transparent visor because.
The the cameras see outside and then you know project that onto these two 4K screen so it makes it feel like you're seeing through the visor and it's in full color at 4K with less than 12 millisecond latency which is.

[11:20] Other VR headsets have a pass-through mode like the Oculus has a black-and-white pass-through mode but the latency is.
As much there's a lot more lag and so that creates like all these like motion artifacts and stuff.
That this is all very premium high-end Hardware which seems, pretty cool and so the experiences seem cool everyone I've read you know just got to actually try it thanks though I.
On your face experience was vastly better than any other a rvr.
They had experienced and then they also you know brought in Bob Iger from Disney and who announced that they were doing a bunch of proprietary content for the platform which is a.
Another exciting thing right because the these headsets are only as good as the.
The content you have for them so all that to me was super favorable the things that they're rightly getting knocked on is you just talked about the price of the Disney hotel being unrealistic they didn't really even mention the price in this announcement but they released it afterwards and it's the base price is going to be over 3500 bucks and if you're blind like I am you're going to have to then buy some prescriptions Iceland's is that screw into it.
And so it's an expensive device.

[12:43] It also has kind of mirror battery life like the there's a small battery on the device but in order to get a two-hour battery they make you put a battery pack the size of an iPhone in your pocket and connect it via a cable, to the headset and that gets you two hours which frankly isn't even enough time to watch a lot of movies that are out these days.
People have talked a lot about it being really heavy.
On your face because of all this like you know metal hardware and premium materials that it feels pretty pretty meaningful on your face and then the biggest weird thing to me.
In the announcement they made multiple they took multiple occasions to talk about.

[13:28] How important what they called presences right so they talked like there's a lot of new features and all the OSS around FaceTime.
And making it a more useful meeting thing and and all of those features were around making you feel like you were.
More together with the people you are FaceTiming with and when they first show this, this apple Vision Pro experience the first thing they show is video conferencing with other real people and how their faces are floating right in front of you and it you know it's this great presence experience.
Except for anyone wearing.
This bloody device because guess what you don't get is a picture of the person wearing the device wait what what you get is a.
Uncanny valley like semi-realistic Avatar of the person.

[14:18] And it just feels like very incongruity us that they're both saying presents a super important and then they're partitioning, anyone wearing this device sort of away from real people and so I that to me is worrisome I got to be honest when I add up all the pros and the cons it feels like people like you and I will buy it, but I kind of suspect that this is going to be more like an apple Lisa than the first Macintosh.

Scot:
[14:44] It you know but you gotta start somewhere and this is by setting the goalposts hi it's easier to go down than up so you know I can imagine several iterations and maybe it'll take another seven years but at some point I think they'll solve all those things and they'll get the cost way down but.

Jason:
[15:00] 100% if you look at this as like the entree into a new form of computing I'm totally with you right and and I get I wish I owned one of the a police's but and it did pave the way for the Macintosh so so I'm all down for it I don't think, if you're a retailer at home and you're going like hey do I have to invent some new Commerce experience for the.
For the Apple Vision Pro like the answer is no right like and what like unless maybe your Louis Vuitton and you want to get a good press release about being a first mover you know it's unlikely that there's going to be 100 million people sitting in their house wearing this thing on their face all day and wanting to shop on it.

Scot:
[15:42] Yeah I saw so to last comments on this one I saw One reviewer who's really into a rvr and it was interesting framing he basically said Facebook is going down this path of VR is a social experience and you're using it for meetings and for meeting people which aligns since their social network right and that's part of their DNA where's apples kind of more saying we're heading into a world where we're more alone and you'll you know your increasingly you'll be working for home alone and remote and your you'll you know you'll be interacting with your family with this mask on it's kind of a I don't buy this framing but it's kind of an interesting you know the way it's set up today is very different view of things and then you know then the conclusion was you know for society I hope it's the Facebook silly should be good or else we're all going to be ready player one like sitting in little tiny you know compartments never interacting with each other at a human level and.

Jason:
[16:38] Yeah no I agree and then ironically like apples Imaging everyone sitting at home except for Apple employees who will get fired and they said.

Scot:
[16:46] Yeah.

Jason:
[16:48] Yeah another framing I heard which makes some sense is like they talked about meta really thinking of their device as a gaming platform and it's kind of priced at parity with gaming platforms and the, Partnerships that are leaning into a really gaming Partnerships and it comes with very sort of gaming friendly controllers and things like that and apple is really thinking of this as a compute platform and I think on an implied in their announcement is they Envision a future when.
You know we don't we don't own clamshell devices with keyboards that we used hitter.
Get our work done and that we're more likely to sit in a comfortable chair with one of these things on our face and be much more productive.

Scot:
[17:28] Yeah another thing that was interesting this got obscured by the announcement was I've heard a fair amount of Buzz about this roller coaster experience in Japan and I think it's a Nintendo theme park and what you yes.

Jason:
[17:39] Super Mario Kart and I think they did they just did it in.

Scot:
[17:43] Yeah.

Jason:
[17:44] Universal Studios in Los Angeles I believe may not have it.

Scot:
[17:48] Okay well Apple acquired the company that built this experience for Nintendo and.
Yeah so you know kind of putting that together you see all right you got Bob Iger on stage and that was like content on the device but think about this killer you know imagine you go to your next Generation Galaxy Edge experience in your writing some kind of a ride and now they throw some AR part on top of that experience that that would be pretty cool.

Jason:
[18:14] Yeah I guess so to other random things I thought were mildly interesting normally apple is pretty good about dropping these announcements and then having like.
Pretty quick of the ability thereafter and so one weird thing they're announcing this and June and it's not going to be available in told 2024.
Um which I you know that feels a little unusual for me and then not surprising at all but like very noticeable.
Three words that were not mentioned ever in this announcement were artificial intelligence VR or the metaverse.
So they kind of invented their own terms and I think they very intentionally avoided.
A variety of stigmas that are attached to some of those those other terms and then I guess the last thing in my head you know there's this company and I think they still exist and they have raised billions of dollars.
On a lot of hype around a really high-end AR headset it's this company called magically.
And I think like if there's any loser in this whole Space.

[19:26] Like if there was any hope of magically surviving think I think this you know this seems like a better product in every way than what magically was promising and wasn't able to deliver.

[19:46] Yeah I'm sure there's some IP that's that's interesting to someone I hope so they spent a fortune.

Scot:
[19:48] Yeah I think they're done they yeah they missed their window and they had these really cool early demos but.

Jason:
[19:55] Yeah I actually got one we're like literally the it was kind of like old-school Oculus like there's a you know a refrigerator size computer that was Tethered to the.
To the screen but it definitely it was not 4K with 12 second latency.

Scot:
[20:10] Nothing yep and so this is where Apple wins because they can they built their own silk and they built a chip for that latency it's called the R1 or something and so they basically said alright we need to create Hardware that can have this under eight millisecond latency and they just did it and you know that's not everyone can do that.

Jason:
[20:28] Not many yeah so I thought that was interesting again like you and I will be able to have our little Avatar meetings after this maybe we'll be able to record the podcast in it.

Scot:
[20:38] Yeah people can watch us look at each other with goggles.

Jason:
[20:42] I feel like if there's two people that would whose attractiveness would be improved by the goggles and might be us we have faces for podcasting.

Scot:
[20:47] Yeah yeah I can yeah I'm kind of wondering can you change your eyes you know so those are all simulated so.

Jason:
[20:54] You have to be able to write like if I can buy blue contacts why can't I have yeah because that that is true for those that didn't see the announcement it can look like the glasses are clear because you can see the where's eyes through the glasses but it's because, there's cameras inside the glasses and there's always screens on the outside of the glasses and so they're they're renderings of your eyes.

Scot:
[21:16] Yeah I want to I'm going to do a Terminator ice that's what I'm going for.

Jason:
[21:20] Yeah I'm extra weary about Terminator references in our current AI climb.

Scot:
[21:25] That's a good Segway.

Jason:
[21:28] Nice I like it.
Yeah so there's lots of AI news like we could do a month of AI shows it feels like the only thing I talk about it work but there's one particular subset of all this AI That's often called generative Ai and I'm going to even say focusing very specifically on the image generation Ai and there's tons of cool stuff that I think you and I have both been playing with.

Scot:
[21:58] Yeah I'm big into mid-journey and then everyone's done chat G PT but then the big the big thing that's helped me is once it became where you could do the links I've been able to I do a lot of writing and I've been able to accumulate all my writing in a file and then feed it in and say Here's my style analyze this so that it goes to, then I taught to start writing in my style and then that has been a huge game-changer for me that's the first one gives you like a decent draft and then you're kind of find yourself editing a lot but like having it where you can now upload new information either from the web or in a file or a PDF is a been a big game changer for me it's it gets it more like you know 95% weather.

Jason:
[22:47] Oh yeah I think I've mentioned this before but like there's a small subset of the writing I do that I get to partner with a copywriter so I'll like, give outlines or dictate things to a copywriter in the draft I get back is almost always will written but not remotely in my voice and so it takes me a long time to edit it and give I give the same raw inputs to chechi BT that that I've trained.
To know my writing style what I get back is is way closer to use them.

Scot:
[23:19] Does your copywriter listen to this podcast.

Jason:
[23:23] Hopefully she does not.

Scot:
[23:25] Okay good.

Jason:
[23:27] Yeah yeah no I you know again there's a whole we again we could do another podcast about whether AI is gonna create or destroy jobs or both but I think like a lot of things there are things that we used to pay people to do that are it's going to be harder to make a living doing, but there's going to be lots of new jobs to write and those copywriters like ought to be the first ones learning how to write good prompts for these for these things, the image ones I've been playing with image generators to I use mid Journey, you know there's an open source one that you can kind of run on your local hardware stable diffusion, that has a lot less constraints it's not quite as high quality of rendering is mid-journey but I'll tell you the new thing that's been fun for me is Adobe announced a generative AI model called Firefly and they already built it in one of their products so the the if you own Photoshop CC you can download a Photoshop beta and it has this feature that they call.

[24:28] Excuse me generative Phil and, generative Phil is a legitimate Game Changer there's a bunch of use cases that used to be super time-consuming for designers that that this beta version already like.
Makes Child's Play and one of the sort of unfortunate thing mid-journey generates really beautiful images the one thing it doesn't do is, trademark images or copyright images or text right so very often you might generate an image in mid Journey but then you had you'd have to hand it to a good Photoshop artist to put the spiffy logo in it or to put you know and actual image of Scot Wingo in it or something like that.
And Adobe Firefly is really good at that use case so like I've actually done a bunch of kind of Blended image where I made an image in mid journey and then, I refined it in the Photoshop beta and it's, it's super fun but man like you know if I'm any kind of designer or graphic artist like I want to get good at this stuff right away because it, I'm not saying is going to eliminate jobs but it's going to change the kind of jobs people need to be good at.

Scot:
[25:43] Yeah there's been a lot of really cool use cases of the generative AI feature in Photoshop where people would start like with them Nirvana cover you know the little baby swimming naked and then expand it ever bigger than you can like see the rest of the scene what the computer imagines and they're starting to it with memes to it's pretty wild to watch some output of that it's it's like it's a little scary wow it could be, how real it is it feels like it is it's not real obviously because no one knows what's in that rest of that frame.

Jason:
[26:15] Yeah there's a real world use case where Nike and Tiffany announced a collab product and everyone saw it and thought it was awful.
Right like that it just like is just a very like not inspiring combination of Nike shoes with Tiffany branding and a bunch of people then you know went and use these generative AI models to create.
Way better looking shit Tiffany Nike shoes and that really happened and then last night I actually watched the Nike are movie which is the movie about the.

[26:50] Both of the Air Jordans with them.
Matt Damon and Ben Affleck in it awesome movie by the way especially if you grew up in the 80s like there was a lot of fun nostalgia.
But in this movie The they get a meeting with young Michael Jordan and his family who are going to come to Beaverton to talk about.
In doing a Nike endorsement and and Nikes though Dark Horse like Jordans not interested in Nike and so the the the team after they booked this meeting on Friday afternoon they go to the the one Nike designer in the basement and they say Hey by Monday I need a prototype and a rendering of the world's greatest basketball shoe and this, this guy had a weekend to invent the Air Jordan which he did right and and history is made like you know it made 40 billion dollars for Phil Knight and a couple billion dollars for Michael Jordan so great success but you imagine that if that kind of thing were to happen today, um there'd be a team rendering, a hundred different concepts in these generative AI models and that it have like a way wider variation of interesting ideas to consider.

Scot:
[28:10] Yeah very cool.

Jason:
[28:12] So I will say we're starting to see some interesting Commerce use cases the I have seen a bunch of clients that are using generative AI to create or refine product images and in some cases they are literally saving millions of man hours now.
You know so maybe you've got you know a huge catalog of products and they're all shot as lifestyle imagery or they're all sot on a particular background and then you now need to sell them in the new Marketplace at Sheehan that didn't exist a year ago.
And there's a requirement for white backgrounds.
Well you know you used to pay like an army of graphic designers to mask out all these images and change the backgrounds and now that these like generative things can do it.

[29:02] Trivially and you imagine pretty quickly that all these images are going to be personalized right so instead of, you know seeing that that product around some you know model family like at some you know random persons Thanksgiving table, you're going to see that that that new food product.
At your Thanksgiving table with your family sitting around it and all of these sorts of you know personalized cases as as the imagery the ability to generate imagery on the Fly gets really good, and I've actually never seen a couple of demos from Google of a product they first announced.
Last year and then they announced that it's going to be released eminently last month, it's called Google seen exploration in this is a cool AR use case specifically for retail so this is walk into a store hold your phone with the camera on in front of an aisle and it recognizes all of the products on the Shelf using computer vision, and then it overlays all the products with Google ratings and reviews.

[30:08] So like giving you a lot of this like valuable digital information that didn't used to exist on the shelf right and you you know they talk about all the use cases like you know you need to buy a highly rated nut free vegan chocolate bar and you're standing in the chocolate aisle and there's a you know a thousand chocolate bars there's no way to search by that right and and with this scene exploration you know you can now do that on the fly in a store and to me that seems like a, pretty cool use case and it's it's going to be built in the phones and then area of your in the OS in the very near future.

Scot:
[30:50] Yeah I saw a Salesforce they've been going at this very hard in within the Commerce Cloud they announced like 10 features they have one where it will auto-generate your pdp's for you they have one where it will it'll generate tags so like it'll search the description and come up with sizes and colors and and you know kind of like a variance and things out of a description to have another one, there was no actually go create product catalog for you so if you've you've this was a huge thing we had a challenge with it Channel visor is if you're selling if you're selling on Amazon and you're just matching to their Easter eysan you don't really have the rights to that product information so then you can't just copy that and then put on eBay or something like that or your own website so they've got this whole way that you can take that data your your properties which aren't, sentences create the description and then move it to other sections to a lot of really interesting things going on in the intersection of AI and e-commerce.

Jason:
[31:56] Yeah absolutely so exciting about that and there's going to be I have a feeling we're going to be talking about significant new capabilities on an ongoing basis for the foreseeable future.

Scot:
[32:06] I remember you'd walked internet retailer and there be ten vendors there that would take your product pictures and add a white background yeah.

Jason:
[32:15] And that win from like you know people in America doing that to people in India doing that and now it's it's an Nvidia chip doing it.
Which side note like you know people keep asking who's winning the who's going to be the one to monetize a eyes are going to be open AI or meta all these small companies we also got the answer to that this quarter it's Invidia.

Scot:
[32:36] Yeah they're gonna win yes.

Jason:
[32:39] So for those that don't know nvidia's market cap Nvidia has a chip manufacturer famous for, these high-performance graphic chips that were originally used for gaming and still are and their chips have been extremely useful for training and doing refining training for all these these large language models in AI, and their market cap briefly passed a trillion dollars, um this month I think it dipped like just below a trillion dollars at the moment but to put that in perspective Intel's market cap is like 130 billion dollars.
Like so Nvidia the game chip company is eight times more valuable than Intel at the.

Scot:
[33:25] It's crazy yeah who knows no one had that on their bingo card five years.

Jason:
[33:29] No I wish that was one of my year beginning predictions.

Scot:
[33:34] Yeah anything else on a iron.

Jason:
[33:38] No no did you Amazon 10 announcement last month you follow.

Scot:
[33:44] Yeah yeah well it wouldn't be a Jason Scott show without some.

[34:00] That's right time for some Amazon news Amazon has been unexpectedly quiet so we've got a new CEO basis is out romping around wearing crazy shirts at festivals and living the high life with his girlfriend so, some of that out there other engage did not know that congratulations Jeff I know he listens to.

Jason:
[34:26] If you're playing bingo it was a 2.5 million dollar diamond.

Scot:
[34:29] Nice the one thing I saw just to highlight is a lot there's kind of a, this bit of an economic downturn has made many of the video providers get more serious about profitability so we saw both Netflix and Disney add an ad-supported tier and increase their prices and just as we're recording this Amazon announced they're going to do the same thing with prime so they're going to have an add to your 44 Prime but I know you follow the devices I totally slept on this because I was so eager for the Vision Pro tell me about the new devices.

Jason:
[35:07] Yeah yeah.
I would characterize it as disappointing they want some new Echo devices at.
The in the middle of May for release on May 31st and you know I have it.
An embarrassing amount of these devices controlling smart home features throughout my house and they when I first got them like.

[35:37] I seem very I felt very satisfied with them like the the accuracy of the speech recognition and stuff seemed adequate like based on my expectations at the time but I've grown to be very annoyed by them like they really struggle to know which room you're talking to and they're inconsistent about how semantically accurate you have to be like in in this world where Chad gbt is writing all my articles for me you know you just go I, man the speech recognition in this Hardware has to be better and so I was kind of eagerly looking for some new Echoes that have like an llm in them it seemed like Amazon was a first mover here, and so they did announce some new devices but they're pretty boring so they announced a new form factor called the echo pop which is.

[36:27] I want by my count their fourth or fifth attempt to build a more premium speaker into an echo and this is like.
A more affordable premium speaker which seems like a weird Niche so that wasn't that interesting I don't actually use the echoes.
As speakers so much and then they launched a new Echo Show 5 which is.
The the echo with the screen it's the smallest screen has 5 inch screen and then they announced some new Echo buds the echo built into the the earbuds which you and I both tried and I don't think we're very enamored by.
The.
The features are like oh the speaker sounds better than the old speaker the microphone is more accurate than the old microphone and it's 20% faster.

[37:15] And so like I bought a couple of these new new Echoes to see if I you noticed a difference and it's.
Like it's to me it's mostly imperceptible from the old Hardware so pretty disappointing.
Um but app that announcement I will say Andy jassy said that hey the large language model for Echo is coming and you know there.
It does feel like Amazon's a little behind and I don't know if this announcement was meant to apologize for that that.
Status or whether there really is something that's going to be imminently announced but you know like he he doubled down on their effort to make this the, the most useful personal assistant on Earth and you know part of that is we're going to have a robust large language model that's you know on has a, a similar number of parameters to to open a I or bear door or Lama from from meta, that the Amazons going to release to make these these sneakers smarter so I hope he delivers on that promise.

Scot:
[38:23] Yeah the there if definitely feels like chat gbt started this new gear for Innovation and feels like apple even with their big announcement there was they worked some AI in there but it just feels like.
There's a lot of people speculating do you really need a phone if we're going to head to a device where you can talk to it and these plugins at chat gbt now give it action so you can say hey book me a restaurant reservation the things you would do on your phone you're going to be almost able to do totally by voice soon therefore will you need a phone so there's a lot of you know that's a new would expect Amazon who was ahead on voice now feels like they're behind on a lot of this so it's be really interesting this next year to see who can kind of hang with this and you can't the R&D budgets are gonna go through the roof that's for sure.

Jason:
[39:14] Yeah and the irony is you know you go back in time and you know all the retailers in America where happily you know shipping two weeks after you place an order in Amazon you know disrupted Everybody by saying like hey you should get your stuff in two days and then one day and then same day right and they they raised the expectations for everyone else it feels like open AI is doing that to Apple and Amazon right now on the on the natural language models.

Scot:
[39:43] The to the pop did not pop.

Jason:
[39:46] It did it did not I did that in full disclosure I did not buy a pop because again like I don't I don't so much by them for their speaker Fidelity I mostly buy them to control my lights and stuff.
But yeah I like I still have to repeat myself multiple times and some rooms to just turn stuff on and it's frustrating.

Scot:
[40:06] Yeah so this one was one I wanted to bounce off of you I'm a CNBC junkie and I was watching the other day and Target stock had a big Miss and the folks on, Talking Heads were saying that in their earnings release they really called out this shoplifting as a.

[40:24] A problem and they took a one right off of something like 500 million dollars so I'm sure everyone has seen the videos where you know this is just new organized crime kind of wave going on especially in big cities where you'll see.
20 people go in a store and just run out with arm full of stuff it's happening to starting to kind of luxury then then you saw a little lemon and it happens in Apple Stores and now you're starting to see it in every day department stores and drug stores, so I thought that was you know as e-commerce person I was thinking huh that's interesting you know I wonder if and kind of hi Pro some high-profile store closures have followed from the so Nordstrom closed a store and like San Francisco and that's kind of thing so I was thinking is e-commerce person I was kinda thinking well this is interesting this is gonna this is going to benefit Amazon pretty immensely because as the stores have to close due to this crime wave it's going to benefit e-commerce and then Amazon like 60% of e-commerce so they'll just get they'll just absorb a lot of that that that so that the crime is going to have this unintended consequence of getting rid of stores which is bad for for the local environment and then it'll yeah I don't, yeah I don't think they really want to benefit Amazon but they will so I wanted to get your hot take on them.

Jason:
[41:40] Well first of all just to complete your thought the the brick-and-mortar retailers and the national retail Federation would actually say Amazon's double-dipping on that benefit because they're both.
Selling stuff when the the stores closed in the big cities but also most of the Retailer's blame the organized crime on Amazon.

[41:59] So the The Narrative is basically that like you know people here's who used to steal from stores, people that needed something and couldn't afford it for whatever reason right so they.
Stalled food for their family or you know items they could afford to buy that was individual shoplifting and, employees told stuff employee shrink and there now is this much higher occurrence of organized crime for profit where where people are stealing you know every bottle of shampoo in the Walgreens and one of the reasons these big retailers say that this kind of crime is much larger now is it's way easier to monetize that stuff after you steal it, and the reason they say it's easier to monetize it is you can go sell all of this this still the merchandise pretty easily on Amazon and eBay.
Um so that's controversial like the marketplace is due a lot to sort of avoid selling, um song Goods but that one of the premises why there's more organized crime is because.
It is easier to fence and monetize this stuff.
But here's the thing that's super interesting about that like there for sure is this new kind of crime and it's.

[43:22] It's much more newsworthy so when someone drives a truck through the front of an Apple store and then steals all the phones that's going to be on the local news when someone shoplifts pound of cheese, that's not going to be on the local news right or when an employed as a fake return to embezzle 60 dollars from a shirt like that's not as often on the local news so all of these organized crimes get put on the news and on YouTube and things like that more and and a huge problem is.
Like it's much more violent people are getting hurt employees and in a few cases the perpetrators are are getting hurt or even killed and so like there is a way higher human cost to this kind of crime and so we have heard a bunch of.
Retail CEOs, you know raising the alarm bells and they say two things like oh man our losses are going up this is having a material economic effect on our business we're closing stores partly because of this and you know we're having to change how we do do store operations and and you know all these things they're also saying that police forces are underfunded and you know don't have enough resources to retailers with this problem so they're there in many cases you know asking for more more Municipal support here's the thing though.

[44:51] People have always stolen stuff from retailers there's always been a line item on every retards p&l for shrink and for most public companies that's that's a publicly disclosed number and usually, for most retailers and it varies by the type of retailer and the the geography but usually it's one to two percent of Revenue is lost in shrink and so.

[45:19] Target's announcement was hey we lost we potentially could lose 500 million dollars in profit this year.
And their stock partly went down from because of it like I would argue their their stock also went down for some, PR missteps they made and then also because their revenue is just soft compared to some of their competitors, they probably went down for that shrink because 500 million dollars in profit sounds like a big deal but if you gross up 500 million dollars in profit to product costs, that's one point six billion dollars in shrink at Target in 2022 and they're saying it could be as high as two billion dollars in shrink in 2023 that means that shrink is 1.5 to 1.9 percent of targets Revenue which is below industry averages Walgreens, has made all of these same complaints and last year the Walgreen CFO like in the earnings call said hey this is a huge deal like our shrink could potentially be up 52 percent from before the pandemic.
Um and then he did his swing 22 year in earnings and Shrink was lower then then the last two years and he literally had to say like maybe we cried too much.

[46:40] So I do think there is this new crime it's very serious like it is a problem and you know I have great empathy for retailers in addressing that and they shrink should be zero like a butt.
It's a little bit of a fallacy to say hey there's this new material economic impact from this shrink that didn't exist before because the employee shrink is way down because the the surveillance and the the big data and in the business process has evolved eliminated a lot of that and so the net shrink for a lot of retailers, really isn't as significant now it might be more significant in particular stores and so some of the the closing of these stores, seems at least partially legitimate I will say there's even controversy about that like when, Walgreens has hey we're closing a store in San Francisco because there's too much crime, the San Francisco Police Department rides in and goes that's weird because we got way less complaints from from Walgreens last year than we did three years ago or whatever so there's there's.
Room for disputes about all this stuff but organized crime, is definitely an increasingly serious thing that retailers have to deal with but don't immediately by all the hype that it's.
That it's some you know New Economic strain that retailers have never seen before.

Scot:
[48:04] I wonder if there's a bit of a narrative around this shrink number like I you know I'm sure they're reporting it correctly but so I wonder if it has the same store sales effect like let's say Walgreens has to closed in ten stores because the shrink is so bad.
That comes out of the numbers right because it's probably a seems to work kind of metric so they probably you know now gold number would improve dramatically but.
They've shrunk their footprint like it's probably not capturing that you.

Jason:
[48:33] Yeah no agreed, all as a Wayne huizenga taught me 30 years ago like it any good healthy retailers should be closing and opening stores every year why there's like you can't if you had the perfect realist real estate in one year it would not be perfect the next year right and so in many cases like they're closing stores in economically you know unfriendly climates for them and that improves their same-store sales numbers and improves their cops right and you know whether they did that for purely economic reasons or they did it because there was more organized crime or to put protect employees or whatever like, um it's not wrong for these retailers to curate their, they're fully in an economic downturn that might mean having fewer stores than last year historically the challenge with that is investors always expect you to grow.
And so infect investors don't like the story of what of closing underperforming stores and having better comps if you if your overall Revenue goes down so, you know this is yet another kind of excuse for them to reset expectations with investors I think I think that's totally fair.

[49:44] In some cases I will tell you retailers are closing iconic stores that just feels kind of sad like the the, Nordstrom flagship store in San Francisco is has always been a big deal that's closing I lived in Portland Oregon and they had a beautiful REI in the Pearl District which was, like a great super friendly place to live and they're closing that store and they said partly because they didn't feel they could protect employees like.
That there is something happening that feels like a bummer and there's a lot of big cities that it feels a lot less fun to go shopping.
Than it did a few years ago which which is I do think a legitimate concern.

Scot:
[50:26] Yeah so I know you're the king of all e-commerce and commerce data what are you seeing in the the reports that have come out since our last pot.

Jason:
[50:36] Yeah well we've slowed down a little bit on the frequency the podcast so kind of just super brief recap US Department of Commerce data comes out every month so we we have the May report which has data through April next week we'll get the, the May data so January through April sales for all of retail are up 2.4% from last year that, that is down a little bit from historical averages pre-pandemic you'd expect retail to be up about 4% a year so 2.4%.

[51:11] Is concerning if you look at it from before the pandemic retail sales are up year-to-date, three thirty six percent from 2019 for example so still by historic standards that's very high but this year feels like a meaningful slowdown in sales from last year and of course as soon as you start talking about this people go well what about inflation so if I normalize this data for inflation year-to-date sales this year are down three percent from last year, which historically doesn't happen even with inflation so that, that is a real concern like it it feels very legitimate that we're seeing a Slowdown in in consumer spending and particularly in inflation-adjusted dollars so I mentioned retail sales since the pandemic are up 36% if you adjust that for inflation there up about 14% so less than half of all our sales growth since the pend or more than half of our sales growth since the pandemic, has been a direct result of unusual inflation more than typical inflation and then you know people always ask us in particular about the e-commerce numbers again before the pandemic the.

[52:25] Over the last 20 years e-commerce would average around 12 to 15 percent growth a year retail would average three to four percent growth a year there was a weird transposition in the middle of the pandemic when people you know finally went back to stores for the first time and slow down their e-commerce bending so like for the only time in my lifetime, 20:22 size.
Retail sales growing faster than e-commerce briefly that trend has reversed e-commerce is back on top of retail but it's not back to Historic standards so e-commerce year-to-date is up about 7.4% verses 2022 still, you know, you remember in the pandemic people are talking about e-commerce spiking and then regressing to the mean just want to remind our listeners that's not true the US Department of Commerce revised some numbers and e-commerce growth.
Has ended up being much more robust than like the Wall Street Journal reported in in in a famous article in 2022 so e-commerce is up about 89 percent since, since 2019 and that means.

[53:29] Above and beyond the traditional growth that I would have forecasted for e-commerce we've sold an extra six hundred and seventy five billion dollars since the pandemic started so e-commerce still is the biggest winner in this kind of.
Pandemic accelerated spending and it's you know we'll get the cue to e-commerce data and about two months it's going to be interesting to see, how it plays out and whether you know the consumer slowdown persist through the end of the year and holiday or whether we start to get a bounce.

Scot:
[54:01] Yeah and I know it's June and but you get paid to think about this more than I do so what when clients are saying Jason what are you thinking about holiday 23 Woody tongue.

Jason:
[54:14] I think on the aggregate I'm not expecting it to be an awesome holiday I think there's even if, the the economy listens up there's it's going to take awhile for consumer spending to come back and I think the overall consumer spending is going to be you know modest there will be growth but it'll be low growth and because inflation will still be unusually high like profitability is going to really be, be strain for this holiday that being said we are likely to see some clear winners and losers so like not everyone's going to kind of match the industry average and we've already had a couple bankruptcies Bed Bath & Beyond used to sell a lot of holiday Goods so retailers are going to fight over you know who wins that customer this holiday and so I do think.
You can expect to see some retailers have a really good holiday and you know, I hate to say this for all the small retailers out there but like at the moment the the likely narrative is the biggest best retailers in the ecosystem are likely that too.
Disproportionately win holiday so like if I had to guess I would guess Amazon and Walmart are going to have a pretty good holiday at the expense of the rest of retailgeek.

Scot:
[55:32] Got it well you're a Grinch.

Jason:
[55:37] Yeah I want to be wrong I want to be wrong on that I want to be right on all my year beginning forecast which I can't even remember what they were.

Scot:
[55:44] Yeah I'm just kidding you get paid to tell the real.

Jason:
[55:49] I'd rather I would rather be prepared for soft holiday and then be pleasantly surprised.
I almost hesitate to even bring this up because it kind of feels like it always happens but there there are now some potential new supply chain challenges.
Perking up so there's there's some labor disputes our friends the teamsters the unload all the boats on the west coast of America like are threatening work stoppages and, you know any disruption in there like has a meaningful impact on how much Goods we have available for holiday and then one I've never heard before in my lifetime, the worldwide drought is having a material impact on the supply chain what there is not is enough water in the Panama Canal.

[56:39] And so it turns out the way the locks work they have to pour a bunch of water into the canal to lift the boats and there's less water available so the water costs more so it is more expensive to take a heavy boat through the Panama Canal today than it was a month ago.
Because of the price of water which.
It makes sense when you hear it but it's not something you would I would have thought of and so at the moment the supply-chain wonks are are talking about like you know we might have some unanticipated, supply chain cost as you know people have to pay for the constrain amount of tonnage that they can lift through the Panama Canal.

Scot:
[57:23] Wow learn something everyday and I can check that off my box in it.

Jason:
[57:26] Nice well that's probably a perfect place to end it because we have used up our allotted time but even though we've been a little less frequent than usual, I always look forward to catching up with you and it's been great to chat but I look forward to hearing how our listeners are doing.

Scot:
[57:44] Yeah and you know what listeners could do to help us out leave a review we would always love your feedback let us know how we're doing and if there's any topics you want to cover and we appreciate you giving us a listen.

Jason:
[57:57] Scot that's a great idea and until next time happy Commercing.

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EP305 - Amazon and Shopify Q1 2023 earnings

Amazon and Shopify both reported their Q1 2023 earnings last week.

Amazon had a strong first quarter, slightly over-shadowed by it's slowing AWS growth.

Shopify also had strong Q1 2023 earnings although it did not achieve profitability. Shopify also announced a second reduction of headcount and announced that they were selling all of the recently acquired logistic assets.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 305 of the Jason & Scot show was recorded on Thursday, May 4th 2023.

http://jasonandscot.com

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

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EP304 - ShopTalk Recap

ShopTalk 2023 took place at the Mandalay Bay in Las Vegas March 26 – March 29th, and seems fully back to pre-pandemic levels. Over 10,000 attendees, 600 exhibitors, and 50,000 one on one meetings, make ShopTalk the premiere digital commerce event in the US.

In this episode we recap everything you may have missed if you couldn’t make it to Las Vegas. We also briefly discuss e-commerce in Brazil, around Jason’s recent trip to São Paulo.

Key Themes At ShopTalk this year:

Retail Media Networks
Social Commerce and Shoppable Video
Artificial Intelligence
Retailers Becoming Plaforms

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 304 of the Jason & Scot show was recorded on Thursday, April 6th 2023.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 304 being recorded on Thursday April 6th 2023 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo. Scot: [0:39] Hey JC and welcome back Jason Scott show listeners Jason you’ve been burning up the frequent flyer miles I was have all your trips been. Jason: [0:48] I have I just I did a double header I was just in Las Vegas for shoptalk, and then sadly I had to cut out of shoptalk a little early and head down South America to meet with a bunch of pupusas clients I don’t I’m not sure I said the portal right there pupusas clients in Brazil so I got two visits Apollo for my second time. Scot: [1:10] People say I don’t know you could be in the manual or how to how to pronounce your company’s name. Jason: [1:20] But it’s got you sound more like relaxed and laid-back than you usually do why is that. Scot: [1:26] Yeah I am coming to you live from my spring break come down here at the North Carolina coast J tone and apologize I’m not up to my usual audio quality I know that’s going to drive you crazy but it’s been three hundred four episodes we can have a low Fidelity one for me. Jason: [1:42] Low Fidelity Scott is still better than high-fidelity. Scot: [1:44] No thank you I appreciate that. Jason: [1:47] Yeah and is it nice down there. Scot: [1:49] It is we’re having good weather it’s nice and sunny not its usual heat so it’s kind of a 78 but it’s nice it’s got fun to walk in the beach when it’s not blazing hot. Jason: [2:00] Yeah I was going to say I’ll take that. Scot: [2:01] Yeah probably better than Chicago her have to say. Jason: [2:05] Yeah it has just in the last couple days warmed up we hit 70 yesterday and then it did back down to 50 today but I’m heading out on spring break this weekend as well so I’m looking forward to some warmer weather also. Scot: [2:18] Yeah you’re going to a more exotic location I’m jealous. Jason: [2:22] Yeah yeah we’re a family and I are going to the Caribbean so that it is purportedly very warm there so just desperately trying to get all the last stuff done here so that we can go without any guilt. Scot: [2:35] Poop including publishing a podcast I love it your dedication is admirable. Jason: [2:38] That is priority number one I can’t we can’t leave without all our listeners that let me hear it at shoptalk that we haven’t been publishing quite as frequently as they’d like. Scot: [2:48] Yeah it’s a between all the things you have going on it’s been a little harder this year but we’ll we’re getting this one in the can before we jump into the e-commerce have you been tracking the Mandalorian. Jason: [3:00] You know I have it’s another great season I feel like we’re treated to like like you know Premiere movie Caliber content every week now it’s amazing. Scot: [3:12] Yeah I’m really enjoying no spoilers part of our policy that I’m enjoying the storyline and it’s kind of a fun adventure to see we’re going to take this the filoni verse is pretty interesting and enjoyable because they call it. Jason: [3:25] Indeed did you get fooled by any April Fool’s jokes. Scot: [3:30] I didn’t know it was on a weekend this time so. Yeah I feel like usually at work is when I get get kind of caught up in those things but in the ones I saw a companies do were just like so outrageously silly. A lot of them when you’re in a recessionary period of doing layoffs the stuff that kind of it’s hard to hard to be super jovial so a lot of them were either kind of hit flat or we’re just going like not not really rocket industry. Jason: [3:57] Yeah. I I made a LinkedIn post asking why it seems like all these companies are only like really Innovative one day a year with cool product releases. I thought that would be a like pretty transparent comment and I got like 20 comments back talking about why companies aren’t Innovative anymore. Mike I was kind of referencing all the the fake April Fool’s products I watched a product in AI based tool that puts your name on the exclusion list when you buy a product so you get to stop seeing ads for it. Scot: [4:32] I thought is that real or that was April Fool joke. Jason: [4:35] There was an April Fool’s joke but the feedback I got is very clear that if someone does want to build that, um they could definitely make some money I thought it was funny because it’s a feature built into every advertising platform there’s nothing stopping anyone from doing it that’s why I thought it was funny. But apparently like taking the email address of all the people you sell something too and uploading it to a server via an API is too hard. Scot: [5:05] Well the problem is I only you know I’m okay with you pitching the other products it’s just not the one I just thought so so it seems like the way you pitched it was much broader based like my whole I would never hear from you again. Jason: [5:19] Yeah maybe I I mean I wrote it on a plane on the way home from Brazil so we’ve. But you will be happy to know that I use mid journey to create a logo for the new. Scot: [5:32] Uncle yeah I’ve been really enjoying the journey it’s been a lot. Jason: [5:35] I know you’re getting good at it you’ve uploaded some pretty cool images. Scot: [5:39] Yeah I’m the king of anything to do with penguins can have a lot of. Jason: [5:41] I know you’ve got some like penguins lounging on the beach. Scot: [5:45] I’m a very specific command engineer for anything to do with penguins. Jason: [5:49] Yet another I’m going to go vote for you on LinkedIn for that skill. Scot: [5:55] My long hair looks kills the let’s talk about your Brazil trip let’s do that first because shoptalk I wasn’t able to make it this year and I want to get kind of meaty on some of that stuff because there’s a lot of really good good topics that tell us about Brazil. Jason: [6:11] Yeah so short trip to Brazil for those that aren’t familiar with that market it’s pretty interesting it’s the largest market in Latin America people talk about latam all the time but the. The Dynamics in each country are wildly different and of course they speak a completely different language in Brazil than they do in the rest of Latin America so like. [6:32] It tends to be pretty variable country to Country, the Retail Landscape in Brazil isn’t super Dynamic are interesting there’s some good retailers but there’s nothing that would work. [6:44] Super exciting a revolutionary to anyone that’s used to shopping in the US but e-commerce is a pretty interesting Battle Ground Amazon is not the incumbent there’s a Marketplace you know well Mercado Libre that, really focuses on Latin America. They’re by far the largest Marketplace in Latin America and I think they’re still bigger than Amazon but Amazon came to Brazil late and and people are speculating that they would have no chance that there’s, all these laws that are unfriendly to expats and mercado Libre had a local presence in Brazil and all this stuff, and my sense is both companies are doing really well and continuing to thrive. E-commerce is growing similar to the US like they tend to be 10 to 15% a year growth for ecommons 4% for retail and both Mercado Libre and Amazon which are by far the two biggest players in Brazil are both growing, much faster than that industry average so. I haven’t been there for years ago and back now four years ago people are like Amazon’s the new guy and we don’t think they’ll make it and I think, like in most other markets what they’ve learned is that if Amazon is really serious about your Market there they’re definitely going to be able to win over Shoppers and they, open the ton of infrastructure and they seem to be a credible competitor but it’s kind of fun to be in a market where there’s two a gentleman. Competitors. Scot: [8:13] Yeah and then did you go to anywhere else in South America just presume. Jason: [8:19] Saturday just Brazil and just how Paulo which is biggest city and in Latin America like 22 million, people in the metro area the digital stuff that was fun to me in Brazil so you know I like to talk about these Chinese companies that are doing really well in the US Xi’an, and she and is doing a bunch of experiments in Brazil that they’re not doing anywhere else so in most of the country Shion is a direct-to-consumer model where they have deals with a bunch of factories, and they they sell direct to Consumer the in Brazil there a marketplace with three-piece hours. [8:54] And so that’s their first pilot for 3p, and I don’t know if it’s related to this or not but there’s a long time SoftBank exact who led like a hundred million dollar investment in Chien who’s based in Latin America and just took a job as like. The head of Sheehan and Latin America and so it seems like they they definitely have a vested interest in the market. So it’s kind of interesting to see how well she ends doing there like they are here and then you know Tim ooh is only a three-month-old company it’s a pen duo duo, company that has done really well here in the US with app downloads and they did the Super Bowl ads and very similarly they are making a huge, advertising investment in Brazil and getting a lot of traction so that was interesting all of Latin America is having an inflation problem right now and it’s kind of interesting Brazil has had this horrible inflation problem for a long time and so there’s almost a way in which. [9:53] Brazil is. Doing economy is doing better than a lot of other Latin America economies because they are today already felt the pain of the like truly massive inflation that like makes our inflation seems silly. So that was interesting and then the to me the most geeky coolest thing of all although controversial is during the pandemic, the Brazilian government launched a government-sponsored instant payment system so I got. A digital wallet but the distinction between instant payments and digital wallets digital wallets can hold like credit cards and traditional forms of payment instant payment is kind of like. [10:33] You know do direct withdrawal from transfers from One bank to another, um and so they launched this National digital instant payment system called pics and so if you’re a merchant you can accept pics and you don’t have to pay any credit card interchange fees, you get your money instantly from the consumer there’s all the the you know typical anti-fraud and consumer protection stuff in it and it launched in the middle of the pandemic in 2020 and today it’s, used by seventy percent of the Brazilian population so I have to be honest like there’s. In one sense a little jealous because I believe there’s a lot of digital experiences that get held back in the US because it’s such a pain in the neck to pay for stuff. Scot: [11:18] Yeah for a while most of Latin America with Zod and always had it explained to me that it was kind of like, they like to pass cash because the inflation problem they like to keep cash for than in the bank they don’t trust the banking system a lot of times so there’s this pic thing replacing that that Zod is the most popular payment mechanism. Jason: [11:40] Yeah it definitely has online there still is some cod4 sure it depends on the delivery window of the goods Mercado Libre an Amazon deliver like unsurprisingly fast, but like so you earned order furniture from magazine luiza and it’s going to get delivered two weeks from now like the. You want to settle up at point of delivery not at point of order because of that that currency fluctuation or but at least you did. So yeah I don’t know the exact breakdown but it just. It’s interesting to have this like super ubiquitous payment and part of me and I believe the last time I was in Brazil this that didn’t exist yet, and there wasn’t a lot of Regulation so everybody and their brother was launching a digital payment method and they were all like a bunch of them were like fraudulent and sketchy and like I went down there and met like a client that was like a chocolatier that made chocolate, and they’re like and we have our own digital wallet you’re just like why does this country need 400 digital wallets and so part of me imagines that this pic system was sort of. In response to the private sector running amok. Scot: [12:55] Ankle and then how was the flight there and back there in ours there in our time zone right but you but it’s kind of a long flight they’re in. Jason: [13:06] They’re so sad Paulo is a slightly more East so for me from Chicago it’s two hours ahead for you they’d be one hour ahead of you. The flight from Chicago would be uneventful it’s about a 10 hour direct flight but you can’t get there from Las Vegas so I had to go as Vegas. To Dulles which is the wrong direction and then and then down and I had a tight connection I was super nervous, everything went went perfectly I’m sitting in my comfortable seat on the plane for the last leg of the flight down there and I say to myself. All green lights and right then the engine conked out on our plate. Went back to the gate so at the airport for like 5 hours and yeah it ended up being a 24-hour traveled. Scot: [13:56] I hate this map can be recovered. Jason: [13:59] But lucky fresh Jason and exhausted Jason aren’t all that different. Scot: [14:03] Just kind of pull the string and you just start talking. Jason: [14:07] Exactly and it is definitely true that my travel muscles have atrophied so like I don’t know just not quite as routine as it used to be for me. Scot: [14:21] Yeah give me a rundown of shoptalk what was all the good good sessions there. Jason: [14:27] Yeah well so high level this was the shoptalk the definitely felt like back to normal hundred percent like so there were over 10,000 people there which I think was the attendance of 29. 19 if I’m remembering right. It felt super vibrant and busy and you know you couldn’t get a Starbucks because there was a super long line for the first time that I remember you couldn’t get a hotel room at the show Hotel. And so a ton of people were having to stay off site which is a little bit of a bummer. The thing that has grown a ton is you know shoptalk offers this Meetup service. You know where it’s kind of like Tinder B2B Tinder right like you give a list of. Potential customers you want to meet and they give a list of vendors they want to meet and if you both swipe right like they booked a meeting so shoptalk booked 50,000 meetings, for this event and you can you can go online and get you know Google pictures of the meeting space. It’s way bigger than the exhibit space so I give it was a. Pretty interesting Dynamic and people felt like because it was double opt-in that the quality of the meetings was pretty good. Scot: [15:43] Yeah and that’s where this is popular in Europe for a while and then most you should have never did it but it sounds like we’re moving to that where as a retailer if you agree to X number of meetings they’ll pay for your Compu of flight the ticket to the show in a room is it kind of how it works. Jason: [16:01] Yeah and they still have that so yes if you agree to a number of meetings you get comp to the show, I’m not sure about if they comp your hotel room or not I don’t remember but um they used to kind of aggressively sell these meetings to vendors and back then Menders were like the meetings are Hidden Mist because you get a lot of kind of. Major people that were just using the meetings as a way to fund their trip and that weren’t really interested in the products. My sense is that they they stopped doing that heavy cell and they now make the meetings free if both people opt-in. You don’t you can be a vendor and get as many meetings as you want with people that that agree to see you and the only people that are required to take a meaning are these retailers that get their trip. Um but they still get to pick from amongst the people that want to meet with them so, it sounds like a little more voluntary and it sounds like it’s working better and the inside trade show baseball, the guy that founded this show and sold it Anil apparently started a company to write the software to manage all these meetings and he sells it as a service and apparently, that’s another business that’s taken off for an eel that a bunch of shows are now using this this be to be tender software. Scot: [17:20] Like I never misses an angle gotta respect that. Jason: [17:22] Yeah I do. Scot: [17:24] Always gotta hustle goner. Jason: [17:26] I do I you know normally I’m anti serial entrepreneurs but you know occasionally someone wins me over. So that was kind of the vibe felt back lots of people were super kind and came up and, told me how much they appreciate the show and how much they regret that you weren’t there there are some people that feel a little abandoned that feel like, you have your new get spiffy family better than you of your old e-commerce. Scot: [18:00] They can visit with us every so often on the podcast. Jason: [18:04] Exactly, so that was kind of the vibe and then you know as per usual they had bunch of Keynotes they had a bunch of track content, they had a big vibrant trade show booth and this this meeting space. And I kind of divided all the themes of the show into four big themes and the first thing I should tell you is, the first day of the show after about three key notes I made a tweet that like, the shop Todd drinking game this year is retail media networks and generative AI that you have to drink every time each one of those things came up and it got like. Five thousand retweets so it seems like there is pretty violent, agreement on those two themes so as it turned out those were two of the big themes was retail media networks and generative Ai and then the other two, that I like to talk about our kind of the social commerce video Commerce. Progression and then this last one that we’ll talk about at the end called platforms. [19:11] So the first one retail media networks it’s pretty interesting like everybody is talking about this stuff, there are now like we’re tracking over 40 retailers that have launched a retail media Network so there’s there’s a huge fragmentation problem for brands that want to or need to advertise on these things, because all 40 of them have. Different infrastructures and tools and most notably they have completely different metrics and success criteria so there’s no way to I. Apples to Apples how well your investment in any of these. These networks is working but there are a ton of sessions from the brand side talking about you know if and how you should be playing on retail networks there were a ton of sessions including one I did from the retailer side talking about how you should think about, launching a retail Network and use it there are a bunch of. The kind of Legacy vendors that have been known for these retail media networks like citrus add which is owned by my parent company and then pretty oh but there were also, 37 startups that were you know launching new businesses to help either retailers, manager retail media Network or Brands advertised on a retail media Network so. [20:30] Ton of taka talking about it I did a session that was interesting at least to me that was slightly broader than just retail media networks it what I was asked to talk about all the ways retailers could monetize data. Um and I had with me Nadine AA Julie jannetty who’s the VP of, marketing for Vitamin Shoppe, and so I kind of put together this framework for my session hey there’s three ways retailers can make money on data they can sell their data they can rent their data and they could use their data and, for sale I talked about all these examples like Walmart illuminate or Amazon premium analytics or Kroger’s data, licensing arm or even selling data to iri for use we talked about how you could use that data in like personalization engines and generative AI engines and in targeted marketing campaigns, but the rent version was all about how you could use that data to launch and improve a retail media. [21:34] And the reason I call that renting is increasingly the big Trend in the successful retail media networks is, selling ads that don’t appear on your own website so either off-site digitally so, I would buy retail media Network ad from Walmart that appears on Facebook and the reason I would do that is because Walmart has better first-party data than I do since I can’t use a local look-alike audience from Facebook anymore to build the exact audience I want Walmart can so if I pay them to run an ad for me they can Target that add much better than I can and so the biggest retail media networks are, getting a lot of traction with these sort of off-site AD units, and then the other big thing that everyone is doing is trying to figure out how to move more of these ad units into the store and most retailers still get more eyeballs in more more footfalls in the store and then they do on their website and so they’re able to monetize the store space. That’s really interesting and increasingly these retailers are offering these clean rooms where you can kind of bring your data and they bring their data and you can you can kind of rent some customer Insight by, by in an anonymous way matching your data up with the retailers to get more insight about what your customers are doing. Scot: [22:57] Yeah and this is maybe just back up for listeners this is all really out of the IDF a and a TT changes right so, so Apple till third-party tracking and then Google followed and all this first-party data is now worth its kind of gold dust because they have the best clothes look data, is that a fair characterization why this is now a thing. Jason: [23:19] It is I would say it’s a it’s a conflation of two things one of them is that that the first party data from the Facebook’s and Google’s got depreciated by by these more stringent privacy restrictions but then the second thing that happened is grocery e-commerce more than doubled and in Inconvenient Truth of grocery e-commerce is that it’s wildly unprofitable so there’s all of this, margin pressure on retailers specifically in grocery and so if you look at the retail media networks that are doing the best it’s Amazon Walmart Kroger you know that are the three biggest grocers in the US. Scot: [24:00] And then what is if a brand wants to be on like 10 of the 40 of these how do they do that it’s just they just hire an agency to manage it all are there some tools developed coming along they’ll do. Jason: [24:12] So you could do it in-house every one of these networks offer some sort of tool at the moment these are all pretty rudimentary so if you compare the the, instrumentation for these things too like the instrumentation for buying an ad on Google it’s like it’s several Generations behind but, in most cases it requires human intervention so in most of these these networks like you’re literally calling a sales guy to place an ad for you which is. [24:42] Pretty archaic right like obviously the brands that want to do this themselves want to do it in a more automated way and so that this is where Amazon’s the most ahead of anyone else and you know as you can imagine the bigger. Companies have little better instrumentation than the than the you know kind of mid-tier retailers are in are certainly then any independent retailer. So the instrumentation is pretty rudimentary you can use an agency like like mine or many of our good competitors to do this for you I would say the trend while a lot of people use us right now, in the long run they want to be able to do this themselves and not pay a middleman to do it for them so they’re they’re all putting pressure on the retailers to offer better tools and then there are third-party tools, um that try to learn the, the different data vulgarities and metrics from each of these platforms and kind of be a universal translator and I described many of these as like the channel advisor of retail media Networks and I actually think Channel advisor may offer a product in this space now too but like if you. [25:59] Longtime friend of the show Melissa from Pat view as a tool that that, is it is getting a lot of traction in this space there’s some traditional ad automation tools like kin shoe and what’s now sky, um [26:17] Do all this stuff so there’s a lot of competition for tools the tools are replacing a lot of inherent deficiencies in the in the media networks at the. Scot: [26:28] Yeah yeah I like this one too many problem so I wouldn’t be surprised of Channel those are spoken in there and then if you did it for Amazon like most of the verdict had done you know then it’s easy to add multiples. Jason: [26:41] Yeah and you know everybody started with Amazon and they’re now starting to expand and so. You know there’s a lot of like coaching for people at different levels of maturity about all this stuff there were a bunch of retailers that came on and give case studies about how successful they’ve been, because these things are all pretty small they’re growing really fast so like Ulta, I gave a presentation and they talked about how their Regional media networks growing at 40% Macy’s talked about how you know in this was kind of a sales pitch but like, um how you know brands that bought their Premier retail media ads units like had 25% better sell-through than, then brands that that did not so talking about the efficacy. The tracking and measurement of all these ads is super dubious right now by the way Uber did a presentation and I don’t know if you’ve noticed this an Uber lately but there they are weaning heavily into these ads as a new, monetization Channel I feel like their way over the top like I keep. You know I’m trying to book a flight to a ride to the airport and I’ve got a click through I you know click around eight ads too. [27:55] To do that which is somewhat annoying. So there’s a lot of positive momentum and everyone talking about this is the Panacea and this the way to make money to more nuanced interesting conversations a lot of people are like. Is this new like when you’re talking about retail media networks moving in store like isn’t that a hundred year old practice called Co-op advertising that like every retailers, been doing I get in many ways this feels like kind of the digitization of a long-standing practice at retail and then you get into all these interesting questions. [28:28] Where’s the money coming from that’s going into these ads is it a zero-sum game is it like are they taking dollars from their trade budget that used to go to a store circular and buying an ad with it or is this marketing money that used to be going to Facebook and buying an ad with it, all of those conversations came up and then for the first time because this has been the most hype thing in my world for. [28:50] I don’t know two years 18 months for the first time you’re starting to hear the stories that and it doesn’t always work out right that like. It’s a lot harder to do than it sounds like when you just see a PowerPoint presentation from a vendor that’s trying to get you to buy their tool. And you know a bunch of these guys are kind of stumbling like the the amount of eyeballs you have to sell like drop off really fast after you get pissed Amazon and Walmart, um and so you know it the fragmentation problem becomes a real problem for. For targeting and selling ads and we’ve seen at least one one retailer Gap actually have to turn off the retail media Network and kind of, give up and it makes perfect sense that they like, wouldn’t be successful because at the moment all the advertisers on these networks are what we would call endemic advertisers their people that are selling stuff through the retailer and so you know probably have some, additional interest in having an add-on that retailers properties, there are no insurance companies are car companies buying ads on any of these platforms and if you think about it what who the Gap does not have is any endemic advertisers right like they sell all their own stuff so. They just had a hard time I think selling enough adieu. Scot: [30:08] Young sir wall she loves it because it’s just pure margin was so much easier to sell a margin add than a product. Jason: [30:14] I have a whole deck of CFO quotes talking about how like this is the greatest business I’ve ever seen in my 30 year career as a retailer, because they’re like there’s 75 percent gross margin businesses for a bunch of companies that are used to eight percent gross margin businesses. Scot: [30:30] Yeah yet Game Changer it doesn’t have to be it could be eight percent of Revenue and it’ll drive likes it. Jason: [30:35] No that’s that’s why I keep talking about like you know a bunch of these guys are like uber just announced that they’re near a billion dollars in. Ads you know that’s I don’t know that could be a hundred billion dollars in gmv equivalent or 50 billion dollars in gmv equivalent for Gruber. Scot: [30:54] Yeah they’re actually they were one super annoying because I feel like there’s a misalignment there because, they’ll say you’re right is 3 minutes away and I’ll show you an ad and then suddenly will be like 12 minutes away you’re like wait a minute and then they yeah they almost intended to make you wait for the ride while. Jason: [31:11] You’re monetizing your bad service. Scot: [31:14] Yeah yeah that one feels like that’s kind of bad biopsy. Jason: [31:18] Yeah and there’s a controversy with all these things like you can, you know what’s the right level of this stuff to put in right like a little bit of advertising there’s an argument that it’s a customer amenity and helps a customer but but too much is super annoying right and in general, why you know people start to start by sprinkling a little bit on this and it’s not so objectionable but once they get addicted to it you know the first organic result on Amazon is now you know often well below the fold because everything above the folds been monitoring. Scot: [31:48] Yeah. Jason: [31:50] So that was the thing on retail media networks happily my company has like 50 subject matter experts in that that no more than me so I don’t end up having to talk about that as much as I used to, which I’m frankly grateful for because I don’t I don’t like that business that much it’s Louise interesting part of our whole Space to me, but the next big Trend was the whole evolution of social commerce and I’m kind of lumping shoppable video into social commerce so there were a bunch of platforms that gave Keynotes, Bill ready is the CEO of Pinterest he gave a keynote and he had kind of an interesting metaphor he’s like you know for a long time, Pinterest has been kind of like the digital equivalent of window shopping except you are only window shopping at night when all the stores were closed and you weren’t allowed to buy anything, and he’s like you know the big goal for Pinterest this year is to open up all those stores and let you buy the stuff that you’re interested in right and he made. Yes um funny arguments you know there’s there’s a lot of objectionable stuff on a lot of these social media networks and negative sentiment and all this stuff and because. [33:01] Pinterest is mostly product-centric it kind of side steps a lot of those. Those controversies and so you know he talks about it is a much more brand safe platform than a lot of other social networks they launched a second product last year called shuffles which is kind of a. A gen Z version of Pinterest that’s even more kind of shopping list Centric, um it has and it has more video and short form video on that vis-à-vis Tick-Tock and so they announced that the show a bunch of shoppable features for shuffles for example. Um They do have some live streaming which one of the conversations that this show is that you know mostly live streaming isn’t very high volume and isn’t working but what bill was saying in their case is, they’re using a i to chop up the live streaming video and turn it into short form video that’s not live, and that that’s monetizing pretty well so so you know he gave a kind of interesting talk about. [34:10] Commerce getting social getting more Commerce E from his perspective Tik Tok was also a platinum sponsor they had a big booth, um before shoptalk they launched the most robust, checkout experience I’ve seen on a social platform so they they have a multi-item cart called Tick Tock shop so you can add multiple items you can add actually add multiple items from different vendors all in a single Universal car, and check out a lot of the things that I always point out are usually missing from social check out like in tick-tocks to take tax credit they’ve added so this is a pretty robust, shopping feature that they’ve launched and when they launched it. It came with a Shopify integration so the first cuss clients that were on the shop we’re all like Shopify customer so you know to me the most recognizable brand was packs on had a had their products on a tick tock shoptalk, and then at shoptalk the announced the first customer that was using their Salesforce integration which is the Cosmetics company e.l.f. [35:19] Um and so so you know we’re starting to see. More robust shopping features on at least the tick tock platform, WhatsApp it’s owned by meta they were pushing they were also Platinum sponsor they were pushing a lot of newcomers features that they built into their chat interface and so they’re they’re leaning heavily into this chat for business thing and they have what’s called, they’ve had it for for Facebook and Instagram for a while now they’re adding it to WhatsApp so you can kind of. Use WhatsApp is your customer service channel for asynchronous chat and you can natively sell stuff through that, B dance which owns Tick-Tock and you know also one of the biggest Platforms in China they have a they have a couple apps now that are doing really well, and you heard it here first on the show the up-and-coming one in the u.s. is called the laminate which is kind of, Tik toks version of short form video Pinterest it’s very product Centric wish you eccentric version of tick-tock, and it’s targeted at kind of gen Z, users and they announced shopping features in eliminate so that was interesting, Twitter had a I don’t think Twitter had a formal presence that I saw but it kind of leaked during the show that they had applied for a license I didn’t realize you. [36:49] I don’t know who the governing body here is but to do in app payments so. You know you on musk likes his digital payments and so we try Twitter’s moving there. Their shop gave a keynote the founder in Minecon gave a keynote, and he talked about severe shop is a native we social commerce Marketplace, um and he talked about how you know most social commerce experiences just suck and particularly the post-purchase experienced when you’re going to get this stuff how you would return it, the shipping confirmation all of all of that sort of stuff oh I forgot my promo code all of that sort of stuff most of these native checkout Schmitt are missing, and so you know he kind of position very shop is a more robust version of all those and, particularly interesting because they have a livestream feature and they’re often called out as the livestream success story and he said live streaming is a mixed bag he’s like, live streaming converts way better than any of our other media types but it has way poor reach than any of our other media types so his thing was, it’s very hard to get people to watch your video live but when they do you can sell them some stuff. [38:09] And then the last keynote that was interesting to me in this whole social space is tapestry which is the parent company of coach, talked about this whole notion that you know people used to discover stuff in store and now they’re discovering new products they want to buy on, Kamar on social media platforms, and so sort of influencers are becoming the new Merchants for all these products and so they talked a lot about their their micro influencer campaign, and I’m always pretty getting interested tapestry turns all of the coach employees into micro influencers so they give, tools to all their sales associates to kind of publish influencer content and they financially reward them for doing that so, so a lot of cool interesting stuff in social commerce in short form video in the hallways there’s still a lot of conversation about. How you measure this and how big is it going to get and you know are we going to catch up to China or we inherently different like they’re all these kind of. You know open questions that are still out there but there was just a heck of a lot of talk about this whole problem of discoveries not happening on the stood in the store as much it’s happening on social networks so, you know how the heck do we make that Discovery happen as much as we’d like it to. Scot: [39:33] Yeah it’s a fascinating problem the Pinterest guys have been at it forever and never really broken the code on it you think by now they would figure something out. Jason: [39:41] Yeah this is the most explicitly I’ve heard them say and we’re all in on building Commerce features, um the you know he talked about the progress they’ve made on onboarding shoppable pins like you know a small percentage of all the pins on the site are, are shoppable right and when I look at readers I have some retailers with huge catalogs and you know they could have. Millions tens of millions and a few cases hundreds of millions of skews and they might have like 6,000 shoppable pins on Pinterest right and so those pins. Do pretty well but it just like the the infrastructure of Pinterest isn’t really there to handle these these massive catalogs yet. Sounds like they’re working on it and by the way the CTO at Pinterest used to be the CTO at Walmart so he Jeremy King knows how to do Commerce at scale. Scot: [40:33] Wow cool. Jason: [40:35] So then my third trend is. Like the most megatrend of the year at the show and outside the show and they’re actually a bunch of things that were like hinted at the show that then happen afterwards is the hole, emergence of artificial intelligence and whether you want to generically talk about artificial intelligence or specifically about large language models or generative AI like theirs, there’s a million ways to slice this but I did a fun thing I scraped all the exhibitors from the the show and there’s something like. 680 something exhibitors at the show if I’m remembering approximately right but 23% of them describe themselves as an AI company. So everybody has an AI story whether they’re you know how a gentleman it is or not. And I’ll be honest this is a plea for anyone listening in the show do not send me an anonymous LinkedIn invite telling me that you’re the one company that invented a revolutionary way to shop Vai for the first time. Because you didn’t. But I get a lot of pitches and I’m sure there’s some amazing ideas in there but there’s also a lot of noise. [41:57] So at the show I think Salesforce may have announced this at their own show beforehand but you know they’ve had this AI, Persona called the Einstein for a while they announced Einstein GPT for Commerce so for the Salesforce Commerce Cloud they’ve licensed the opening I technology so they you know you can now, use the their language model for shopping functions on your Salesforce Commerce Cloud thing. Meta did a keynote and they talked a lot about. [42:31] The use cases they saw for AI and and they maybe like an interesting comment that Mark Zuckerberg and Senior leadership are spending the bulk of their time on AI, and it almost feels like they’re starting to do this pivot we’re like they’re calling they’re trying to call a i part of the metaverse so that they can, stay say that they’re still on the original Mission, but it seems like they’re leaning into a I more than the metaverse right now and they hinted about some new image tools and then this week they released a new tool called segments anything which is sort of like an intelligent, um tagging and masking system so I put it through its Paces it’s pretty powerful. [43:17] You know imagine you’re you have a catalog of 100 million a pair of pieces of apparel and maybe your Marketplace so all that content was developed by different people and you want to show all of the dresses, on a mannequin instead of a live model and you don’t know if you have the talent rights to the live models. The segment anything makes it super easy to, Why move all those those dresses to a mannequin or to a flat you know, merchandising hero image or whatever you want to do like so these these tools are solving real business problems for for high-volume e-commerce sites that are pretty interesting. There was a lot of talk at the show there weren’t so many scheduled sessions on AI because if you think about it. [44:04] Shopify or shoptalk you know booked other sessions months ago so I need before all this chechi Beauty Buzz started and so the titles of the sessions weren’t so much a i generated but the content and all the sessions was AI Centric, um she PT is something we’ve talked about several times on the show we probably should do a deep dive but they launched a new framework called plugins and so now for the first time you can extend chat GPT with actual Commerce actions so you can say plan I said make a meal plan for a week I want it to be keto friendly I want the meals to all be under 2,000 calories for the day and cost less than $20 and be easy to make and order all the ingredients and chechi PT will, build you a meal plan figure out the calories figure out all the ingredients and place an order with instacart or Shopify for all the stuff on that that shopping list and as you and I have talked about. The chat CBT website is now a huge platform and it was the fastest technology in human history to get to 100 million active users it took him two months and so there’s over 100 million people using that website every month and they can now use it for actually buying stuff if they so choose. Scot: [45:21] Yeah the plug-in framework is amazing the it’s kind of a whole new platform it’s crazy. Jason: [45:28] It’s pretty exciting a nuanced conversation I’m having with clients is that plug-in framework is not for the API so it’s not so much like extend the capabilities of the, AI engine you’re getting from open a.i. that you’re building in your own branded mobile app it’s extending the capabilities of the website URL owned by chat gbt owned by open a right and so. It really like they’re creating a destination that arguably is going to compete with Amazon or Tik-Tok for visits and attention and so it I don’t know if that is kind of a, you know a short-term thing until this functionality gets you know ubiquitously deployed or whether that’s permanently going to be a super high volume destination but it’s super interesting right now. Scot: [46:17] Yes fastest product 200 million users of statue PT so it’s well on its way to being a whole new destination and it’s been funny watching Google be so dominant for so long and all the excesses of, one time I went there with an engineer and he had a hissy fit that he didn’t get fresh coconut milk and and yeah it just has been raining money out of the sky for those guys for so long it’s going to be interesting to see them with a new competitor and see how they react, I think I think they’ve had it easy for so long that’s going to be very hard for them to react at all. Jason: [46:49] Yeah the one of the Keynotes was this guy Sean Downey who’s the president of America’s for Google and that was his kind of first position he’s like. Yeah you know search is one of the ways you’ll use generative AI but, you know they’re like I’m really excited about all the capabilities that you know we’ve built into Google Cloud platform to enable other people’s to do Ai and so you know they’re they’re kind of saying like hey don’t look over here at the large language models where we’re not doing very well like look look at all these other things, but he did kind of you know he he openly talked about it and he’s like hey from our standpoint. There’s three things that you’re going to see retailers do with a I right, where you know you’re going to use it to help businesses grow You by better ads do better marketing better targeting stuff like that, you’re going to improve operational efficiencies and he talked a lot about the demand forecasting use cases Amazon later gave a keynote where they talked about how they’re really leaning into a i for for supply chain efficiencies, and then you’re you know you’re going to have new customer experiences like it’s going to be a lot easier to shop for a product you saw in an image or that you can see with your phone or, or things like that then it than it ever was before and so so yeah he talked about it. [48:14] You know Amazon talked about how they’re seeing that they now have 600,000 skews that they ship in 90 markets same day. [48:24] And so the big question is what’s the right 600,000 excuse to ship and and which ones in which markets. And so there are saying that like this is really a problem that you know is way more efficiently so via a Ai and so there you know increasingly turning over the, the demand forecasting to these AI models they’re also like heavily leaning into a i automation for the, the Fulfillment centers and you know you’ve talked about. They originally acquired Kiva and which was kind of an early a i model and they were kind of slow to really push that out to all the Fulfillment centers but it sounds like with their new focus on efficiency. The the heat is turning up on automating all these these fulfillment centers with quite a bit more. Um so those those kind of supply chain and back of house AI stuff we talked about a lot a thing that I didn’t think about that’s coming up a lot is. AI for employee training like that they’re all these. [49:28] Tools about training people and helping people understand new Concepts and having access to vast knowledge bases and things like that and so a lot of the use cases that the show were, AI tools for employee upscaling in education which I thought was pretty interesting. Of the obvious application that we’ve done the most with is AI for product content so you know writing better product descriptions writing more unique product descriptions generating better in images, stuff like that and then again not a formal session but a lot of hallway conversation about. The brand risk associated with all of these AI engines so you know Getty is suing one of the big AI engines for kind of illegally training, on trademark Getty Images there was big news this week that some a bunch of Samsung Engineers were taking their most. [50:31] Why proprietary secret code like the debugging code for some of the the you know silicone chips that suck that Samsung makes, and uploading them to chat gbt to debug which you know then means open a.i. employees had access to all this you know all these Sam, secrets, um so they’re a lot of those kind of things and the most bizarre but interesting keynote at the show and I think shoptalk always gets one of these like left-field Keynotes where you go why is this person in a Commerce show was Jeffrey katzenberg. [51:03] Who’s you know one of the founders of DreamWorks and he works for a VC now or is one of the founders of a VC I think it’s called Wonder company, and one of the companies in their portfolio is a net is an AI company called Natoma me and, they’re trying to solve part of this brand safety thing they’ve invented their own flavor of, large language model they’re calling sanctioned a I wear the the AI model is trained on a constraint set of data and it can only learn from that data, and so their pitch is hey you want to have an employee knowledge base and you don’t want it to run them run amok and start trying to talk employees into leaving their spouses and stuff like that that like, the sanctioned a I approach is a much, bran safer sensible way to do it so I don’t know where that all that out but it’s it’s super interesting to think about some of these problems. Are you worried at all about AI. Scot: [52:07] I am yeah there’s there’s a lot of icky things to be decided you know where yeah right now these things are crawling all this data and coming up with these insights from you know is that fair use copyright none of the IP laws were written with any of those in mind sir, there’s a whole lot of lawyer and that’s going to have to go on to figure it out so then being able to turn it on your own data is super handy because you own it and you could have your own little way either. It’s happening so fast you can’t even keep track of it you know there’s there’s people that now have wired a chat GPT to these 0 code interfaces so you can using your voice and some prompts you can build apps now it’s just kind of. It’s really crazy to see where this is going so fast. Jason: [52:52] Yeah yeah yeah I mean to me the speed is the the super exciting so a scary thing there was this letter that came out last week you know that was signed by, um a bunch of like super credible AI researchers and also some. Some like interesting you know competitors and people would likely ulterior motives there was calling for a pause on on all AI research that’s more powerful than Chet CPT for and so now, you know all of my clients that are like hey I think I should be doing a I but you know, I have too much on my plate and I don’t know what to do they’re now using this letter as kind of an excuse to slow play it right because they’re like. Like what are the you know concerns and ethics about all this stuff so I do I’m not saying they’re necessarily wrong but this letter is I’m kind of dubious of this letter did you follow the. Nothing at all. Scot: [53:51] Yeah I don’t think it’s kind of causing one to slow down by any means so it seems. Jason: [53:58] That’s a point like like how could it like a it’s like. Is China gonna follow the pot like you know I mean you’re not like them nobody’s gonna be able to enforce it like there’s no like what’s the governing body that’s going to enforce that and it has language in it like. Stop AI models more powerful than Chet gbt for well what’s the metric for how powerful a large language model is. [54:25] Like how you know is bared more powerful I don’t know. [54:30] Yeah so yeah I don’t know but it it does put some fear uncertainty and doubt in the whole thing which is just kind of interesting and then the last of my four Trends is retailers becoming platforms, so you have a bunch of big retailers Amazon Walmart and instacart the between them had seven booths at the show. Walmart was a two-time gold Platinum sponsor of the show right so they separately have a Walmart marketplace booth, Walmart Commerce Technologies Booth where they’re selling they’re their SAS Commerce platform they’re selling their Walmart go delivery services and they separately had a booth for Walmart data Ventures which is illuminate and all these, these other services like monetizing Walmart data, Amazon had three booths they had a by with prime Booth which is super interesting and they were they were touting, 25% sales with Don sites that added by with Prime and there was a lot of hallway conversation about the pros and cons of by with, that Amazon pay Booth which I found it interesting that they didn’t roll Amazon pay into the buy with prime booth that it was its own separate booth and then. There are third booth that I have to be honest I think it was watch before the show but I had never heard of it till the show called Amazon today are you familiar with Amazon today. [55:56] Yeah so this is a service for brick-and-mortar retailers to list their in-store inventory, on Amazon search and if a customer wants to buy it they’ll have an Amazon Flex driver go to your store pick it up and then deliver it to the customer. [56:13] So it’s extending the marketplace inventory to the to the you know these brick-and-mortar retailers and so I, GNC PacSun and Superdry were three retailers that were always piloting it and I I think what that means is like, retail to the word that you know who’s inventory isn’t Shopify which is funny that it’s Amazon. [56:37] But yeah I hadn’t heard of that service and that’s interesting like I’m digging into that service more but like. It just super interesting that like a company that you think of as a, competitor for a bunch of retailers has three separate booth that are booths at a retail trade show selling stuff to other retailers and by the way they’re huge Marketplace they did not have a booth recruiting marketplace hours, I’m assuming because most of the new Marketplace sellers are located in other countries. And then instacart who you think of is a b2c company that has a bunch of consumers going in their website they had a booth totally dedicated to all the white labeled services, they’re selling and most of them have carried in the name so I call it carried everything they call it instacart platforms, so it just super interesting to me to see all of these retailers again saying. Selling bananas is a well margin business it’s way better to sell Services I Scot Wingo used to do it at Channel advisor. [57:48] Exactly yeah so you have a lot of Prospectors that are starting second careers as as pickaxe salesman. Scot: [57:56] Analogy. Jason: [57:58] Yeah and then of course there’s all the, the actual platforms that are you know dramatically expanding their their services so Shopify waiting into the Professional Services Market a lot more Salesforce weaning into it and then a social commerce platform snap, actually like was selling all of their AI stuff which there are I’m sorry AR stuff which they’re pretty you know advanced in as white labeled services to build into your own apps. Scot: [58:27] Probably cleanses and. Jason: [58:29] So if you want like if you have a product catalog that you need you know that’s why I get home decor and you need to visualize it in the canoe in the consumer wants to, you know kind of use a IR to visualize it in the room or makeup Tryon or, or you know those kinds of things or maybe you want to scan a shelf and overlay reviews over product on the shelf or any of those kind of a our use cases you can now license a set of snap. And I think they call it snap are at our ease which I think a res is acronym for something but. You can you can license all those capabilities from snap instead of building them yourself. Yeah so that was in my those were my big takeaways from the show the kind of stuff that didn’t make my list but came up a few times, there’s a lot of talk about the the macro-environment macroeconomic environment and all the uncertainty there were a lot of sessions around convenience and Rapid delivery, they’re you know our e-commerce and resale is still a big thing and there’s kind of just this General notion that that it’s the year of efficiency so retailers are investing a lot more in. In stuff that has a short term Roi and that’s kind of back-of-house in the lesson just growing at all costs. Do you feel like you’ve been in the show now. Scot: [59:52] I knew that was awesome you saved me a lot of travel and a lot of trips in Starbucks. Jason: [59:58] Yes but you missed enjoying a bunch of iced lattes with me and you know hearing from all the fans that appreciate your your knowledge and POV on this podcast. Scot: [1:00:10] Yeah we need to open up an auto segment and then I can justify the trip can’t do it right now. Jason: [1:00:16] Oh I forgot the most important part they announced a new show shoptalk fall. So shoptalk is normally in April they have two shows in the u.s. shoptalk in April grocery shop in October and then there’s a shoptalk Europe that’s in I think June or May so they’re starting in 2024 they’re going to have to shop talk shows in the US, the regular shoptalk in Las Vegas in March and a shoptalk fall which will be in my hometown of Chicago in late September. Yeah so second show I think there’s some controversy if you’re an exhibitor at grocery shop and shoptalk those two shows might be pretty close together and it could be annoying but I’m excited that a bunch of my Commerce friends will have an excuse to come visit me in Chicago and I’m thinking we I got a host some kind of event for a meet up for for listeners that want to get together because I never get to schedule meetings with as many people as I’d like to. Scot: [1:01:22] Yeah that’s a lot easier to get to than Vegas for me so we’ll see. Jason: [1:01:25] Yeah that’s why I’m saying is you and I we should have a Jason and Scot Show event and we’ll get like. Foxtrot is a local market and restaurant to host like cater breakfast tacos for everyone or something. Scot: [1:01:40] Okay I’m liking the sound of that did they announce the time let’s work what will work on it offline. Jason: [1:01:45] And you think like if I was going to do a podcast I would do some research and get my intern on it it is October 8th through the 10th 2024 in Chicago at Javits Center. Scot: [1:01:57] All right let me check the calendar and get back with you. Jason: [1:02:01] I like it I know that was a lot there was a little bit of Amazon news did you have a POV on the recent layoffs. Scot: [1:02:11] It’s been pretty dry an Amazon lamp they’re just really trimming staff like crazy so they announced yet another 9,000 way off so I think this gets up to 27,000 because Amazon rules the warehouse people into their head count they’re always in a million so it’s feels like a small percentage but these are coming from, yeah I’ve heard the Alexa team got hit pretty hard, Lester was way out in front and all these new chat gbt capabilities far none of them are on a device yet but pretty soon I think we’ll see it all over the place, there’s some speculation maybe Microsoft will come out with a new phone products that would be that gbt enabled which would be kind of an interesting next-gen phone platform so I think. They’ve got a lot of precious they got macro they having to trim their head count to hit their numbers from a bottom-line perspective they were hired and then they’re in this kind of gun / a knife fight over a i. So it’s very interesting to see what they do the rest of the year around some of these these areas it’s a tough sledding for sure for Amazon right now. Jason: [1:03:19] Yeah it’s interesting because on the one hand you if you look at how many people Amazon added over the last 18 months like the layoffs don’t you know. Don’t seem that severe but it is interesting like some of these layoffs were in pretty key areas like areas that you would think of is primarily. Like income additive like they like they laid off people in the Amazon ad unit right which. To me that’s not necessary where you’d expect to see. Ceci hits I personally am a little sad that they have this huge focus on efficiency because I very selfishly feel like the the echo Hardware is getting kind of long in the tooth and now there’s all this new exciting large language model capability and like I’m super eager to see like a vastly improved. Solution there and I’m kind of worried that like all of this efficiency stuff is going to slow down the likelihood that it’s going to come from Amazon. Scot: [1:04:19] Yeah I talked to a lot of people at Amazon still and something happened kind of during the pandemic where, the whole work from home and then the explosion of employees they’ve lost their efficiency so you know for a long they did it better than any other company with the two pizzas team Rule and all this Jazz but now there’s so many to Pizza teams running around none of them know what’s going on and it’s kind of total chaos has become very hard to get stuff done, so I don’t know them feel like trimming that count can be a good thing. Jason: [1:04:53] Yeah no I feel like the investors have mostly liked it by the way but yeah I think the big problem is its Day 2 at Amazon. Scot: [1:05:04] To be sets the stage for a bob Iger like return of pesos at some point maybe he’ll. Jason: [1:05:10] Yeah I think that was that was on the bubble for me as a prediction for this year so. I don’t think I actually pulled the trigger on it so I hope it doesn’t happen this year I’ll kick myself. But Scott what a shock we’ve used a lot of time again so as always if you found value we’d love it if you jump on iTunes and leave us that five-star review, and super appreciate everyone taking the time and all the kind words that you passed along the Scott and I the we’re grateful that the show adds value and we really appreciate you guys. Scot: [1:05:47] Yeah have a great spring break Jason and until next time. Jason: [1:05:51] Happy Commercing.

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EP303 - Amazon, Walmartand E-com Q4 Results

In this episode we cover:

Amazon Q4 Earnings
Walmart Q4 Earnings
US Department of Commerce Q4 e-commerce data
Discussion of Temu and other Social Commerce News

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 303 of the Jason & Scot show was recorded on Thursday, February 23rd 2023.

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 303 being recorded on Thursday February 23rd 20:23 that’s a lot of three Scott I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo. Scot: [0:40] Hey Jason welcome back Jason Scott sure listeners it could have been worse we could have done it on 22 to 23 so there’ll be a lot of tooth so we broke up the to smooth some threes. Jason: [0:52] I believe that was episode 223 was on that yeah. Scot: [0:56] I had I am not a big sports ball person but I watched the Super Bowl every year for the commercials and I had, I know you’re the grand poobah of all things advertising and I had an ad question for you. Jason: [1:12] Yeah awesome you’ve come to the right place hit me. Scot: [1:15] What is to EMU and why is it not the same thing as wish.com. Jason: [1:22] That’s a great question I can only partially answer so Teemu is a e-commerce site. In as far as I know at this point only in the United States of America it’s owned by pin duo duo in China which often is called a PDD and depending on how you count PD is the second or third largest e-commerce site in China in China it’s a super interesting gamified model where like you get your friends to go in on the deal with you and it drives your deal cost. Down so everybody saves more when you all by together kind of thing so it’s a. Scot: [1:58] Okay group buying used to be called back in the day. Jason: [2:00] Social shopping exactly and so it’s super interesting and they’re doing really well so they launched an e-commerce site in the u.s. it appears that it’s primarily a catalog they built by aggregating a wide variety of different. Producers in China and it does have very much of a wish Vibe like it’s a lot of. Extraordinarily inexpensive apparel and you know inexpensive tchotchkes that you probably didn’t know you need but like if you start browsing the side it for a.m. on a Friday night you’re. You’re gonna end up making some ill-advised purchases and then it seems like everything drop ships from factories. In China via u.s. post so they if you remember back in the day wish was like very slow shipping like to 26 weeks. T mood typically quote six to eight days they launched in November I ordered a couple shirts and they promised me like a delivery and they actually arrived in like five days to the United States. Scot: [3:07] Wow. Jason: [3:08] Yeah so it was reason via US Post Office in the u.s. portion at least and you know there’s this. International postal treaty that probably meant it was super inexpensive for Teemu to ship it via US Post Office to the US. But what was interesting to me is I give you an idea of how cheap this stuff is the I ordered a dollar shirt that was forty percent off with free shipping so. I literally have 60 Cent shirt delivered from China and five days. Scot: [3:40] Cool is it like wish were eighty percent of the businesses hair extensions. Jason: [3:44] Yeah so I don’t have a break it is a lot of that like it’s a lot of like USB accessories and stuff I do think it’s more heavy on apparel and I have talked to people that are more hip and in the know than me that think there’s like, that you know it’s very short-term apparel it’s kind of disposable apparel so they’re all the usual caveats about being an ecological disaster probably apply. But I have been told that they have that they like have some interesting on-trend Styles and things on that that like for some demographics it’s the, the apparel selection is appealing but what I do know is they launched in November and when I looked at the year in and it’s mostly on a mobile app when I looked at the year in app downloads, it was the eighth most downloaded shopping app. On iTunes so more downloads than eBay for example over the year and Timmy was only in there for two months and and so it’s kind of funny I’m a little embarrassed I. [4:52] Posted some stats on LinkedIn about mobile apps and I said and don’t sleep on Teemu it looks like they’re running fast and then a week later they ran that Super Bowl ad that you saw which is certainly going to Goose their downloads more and literally right before the game I found out that my company publicist actually produced that Super Bowl at so, it may have seemed like I was promoting a client but In fairness to me I didn’t know they were to client when I when I mentioned it. Scot: [5:20] Cool shouldn’t you know who your clients are as a chief digital retail strategy officer. Jason: [5:25] I should as a first a first world problem in your business is when you have too many clients to know. Scot: [5:33] You’re forgiven. Jason: [5:34] Or maybe that’s just a sign of a bad a bed, employing my case but yeah you know holding company like publicist were a Federation of agencies and most of the agencies do their own thing so this is you know a cool creative agency that we have Saatchi & Saatchi out of Los Angeles, um and sure enough they did reach out to me to say hey we have a Commerce client and we’d love for you to come talk to them. Check out their Super Bowl hour and the next they’re Super Bowl add in the next hour and so that’s how I how I found out there are client thank you guys. Scot: [6:05] You’re like you’re like I totally predicted these guys would shoot up the charts. Jason: [6:09] I did I did I tried to take credit but seemed like shockingly not everyone in my company follows me on LinkedIn I know. Scot: [6:16] Should be over should be like part of the onboarding. Jason: [6:21] Sometimes I think it should but then other times I think of how many times has probably saved my career that like important people at work Dan see something I like I said I’m going to so I think on the aggregate I’m going to stick with it how it is. Scot: [6:31] Call any other trip reports or anything to go into before we jump into some news I know you’re chomping at the bit to talk about some data. Jason: [6:39] Yeah so it is obviously well I guess it’s always trade show season but this feels like a special version of trade show season next week is e tell West, in Palm Springs which is usually a good Joe but for sure a good boondoggle if you’re trying to get out of the Chicago winter in February Palm Springs is a good, a good place to go so I’ll be going there and I have a lined up a couple guests for folks to listen to in the in the subsequent weeks and then the end so that’s the end of February the end of March is shop talked and so I’ll be giving a talk at shop talk and. And talking to some folks there too so so a couple cool industry events on the on the horizon. Scot: [7:25] Cops are gonna have a little Gap and then we’ll have some a lot of show reports to go over I guess. Cooper one of the things we wanted to start today was finally got the last piece of data from 2022 from the US Department of Commerce walk us through what your magic Tableau Data machine is Tanya. Jason: [7:47] Yeah so mid-February US Department of Commerce publishes this quarterly report on e-commerce and so the Q4 data from last year came out in mid-February and so now that we have qu for we can see a whole year so in 2022 us e-commerce sales were 1 trillion, 33 billion in sales so the first time we’ve officially exceeded a trillion dollars so that’s kind of cool. [8:20] What’s I guess slightly less cool depending on where you stand is the growth rate so that trillion dollars is 7.4% more than 20 21 largely because 2021. Was a like pretty astronomical year but but to put things in perspective. Over the last 10 years than normal growth rate for e-commerce is 16.4% so 7.4 percent is less than half of what our traditional growth would be. And it’s actually the slowest rate of growth. Basically since e-commerce happened so so 2022 is not a, a stellar year for e-commerce growth, now when you look at that three-year stack you say how much did e-commerce grow since before covid it’s up a lot it’s up 81 percent. [9:17] And you know a trillion dollars total retail sales are about 7 trillion so e-commerce ends up being 14.6 percent of all retail sales, a lot of people like to talk about what percentage of course sales it is because like people don’t tend to buy gas. Via e-commerce and Tull spiffy start selling gas and until recently people really weren’t buying cars online so a lot of, we could debate the merits of this but a lot of people still have this definition of core retail which doesn’t have Auto or gas in it and so if you take Auto and gas out and you say that trillion dollars is 21.5 percent of core retail which. Makes the us about the third or fourth highest e-commerce penetration country in the world. [10:07] Obviously I get a lot of these e-commerce Spike during covid and then kind of regress to the mean but. You know if you look at the e-commerce dollars growth. Were 36 percent above what we would have forecasted. Before covid started and we’ve sold like 275 billion a year more than we would have expected to sell this year so over the three years e-commerce has, has grown quite a bit and remained high but what is true and worrisome about 20 22 it’s the lowest rate of growth we’ve ever seen and for the first time since e-commerce started. Retail actually grew faster than e-commerce so that the total retail growth number for last year was 8.2 percent versus the e-commerce rate of 7.4 percent so that’s an interesting backdrop as we start to get all these. Q4 earnings reports flowing in. Scot: [11:09] Yeah and that’s really just you know it’s a reversion to the mean right so we had a surge in e-commerce so you Commerce is more coming down more so than retail surgeon is that if we charted that out is that what would see. Jason: [11:23] Ecommerce has not surged as I mean retail is not surged as much as e-commerce has come down so. Yeah so like on the whole the three years of the pandemic were very good to retail and very good to e-commerce the, when they happen with slightly different e-commerce is biggest year was the first year of the pandemic and retails biggest year was 20 was the second year of the pandemic so when you’re looking at year over year sales Ecommerce is comping against a big number on the numerator while the denominator suddenly got a lot bigger, for retail and so when you look at it as a percentage of retail it definitely looks like it regress to the mean but when you just look at, net dollars people spend an e-commerce before and after the pandemic. We both we spend a lot more money at retail than we used to and we spend a lot more money on e-commerce than we used to and so the spoiler where the fear is. Is that the new normal or did we just pull in a bunch of demand and that bodes poorly for 2023. Scot: [12:31] Yes go for some tea leaves to help us kind of parse through that we had some interesting earnings first of all we wanted to chat about Amazon’s fourth quarter the way I would kind of we didn’t do a show on this one because it was really not that much to talk about to be honest with you so they came in just their dramatically lowered over the last couple quarters they have dramatically lowered the the back half of 22 so they the Q4 of this slightly beat that that new Lowered Expectations, and then their q1 guidance was in line with a little bit lower than what Wall Street was expecting but not enough to be super material one thing I thought you would find interesting is they took about a 3 billion dollar charge on restructuring there was they announced they laid off 18,000 people I think most people saw that, and that was 640 million but part of the charge was 720 million to impairment at fresh and go stores I thought you would find that interesting and I guess they had I guess those are the ones they must have planned a bunch of openings and now they’ve got all this kind of like you know they’re kind of half pregnant with this bunch of real estate bunch of stores they want to launch and then they pause that. [13:44] And then one that was interesting to me is we work a lot with these Amazon DSP companies and I’ve often wondered who insures them because they bang the heck out of them and Amazon increase their reserves for Self Insurance in their transportation Network by 1.3 billion which I thought was interesting given that we see these things just 90% chance if you see an Amazon Prime van it’s got a fair number of Dents & Dings on the side of it. Jason: [14:12] Yeah that’s yeah that’s a hard gig for a van although there probably are no easy gigs for van. Scot: [14:19] Yeah would you think about the freshen go. Jason: [14:21] Yeah so the grocery story is interesting right longtime listeners will remember Amazon kind of retreated from most of their non grocery, retail Concepts I want to say a quarter ago so they kind of they closed all the bookstores they closed the five-star stores and and they kind of said hey we’re we’re we’re revisiting our brick and mortar strategy the one, aspect of brick-and-mortar that they continue to operate where these grocery stores that are called Fresh and these. [14:53] Convenience stores or grab-and-go food stores that are the Amazon go stores that just walk out technology and, you know grocery super important I talk about it all the time it’s like the second biggest category of consumer spending and Retail and it’s one category where Amazon hasn’t done very well arguably Whole Foods hasn’t done very well since Amazon bought them, and you know the magic question was where they going to invent a more successful grocery Concept in Amazon Fresh and then this quarter they answered that question no now essentially said we haven’t found anything differentiated enough in the Amazon Fresh stores to make us want to scale them, rapidly we haven’t given up on Grocery and we’re going to continue to work on it and roll something new out but we’re for sure pulling back on, growth strategy for this current fresh concept, and so so you know it sounds like hey they definitely don’t think they’ve got brick-and-mortar figured out between fresh and Whole Foods and on delivery, last year, you know they started charging even for Prime members they started charging for delivery at Whole Foods and. [16:06] That way I have a hypothesis that that dramatically put a crimp in there, they’re grocery e-commerce sales although in a lot of places in the country groceries are delivered by fresh not by Whole Foods so this quarter they also announced that they’re adding a delivery fee even if you’re a Prime member. For fresh grocery delivery so there is no free grocery delivery option at Amazon, um you know which in my mind puts them at a pretty significant disadvantage vis-à-vis, instacart Walmart and Kroger that are all aggressively acquiring customers with offers right now. Scot: [16:44] Yep Anderson tough category. Jason: [16:45] So grocery seems like a place where like Amazon has put some serious effort in and it has not won yet has not figured it out. Scot: [16:56] One of the other things that’s weighing heavily on the minds of Amazon shareholders is the AWS Computing platform saw its growth really dip below 20% all the cloud providers are feeling this Google Microsoft I think Google has laid off a bunch of the people leading their Cloud effort Microsoft Azure is under a bunch of pressure as well and what’s happening is as we hit some economic headwinds the users of these Cloud infrastructures are lots of startups that have venture capital and VC rounds are getting few and far between so they are reducing their loads and their trading down you know one of the things you can do on these platforms is have a machine with a certain computer, horsepower you can kind of say you know maybe I’ll go down a couple rungs on the ladder of compute horsepower there and save a little bit and. So it’s an area where companies are looking to save money very quickly because you’re not locked into certainty or anything like that like you would, be with some software as a service platforms. Jason: [17:58] Yeah I think I’m not to give you credit but I think you were one of the first people I saw, talking about that phenomenon and then it became a big thing I think I like Twitter announced that they were slashing 75% of their salesforce.com seats and it just seemed like in the same way that like, you know Middle America when when budgets get tight you know everybody looks at their recurring spending and cuts all these you know apps they accidentally signed up for On the App Store and in the same way it feels like every company in America is like. Going on a SAS diet right now. Scot: [18:31] Yeah I you know I like to coin phrases we famously coined ship again on the show I call it’s a split so when you wake up one day and you look around your company and you’ve got 200 different stats platforms that you’re paying it’s only $30 a seat a month but there’s 1,000 employees using it and you got 200 of them that I can’t do the math on that but it adds up very quickly, so a lot of companies are right-sizing, their SAS budgets one of the interesting beneficiaries of this was the Microsoft Azure platform had pressure but the the Office 365 has done amazing because what happens is people say well I’m using slack Dropbox. And you know maybe maybe one of the Google platforms and you know and I also have Office 365 will if you start to reconcile this you can drop drop box for OneNote and. OneNote Drive. Jason: [19:32] Know what you’re right one drive. Scot: [19:35] OneDrive yeah and I can drop you no slack for, they have their own teams and then Zoom for teams and then so so Microsoft because they’ve got one of the most fullest sweets and almost everyone has Microsoft because of office kind of packed in there their they’re a huge beneficiary of that SAS Bluett interestingly I think it was enough to offset the this the downgrades they saw it and measure. Jason: [20:04] Yeah that’s super interesting. Scot: [20:06] Yeah one of the you know one of the interesting things that when you’re in these weird Economic Times when these companies released their numbers it’s late enough into the next quarter so this all came out kind of mid-February that they can give a little color and one of the on the current color. [20:23] Quarter, so they’re talking about Q4 results but then sometimes they will drop a little bit what we’re already we’re seeing kind of right now so they did they did talk about AWS had kind of bottomed out at a 17 percent growth rate or something like that mid-teens, so Wall Street took that positively they also said you know they said we’re seeing really improved efficiencies and the retail business which I think Wall Street took to mean they feel like they’re at this right balance now of, Transportation warehouses and all those things that they had to shed if feels the feels like they’re done based on kind of like what they’re seeing, there’s always this caveat that that’s they’ve only seen 45 days of the corridor so who knows what the back after that looks like. [21:09] The real bright spot and this is interesting because there’s this theme going on the economy where services are are kind of growing much faster than Goods and, at Amazon DE Prime Service Group re dramatically grew 17 percent over a year and acceleration from last quarter’s 14% so so Wall Street found that really interesting and I think, you know it’s hard to it’s hard to know why people are picking Prime I think some consumers are going through a reconciliation with their streaming platforms and they’re kind of just like that Microsoft example they’re saying well if I go to Prime I get Prime video and I can get access my Yellowstone through there and some other things and that’s probably good enough maybe I’ll turn off. [21:55] I don’t know there’s this design of these things now so in any case Wall Street was really pleased with this because there’s been a lot of talk at Windows Amazon hit Prime saturation, well you don’t hit saturation if you have an acceleration of growth like that so so that was you know a couple the positives in the quarter there but interesting enough and you probably know the ads part I think it had yet another Blockbuster business because they’re they continue to benefit from that first party you know all this, effectively the biggest retail media Network out there and I know you think a lot about these retail media networks but that was a gift from our friends at Apple to Amazon so that continues to be the gift that keeps on giving. Jason: [22:37] Yeah yeah it the rate of growth did slow ride so they were in the like 30s and forty percent a year that it was growing and I want to say it only grew, 20% in Q4 your over here which again faster than AWS and still quite fast but for 12 months that means they sold thirty two point seven billion dollars worth of ads and if you assume, that ads are about 75 percent gross margin that means that the ad business contributed 25 billion dollars in earned income, um and ews last year contributed 22 billion dollars in earned income so, you’re you know you basically end up with. Retail media networks contributing more to the bottom line at Amazon even than a WS which they’re both great businesses. Scot: [23:31] You know I think the 75% is aggressive I think I don’t understand why it’s like almost not a hundred percent. Jason: [23:39] I agree I used to use a higher number and then I saw some like industry guys the. Like felt like there’s more overhead in there and there are a lot of salespeople you know which don’t don’t you know scale model linearly so so in, I kind of fell in line with some other analysts and dropped it down to that 75%. Scot: [23:59] Yep. Jason: [24:03] However you size it like I’m pretty confident it’s the most profitable business at Amazon and still like although it’s slowing down slightly it’s still still certainly growing, so that was interesting one that I haven’t got my head around yet and I feel like you used to do this math yourself but I’m working on a couple of different models for what. Total us gmv did for Amazon and it’s not completely trivial because we know what the first party sales were we know what the, the the units were but you know you have to make some assumptions to kind of convert those units into a GM V and the and the mix of third party is different than the mix of first party. But there but the reason that’s interesting is liked by most models you know it it was not a huge, growth year for gmv for Amazon and so again I don’t have a official estimate yet but like let’s assume. They grew by 10% the. [25:16] Fees that they charge third-party sellers Drew 14%. Um so that the fees they’re being able to get out of the third party Marketplace is almost certainly growing faster. Then the third party Marketplace and that’s because they’re able to raise a bunch of rates and our friends at Marketplace pulse did some math and they feel that on average the average 3rd party seller on Amazon when you add up all the selling cost between F ba and and advertising that the average take rate is now 50%. [25:55] So Well I always remind I mean Amazon is a good place to sell like I’m not saying anyone that they shouldn’t use Amazon as part of their mix but I get asked all the time if I should just skip it, any other channel in just exclusively rely on Amazon and to me that’s a huge mistake because Amazons. Rightly so going to optimize the profit for them and they’re very good at that and so they’re you know they’re taking a lot of margin out of third party selling because there’s a long line of people waiting behind every 3rd party seller that want to sell that same stuff. Scot: [26:27] Yeah you going to have a blended approach and kind of Leverage it to sell the right thing at the right time in the right Channel someone should start a company that does that but we’ll talk about that another podcast. [26:42] He’s busy car washing right now cool that’s the Amazon report anything any other earnings you found in arson. Jason: [26:51] Yeah so Amazon reported pretty early this year I don’t know if that was strategic or just have a calendar fell but now we are starting to get all of the more traditional retailers and so I want to say we recording this on Thursday Tuesday Walmart and Home Depot reported tomorrow morning targets going to report so we’re starting to get all the the cue for sales data from the big retailers, a bunch of specialty Brands like a lot of the apparel Vans VF and folks have already reported and there is emerging and pretty. Clear picture so maybe before we do the Crip picture I’ll just recap Walmart Q4 and I tried to channel my inner Scott because. [27:36] Scot and I are the perfect yin and yang Scott is a you know former public company CEO and Savvy investor and he cares a lot about how these companies perform against expectations and what happens to their, their evaluations and I just care how much stuff they sold all right and so I feel it’s funny we both look at like all these earnings through different lenses so through your lens I feel like Walmart was mix I think you’d call it a beat and lower because earnings exceeded analysts expectations they came in at 1.71, per share and the in the analyst Target was 1.51 so that’s a pretty good beat Revenue came in and 164 billion for the quarter and the expectation was unearned 59 billion so another good, um but on the bad news I think analysts were hoping for. Guidance of like five or six percent growth for the year and Walmart gave a two to two and a half percent guidance for the year. [28:42] And so basically the story was, we had a solid Q4 and a solid 20 22 but we’re expecting things to get more difficult and more lean, in 2023 and they you know overtly said we saw spending slow down in the fourth quarter we saw a shift in the mix that they were consumers were trading down, to lower-cost products they were shifting from wants to needs and in Walmart’s mix those needs are a lot less profitable so they’re selling more Grocery and less, electronics and toys and home goods and stuff like that, and so the both of the guidance for revenue and especially the guidance for profit at Walmart were where lower and that, to me exactly Echoes a lot of the other earnings we heard like the Peril guys their guidance was awful and they’re starting their stocks just Tanked, Home Depot actually had like a really soft Q4 because they said spending slow down at the beginning of Q4 so they cut they missed their. Their earnings expectations for Q4 and they had a little guidance but almost every retailer I’ve seen report earnings has reported lower than anticipated or has made a lower than hope for guidance, for 2023 so retailers are not super bullish on 2023. [30:05] From a pure sales standpoint it’s kind of interesting I try to just to compare apples to apples Walmart’s an international company, you know with two big retail Concepts in the US and a bunch of other countries I try to pull out like just Walmart sales in the US, and their same-store sales the three years of the pandemic 20 20 21 and 22 they grew 8.6% 6.4% and 6.6%. Average retail growth is 4.1 percent so they, significantly exceeded the industry average for all three of those years but the industry also did much better for the all three of those years so the industry grew at 7.8 14.4 and 6.9 so, basically Walmart slightly out performed the retail industry and two of the three years and underperformed retailing 2021, but solid growth across all three years and then Walmart is one of the nice retailers that breakout their e-commerce growth separately which. I suspect it’s because it’s usually pretty robust a lot of other companies have stopped reporting e-commerce and you can. [31:11] Speculate why that is this is they don’t report it but Walmart eCommerce growth has been very robust during the pandemic so they grew 69 percent in 2020 11 percent in, 21 and 12 percent in 22 and that is you know their 69% was against an industry growth of 42 percent. And then you know this year they drew 12 percent against a e-commerce industry growth of 7.4 percent so. [31:38] Like pretty good e-commerce growth all the way across on a three-year stack that means Walmart Drew or Walmart Drew 100% over those three years their e-commerce business in the US, the the e-commerce industry grew 81% so Walmart Psych the second largest e-commerce site in the United States and they outperformed, the industry on growth Amazon probably did not outperform the industry like like the the best forecast is Amazon probably Drew 56% over those three years, so Walmart not surprising they’re much more than Amazon and e-commerce but they grew much faster than Amazon, eBay ends up being the big loser over the three years they only Group 17 percent so kind of the underperformer and then just for sake of comparison Etsy grew 150 percent over the pandemic Shopify drew two hundred and twenty nine percent. And then this apparel company I talk a lot about, is crazy Chien Drew nine hundred percent during the pandemic and some of their financial data week to last month, and their internal forecast for their us Revenue in 2025 exceeds eBay’s forecast for all revenue so that’s enough, and apparel retailer that’s going to sell more stuff online than all of eBay. Scot: [32:54] Wow that’s crazy. Jason: [32:56] Yeah the world changes any of that. Scot: [32:58] Do they have infrastructure in the US like to do shipping and stuffers at all come straight from China. Jason: [33:04] The for Sheehan. I believe that they may have announced that they acquired some some sorting centers or some fulfillment center space in the US but I don’t think it’s come online yet so I think at the moment it’s all being shipped abroad but I’m not certain on that. Scot: [33:21] Wow that’s crazy it’s a lot of international shipments. Jason: [33:26] Yeah yeah but it sounds like it’s moving and then the speculation is you know she in in a lot of markets is a Marketplace and they are not a Marketplace in the US yet but a lot of people are speculating, that they’re going to launch a Marketplace this year and especially if you if you think there are bigger overall than eBay. You know they’re the biggest apparels reseller in the u.s. online or offline like they’re on a on a tear it’s pretty interesting and what covered on a different show but like their model about what I think is most interesting about Sheehan is there no Merchants they’re literally getting their product ideas from tick-tock. Scot: [34:05] Yeah yeah and having a Marketplace will be good will be another piece of data to feed into this kind of viral Crazy Fast fashion engine that they’ve created. Jason: [34:15] 100% And it’s interesting you know. Scot: [34:18] Third party seller would be scary. Jason: [34:18] Accused of doing that in a in a non-competitive way but and they may or may not be doing that but if they are doing it they’re doing it with people like you know Sheehan is doing it with Skynet. Scot: [34:30] Yeah cool any other news on the e-commerce front. Jason: [34:37] Well so those are the big earnings I again there’s you know we’re going to see a bunch of the other big box retailers report over the next couple weeks so we’ll put together a more complete picture of of who the winners and losers were like it’s mapping if you look at the US Department of Commerce data and you see the categories that won and lost. By shockingly and I would have gone these predictions wrong at the beginning of the pandemic but you know what category like was about the best specialty category to be in over the last three years it was Sporting Goods. Scot: [35:05] Sporting Goods. Jason: [35:07] Yeah which I would not have thought right and Dix’s you know had a like Dick’s Sporting Goods has had a particularly good run and in fact they bought Moose Jaw from from Walmart today. The and the worst category to be in in the last three years by far is consumer electronics and so, spoiler alert Best Buy hasn’t reported this quarter yet but all indications are that it’s not going to be a Rosie. Quarter for Best Buy. Scot: [35:38] You know saw Home Depot had theater announcer pre-warned that things were getting kind of soft and so they’ve had a tremendous run since 2020 said some point people had to run out of money for upgrading their houses looks like we may be at a Tipping Point there too. Jason: [35:53] Yeah and I would categorize them as kind of one of these middle ones they had a phenomenal first half of the pandemic and now it appears to be slowing down and I you know some of the furniture guys are in that same boat and so that the you know it’ll be interesting to see where they net out over the three years like I think they’re going to net out to have done better than average but not but not amazingly right and in the middle of the pandemic we were all saying like oh man these are. You know Home Depot might be the biggest winner of the pandemic because everybody redid their backyard. So the that’s all the earnings stuff I had the other like kind of pool of interesting news that I’m going to ask a lot about right now all centers around social commerce and what’s interesting is, there’s like news and diametrically different directions so Tik-Tok which, it’s not the biggest social network but it’s certainly the fastest growing social network and it’s it’s you know it has prodigious engagement at this point Tick-Tock launched they’ve had some native shopping before but they launched a native shops feature and it I would characterize it as the most robust. [37:09] Feature set for shopping on a social platform that I’ve seen yet so stores can have their own shop they can aggregate their own catalog and it’s everything is not just a buy now which is normally how social networks do it they have a persistent cart and you you can add multiple items to a cart um you can change all the attributes of those items which is often a problem with other native checkouts you can get a delivery forecast you get tax calculate promo code you get all these things that like historically social networks Skip and then a feature I would have never expected, it’s a multi-vendor universal cart so you can actually buy from multiple Tik-Tok shops, in a single transaction and they take PayPal and Apple pay so I would characterize that as a surprisingly robust, native feature to get people buying on tick-tock, and so if you just saw that news you’d say oh that’s the future is you know people are discovering stuff on Tik-Tok instead of in the Shelf in the aisle at a store and now they’re just going to buy it right on Tick-Tock but in the the same month, our friends at meta turned off their shopping tab on both Facebook and Instagram and said, hey we tried it and we don’t we don’t think that’s how people want to shop and then I guess one other. [38:37] Selfish piece of. Of content in this whole genre a lot of the hype in the u.s. when I get clients asking me about like the Buzzy thing in social commerce it’s a live streaming Commerce then there now 100 live streaming vendors I get pitches every single day from someone that like has reinvented shopping and it’s all this wise Freeman Commerce which is huge in China but has not. [39:04] Taking off in the US and so I got tired of repeating my same concerns so I wrote a Forbes article that got pretty popular you know talking about how I felt like live streaming Commerce in particular. Was wildly overhyped and it got a lot of them reactions some people violently disagree most of those were live streaming vendors and a lot of, lives a lot of veterans in the space including like brands that sell abroad we’re live streaming is big and in the u.s. like chimed in and said yeah what Jason saying is exactly what we’re seeing. And what it boils down to is there’s there some genres we’re live-streaming makes a lot of sense and I think some of those are genres you shop in a lot like Collectibles and unique items and things like that but like if there’s not huge product scarcity, the other main reason people shop in livestreams is for deep discounts and so like you can almost replace the word live stream with flash sale. Um for kind of a similar kind of reach like all of this live stream in Commerce in China is and it’s 40% off for the next 20 minutes. And so you know that those that kind of extreme deal-making like hasn’t, you know how to legs in the US and so it’s not surprising that live-streaming hasn’t taken off to the same level but I’d be curious our view. [40:31] Like so when I could talk to clients it’s an open question right now like what’s the future of social commerce is it important is it not important and that is important like is it going to happen on, the social platforms like Tik-Tok their native check out like does Target need to have their own Tick-Tock shop or. Is social a great tool for Discovery and there’s lots of ways to connect that that social discovery with traditional e-commerce experiences and you know I. I don’t think there’s a clear answer yet in the US but it’s a super interesting question. Scot: [41:14] Then that’s where it would be driven from like if the Kardashians you know had had some kind of a platform of some kind. They have a big enough audience they could direct that audience to the platform and do things it just doesn’t really exist in an integrated fashion right you’re in you can’t really do it on Instagram because you don’t have the check out and it just hasn’t come together. Amazon can’t do it it’s like kind of complicated to bring the influence over there and they may not have liked the right thing the influencer wants to sell. Jason: [41:46] Yeah and I do think it is a different story if you’re if you’re a mega influencer that has a huge audience and you have a relatively limited catalog right so Kylie Jenner is a perfect example like, I think she could do a lot of business on Instagram and Tik-Tok but like that’s a wildly different problem than a wholesaler that has. 5 million 10 million 80 million skus in their catalog and what they should be doing on on social networks. Scot: [42:17] I think it can work for it works for Collectibles because you have this kind of like high Affinity audience it works for beauty and apparel and I think that’s kind of it. Jason: [42:26] Yeah what I guess and you know. Fair enough for retailers to have broad Ambitions but if you look at China a lot of this like social commerce and e-commerce like a bunch of it happens on social networks like Dao Yuan which is Tick-Tock there and WeChat which. I guess Loosely similar to Twitter. But a lot of it does happen on platforms owned by the retailer right so towel live which is you know essentially a site owned by by you know the the Amazon of China. Is a big social platform where a lot of people go just to watch short-form videos and buy a lot of stuff. Um and so you know of course if you’re a retailer that’s what you’d want like you don’t want to be disintermediated by the social platform and have to pay a fee and not know who the customer is you you want the customer to come to you. But it. [43:23] It seems like recreating that model in the US would be super hard and the I would argue the retailer that stride the hardest to do it is Amazon and Amazon has all the features like they they have a. They had Amazon live for a while now they have Amazon Inspire and they have a lot of influencers creating unique short form video content with shoppable ads in it. On the Amazon platform but I would say the early indications are that. It’s not organically working like you know it’s not drying a bunch of people that just want to Doom stroll on Amazon instead of tick-tock and creators aren’t going there because they’re making a bunch of money, in the normal economic model what what it seems like is happening is Amazon is paying like extra bounties to get creators to try the platform. And they the Creator goes to that platform as long as that Bounty exist but as soon as that Bounty expires and they fall into the normal economic model the Creator’s returning to tick tock because they can make more money on Tick Tock than they can on on inspire. Scot: [44:25] Yeah the whatnot platform is pretty fascinating because it has like yes it’s got a persistent store on one side of the screen and then you’re watching the talent and then you know they can do they can sell things like a variety of different ways that can run an auction they can they can do a limited almost like a QVC I’ve got 10 of these and when they’re gone they’re gone and on the screen it does a countdown they can do a. Did you like a markdown I think you would probably call it a filene’s basement kind of thing you know that wear it the longer it’s there the more discount there is so it’s kind of counterintuitive lie you’re kind of like. You’re kind of like waiting waiting and then you see it. Jumping yet game a discount chicken and then you know it’s really fascinating how they you know they give the the. Seller who is largely you know an influencer of so many tools to sell and they’re all integrated so once you have your your payment information in there you know you get really sucked into the game and I think that’s really what it’s going to take like that’s what you’re missing on you know any of these Tick-Tock may have it I haven’t seen their platform but you know certainly Instagram or Facebook reels or YouTube they don’t have that level of integration even the Amazon stuff I’ve seen has been kind of. Not super Innovative from is like a Lincoln you know feels affiliate e it’s not like an integrated into the video thing. Jason: [45:55] Yeah no I hundred percent agree I think some of those knit your experiences are a lot more interesting at the moment than any of the super mainstream ones but what not is certainly interesting to look at I do think like Network without any vowels in it is like interesting, flavor of live shopping which seems like it works in some genres so yeah I think some of those the sites are interesting one thing I would point out about all of those is, their definition of influencer is maybe a little different than like the traditional like when we say influencer I think a lot of people think of Mega influencers right in the think of these. These superstars with millions of followers but. Like on most of those these platforms that the influencer is someone with a much smaller following so it’s much more of a long tail influencer or a micro influencer. Scot: [46:46] Cool. Jason: [46:49] Yeah so I feel like this is going to be an interesting space to follow throughout all of 2023 but I do think. It’s going to be an interesting year in retail and 2023 because I think a lot of retailers are worried at least at the first half is not going to be robust and so you’re seeing a lot of shift in investment on retailers from. Kind of like you know mega growth and customer acquisition activities to like. Operational efficiencies and improve our our profit and our short-term returns type activities. Scot: [47:23] Yeah in the I guess used to continue to get pictures from the live stream guys are they on to you now. Jason: [47:30] Yeah no so again you know you can totally pan them on in an article and you know the internet has a short memory so I still get. Get lots of pictures and you know. One of them will be amazing right so it’s hard like you want to listen to all these pictures because someone will there’s some entrepreneur out there that will have some amazing new idea and odds are like all get jaded and cynical and ignore him and miss it. But the signal noise ratio is pretty tough because you you will have to list you know listen to a lot of like you know poorly articulated pitches to get to that one good one. Sure I’m sure you get that from an investment perspective all the time. Scot: [48:10] I do yeah it’s it’s hard to pick the if I’ve learned anything it’s very humbling trying to pick winners and losers so I have given up on them. Everyone’s a winner everyone gets a trophy Jason. Jason: [48:25] I love it participation that’s the modern. Scot: [48:26] Yeah yeah. Jason: [48:38] And I feel like it’s both overhyped and legitimate at the same time is all this generative Ai and its use cases, in Commerce right you know so obviously the most Buzzy one of the moment is chat gbt but GPT Beth. There’s actually a lot of super interesting tools that are that retailers are starting to legitimately used to get more operationally efficient and I think that might be an interesting topic for a deep dive of Europe for. Scot: [49:10] Yeah yeah guilty pleasure confession I am addicted to mid-journey I love playing with the generative visual a is that there are a lot of fun. Jason: [49:20] Yeah I think they are super interesting and I will tease the Deep dive. So the interesting thing about the she and apparel model is they identify a trend and they have a fast turn Factory that can make literally like a first run of that apparel item in a day. So a day after they see a trend on Tick Tock they’ve got 100 up for sale and if those hundreds L then they make 10,000 right and so it’s this like super fast iteration. You know you’re not trying to show for she and because there’s a lot of challenges with the model to but that I have heard that she and launches about 10,000 skus a day. So a day to put that in perspective fast fashion like H&M launched 20,000 skews a year and slow fashion like the Gap launch for thousands of years a year so 10,000 a day is. Is game changing but it’s super hard to do and so. You know what super interesting about the generative AI for images is. If you’re really just doing a one-day test to see if there’s demand for some new apparel like. You can generate amazing images of apparel Styles without making the apparel you can put it up on an e-commerce site you can collect a pre-order and then you can make it tomorrow if it gets the enough demand. [50:43] And so you’re starting to see people like skip the photography all together and use generative AI to do concept testing and for sure if you’re on a parasite in your shopping for. An outfit that’s coming from multiple vendors you can use the generative image AI image generation. Render all three of those apparel items from different providers on the same mannequin or increasingly, on a virtual Avatar of the Shopper right so it Walmart you can see all that apparel like on your own body which no apparel looks better on my body than it does on the mannequin so in my case it doesn’t work but. I can see the appeal for others. Scot: [51:25] Yeah it’s a good inventory turns to not make something and then sell it. Jason: [51:30] Yes exactly it’s like moving One Step close yeah so, and in the apparel where they make a lot of that clothes and can never sell it and then it goes into the landfill like you know it helps with the Ecology of the industry so so super interesting stuff the progress is happening super fast so it’s exciting, but Scott that’s probably a good place to leave it for today because once again we’ve used up our allotted time as always if this show is helpful we sure would love it if you jump on iTunes and give us that five star review and you know get ready to say hi to me at a couple of these upcoming shows. [52:18] Happy Commercing.

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EP302 - Kasey Lobaugh, Deloitte Chief Futurist, Buying into Better: The future of the consumer industry

Deloitte Chief Futurist, Consumer Industry, Principal and Owner, Kasey Lobaugh, joins the podcast for his fifth appearance. Having previously appeared on episodes 68, 114, 180, 213.

Deloitte has published some new new research, Buying in to Better: The future of the consumer industry, in which they uncover dramatic change in the consumer industry that over the next decade will impact the markets, models, and mechanics of consumer industry companies in significant ways.

Also discussed The rise of digital goods and services: Opportunity over threat, and a monthly consumer tracker: Consumer behavior trends state of the consumer tracker | Deloitte Insights

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 303 of the Jason & Scot show was recorded on Wednesday, January 25th, 2023.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 302 being recorded on Wednesday January 25th 2023 I’m your host Jason “Retailgeek” Goldberg and as usual I’m here with your co-host Scot Wingo. Scot: [0:39] Hey Jason and welcome back Jason Scott show listeners Jason we have a very special guest today first of all this is a exclusive first look so some big new industry Trend data were revealing on the show from one of our favorite guests for a long time lister’s I’m going to kind of tease you with a bit of a riddle he’s been here for episode 68 114 180 2:13 and now back 4302 that’s five episodes his title is interesting principal and chief futurist consumer industry Deloitte Consulting LLP and Jason I know you lured the length of your title over everyone in the industry but I’ve done the math your Chief Commerce strategy officer that’s four words this guest has principle I took and out because it doesn’t really count, Chief futurist S3 consumer industry that’s five so he beats you in Tidal length as well ladies and gentlemen welcome back to the show Kasey lobaugh. Kasey: [1:43] Hey Scott Jason how are you guys. Jason: [1:46] We are awesome except for you dethroning me for most verbose title. Kasey: [1:51] Yeah actually before we created that title I went on LinkedIn and looked yours up and did the math so thank you for that. Scot: [1:59] I need 25% More Than Jake. Jason: [2:02] Well we normally don’t let Scott do public math on the show so I do have an intern fact-checking the titles but I had sounded right and then the other intern is on chat gbt right now writing a new title for me. Kasey: [2:13] That’s perfect that’s a good call. Jason: [2:16] Yeah but speaking of unfair check things Casey I believe it is the case that five-time guest is a show record so congratulations on that. Kasey: [2:25] Great where do I pick up my parting gift. Scot: [2:29] The interns will send that to. Kasey: [2:31] I’ll look for it. Jason: [2:33] Yeah you have to part before you get. Kasey: [2:35] That’s right that’s right well thanks I appreciate you guys having me back on again you know after the first four times I thought maybe the fifth time maybe I’d get it right. Scot: [2:45] Absolutely one I don’t know if I’ve ever mentioned this but the so one of your first visits you talked about the changing consumer and the great bifurcation and that played a big role in me starting spiffy so we whenever I pitch spiffy I talk to potential investors and partners about you know we are really focused on the convenience or any consumer and then they say do you have any research on that and I say well actually do and then I afford them the the cherished copy of that that OG material you guys put out there on that that’s been a huge huge impact on me and starting a company so. Kasey: [3:23] Oh that’s amazing that’s very that’s amazing hopefully in our new work maybe you’ll discover some new opportunities maybe start two or three more companies guy. Jason: [3:47] So Casey obviously most of our longtime listeners are going to be familiar with you but for the new listeners can you give us the the quick synopsis of your background and how you came into what I think is now a new role for you at Deloitte. Kasey: [4:04] Yeah it’s a new role but it’s also an evolution even Scott you know was mentioning the research we had done before and you’ll see that a lot of what we’ll talk about here Builds on the things we had done before but just just for background, I think I’ve been at Deloitte now coming up on 27 years, and and really the vast majority of the time that I’ve been at delete I’ve served in the retail industry. First launching you know our e-commerce practice back in the early 2000s and then building our omni-channel strategy practice Within retailgeek. And then most recently I’ve taken on this role on behalf of our firm knows it was somewhat reluctant and I’ll talk about that in a minute but the role is to think about the future of the industry. And to think about the broader. Collection of consumer sector so we will we talk a lot about retail but this includes Airlines consumer products Hospitality Auto you know the broad collection of the ways that consumers spend their discretionary their discretionary cash. Jason: [5:10] It’s fascinating and I think in the great tradition of corporate America you didn’t get to shed any of your old responsibilities as you took on the new ones is that true. Kasey: [5:18] That is true that it just just Stacks up. Jason: [5:21] Other duties as assigned. Kasey: [5:23] Yeah I know I look I’ll talk a lot about the work that we’re doing here today but I do you know continue I have been serving clients and I continue to serve clients alongside that the duties the research the work that we’re going to talk about here today. Scot: [5:36] But now that you have two jobs you make twice as much right. Kasey: [5:39] That’s right. Scot: [5:41] Cool let’s let’s jump into this new research so you know it’s the the future of the consumer industry and you’ve got you know you’re you’re nice enough to share a draft with Jason died and we’ve read through all that and there’s there’s probably six hours of conversation we could have its kind of both deep and wide so maybe for listeners talk a little bit about the origin of the research the purpose and maybe a high level and then we can kind of pick where we want to dig in. Kasey: [6:12] Yeah sure thing sure thing well first of all we like to think that we as a firm a really good with our clients you know helping them to navigate the next two three four years but we also were sensing that there are a series of things going on happening in the environment and questions coming at us from our clients that were a bit longer, you know in time Horizon sort of recognizing that there’s a series of things that perhaps are happening that may sort of radically impact the next decade of our industry and so you know our leaders sort of convened and said you know we should, dedicate some amount of time to throw thinking across a longer time Horizon and so for us we picked a 10 year time Horizon and so we started to talk about doing some work about the future now you guys know me I’m somewhat of a contrarian. [7:02] And Frank they look back in history of you know reports that are titled the future of by the way you can go Google, the word the future of in you’ll find literally you know Millions if not billions of hits on Google with those words, and historically what I found was that many of those you know efforts those research they tended to be prophecy based or prediction based and honestly if you go back in time and a lot of them really are not that good and therefore I was contrarian saying look I don’t want to do that I don’t want to be part of, of making a set of predictions and yeah I can go back in 1999 I remember report in 1999 that said RFID is the future of the retail industry. [7:42] And here we are you know still not a material part of the industry, ten years ago you remember this magic mirrors of the future of the department store anyway so you know over time you see a lot of those things and so as we talked about it I was the contrary instead I don’t think we should do this and Leadership said great, you get to do it, so I get the assignment but I actually think there’s a reason behind that the reason was is because I was a contrarian P because I was pessimistic about the idea of doing it and they are leadership thought maybe we would take a different approach. [8:16] And honestly that’s where I started I asked myself how would we go about this in a way that would be different than predictions and prophecies, you know how would we go about it in a way that I could actually be proud of what we what we’ve come up with and what you’ll hear when we talk about this is that what we haven’t done. Is made predictions what we haven’t done is made prophecies what we have done is research deeply, the things that are happening in our environment I’ll say environment very broadly that we believe are converging forces that will shape the next decade, of our industry and so part of that also was how are we going to go about it, you know previously like even Scott the research that you referred to earlier the great retail bifurcation it was myself and a few other practitioners we got together and we thought through and did the work this time I said I want to do it differently. And so we went about convening a group of professionals experts, that would be informative to the process in fact as we sit here today we’ve now involved over 800 professionals industry experts luminaries academics major industry trade groups, you know have all participated either through workshops or a series of interviews and our ability to convene this kind of group, as input and helping us to shape this was really I’d say is differentiated from anything that we’ve done in the past. [9:44] And then of course we also have our deloitte’s Global state of the consumer tracker. Where we post consumers on a monthly basis across 24 countries to better understand behaviors and intentions and that was part of this as well. And so the whole intention of this process was broad inclusive thorough wide and differentiating a differentiating perspectives in really generational input. And out of that came what we call the six forces shaping the future of the industry, no there were literally hundred or more individual things that were happening that the group raised instead this is important now what’s interesting is there’s no no one person had the complete view you know the art The Economist wanted to talk about the things that they knew we had people who are sociologists they talked about the things they knew people in Auto talk about the things they knew but what we were able to do is really. Collect this information organized it will organize those hundred or so things under what we call the six forces and then we went about doing the research to deeply understand those things, so the first component is really the six horses and then we proceeded to think about the implications of those forces along three dimensions. The First Dimension is markets and that’s what’s being sold who’s it being sold to how are we creating value. [11:11] The second component of that was models what are the new business models how will business models change over the next decade and finally mechanics. They really is operating model how are how are we changing in terms of how we. Deploy labor how we think about operational decisions and really just the execution of the business, so that’s really the two primary assets that come out six forces research and then what we call the 3m’s or the implications upon the industry. Scot: [11:41] Cool why don’t you take us through the 64 forces at kind of a high level and maybe a little blurb on each just so we kind of know you know mentally where they fit in in the world. Kasey: [11:52] Yeah perfect so as I mentioned like, 100 or so things roll up to these six forces the first of which is really the changing consumer now you mentioned that Scott we had done some research in that previously around how is the consumer really changing well we were able to take that one and go much deeper. Of course changes you know the changing consumer you know includes things like increased racial and ethnic diversity. Changing sexuality and gender identity aging longevity shifting geographies it wealth inequality and generational wealth inequality. Those are the kinds of things that begin to make up the changing consumer and each one of those we’ve done deep research on but that consumer also operates Within, a shifting society and culture and so under society and culture you see things like delayed or declining marriage. Delayed or declining homeownership certainly declining birth rates here in the US as well as most major developed economies. [12:54] There’s things that have to do with education and the education gaps are declining, subscription to religion those sorts of things live under society and culture and of course many of those things I just mentioned Define us as who we are as consumers as people and win and what sort of purchase do we make when do we make those purchases Etc but what you begin to see already is, I’ll say a theme of increased diversity that starting to really show up and we can come back to that idea but I use diversity here along multiple, Dimensions to sort of talk about this Mosaic of consumers and behaviors that are starting to really become clear but then we move on to what we call exponential, extech now what do I mean by extech well most of us in the industry you know when we think about technology likely think about infotech. [13:45] But the reality is there’s a broad set of technologies that are all moving, you know and maturing it very rapid rates and converging so not only is it infotech but it’s biotech, it’s Material Science its Sciences it relates to space you know and other Technologies as well that are advancing that usually fall outside of what you know our purview might normally be for, infotech then the fourth category is what we call radical industry upheaval. [14:17] And really if you begin to dig in there you see real declining Financial Health. You know at the Top Line the consumer spending has been growing at about 3.6 percent kegger. Over a 10-year period the vast majority of traditional clients would love to have a 3.6% kegger growth over 10 years so the consumer appears to be healthier than many of the players in the industry. We also see declining barriers to entry a shift from products to services and a whole collection of other things that really begin to impact the industry the health of the industry Etc. [14:53] And of course all of this operates within extreme climate and planet. Three you know we’d be remiss if we didn’t talk about global warming rising sea levels DeForest deforestation natural disasters things like that that certainly have us on a dire trajectory. But there’s also some signs of Hope here too as that you know natural green energy is now cheaper per kilowatt hour. Then petroleum-based energy or coal-based energy and that’s actually a good Tipping Point so there’s some there’s some good news on that front too now. The issue for our industry though is that we’re going to be we’re about 3.5 billion consumers globally we’re going to be adding another 2 billion. Another two billion in the next decade. So we’re already on a dire trajectory Yad 22 billion additional consumers by the way over 80% of those will be in Asia and you have to begin to look at what, you know how that slope of that line increases and what do we do differently our industry produces 60%. Of the greenhouse gases that are produced by any industry and so adding additional 2 billion consumers really amplifies that dire trajectory. [16:05] And finally shifting economics policy and Power, because the whole industry operates within those dimensions of geopolitics and local politics changing monetary policy you know power and and power structures and there’s some real, there’s some real changes happening there we’re we see you know our aversion to nationalism we see these things like reshoring happening for production work political extremism polarization, there’s some issues around immigration the difference between how important it is for us as a country versus some of the political positions in trends that we see around resistance to immigration within the country anyway all of these things matter. And all of these six forces you know are converging colliding coming together and so you sort of have to have this broad understanding of the forces in order to begin to ask okay what happens when you bring these forces together. Scot: [17:04] So for listeners that are that’s a lot to chew on so. So you know and we as I mentioned there’s no way we’re going to cover even you know like more than one or two of the six and then the underlying pieces our listeners are largely in the retailgeek e-commerce world if you were to kind of cherry pick you know a couple of these to dive into and you know with a a mind towards some action ability and you know where where would you start. Kasey: [17:36] Yeah so I started on this word diversity, and I’m going to I’m going to pause there for a minute because the way I’m using the word has multiple Dimensions to it and sometimes that when we talk about diversity sometimes people think about racial or ethnic diversity which certainly is a component here and it matters, you know for example if you looked at the data and if you got out to The Cutting Edge and it just let’s just compare for a minute the baby boomer generation was 75 percent White. [18:03] Meanwhile the Gen Z is 52 percent white with 25% identifying as Hispanic so just there just between those two generations there’s a stark difference in terms of the diversity on that one dimension, Now by 2044 is projected that most of the US population will be non-white and meanwhile those identifying as 2 plus races we’re will nearly double. Now when you couple with that another dimension of diversity, you know aging and Longevity let’s talk about that for a second because there’s a real change that’s happening over the next decade on that front as well. So if you go back in time and you look at the Aging of the population what you see is a real dramatic increase from the 70s until until today there’s already been a dramatic increase you know moving from the 20s into into the late 30s as the average age of a citizen in the United States soon we’ll be at place where we’ve got more people over 60 then we have under 18 to real Tipping Point in addition to that we’ve got. [19:07] Real scientific breakthroughs that are happening daily it seems like that have the potential to really increase longevity. And so when you put those things together we’re talking about increased diversity needs wants, desires along a lot of different dimensions you couple with that wealth inequality the great retail bifurcation Scott that we mentioned before and it just means that there’s a broader Mosaic one of the things I like to talk about often is that our industry, was built for Mass not for a mosaic. And there’s this movement afoot from Mass to micro and what the changing consumer and changing society and culture tell me is that that movement will only accelerate in the coming decade. So how do you think about that shift from Mass to micro how do you build. Your business to be able to execute from Mass to micro and of course in the e-commerce world that’s probably not that. You know it’s not that advanced to sort of think about things like personalization but I think it goes much deeper than that when you really think about Mass to micro we’re actually talking about you know how do you create an assortment That Matters to. [20:20] You know to the right group of people how do you build a brand so the explosion of Brands channels formats all of that is happening around us. And what we’ve got to do is we’ve got to figure out how do you compete and how do you get ahead of that you know if you look at some of the data just around. Gender identity there’s data that says. In the coming decade and I think this was a Gallup poll they said that one in four gyms ears globally. Believe that they’ll change their gender identity once in their lifetime. [20:54] Okay so now if you play that out you think about the coming decade think about the traditional department store that organizes themselves by here’s the men’s department and here’s the women’s Department. What we’re seeing is this Mosaic of how you identify Mosaic of this diversity and how we have to think about appealing to smaller and smaller you know audiences is really going to be Amplified if you really look at the data around the consumer and society and culture, and I actually think that’s really actionable today in a mass. Environment we have a value chain where we make big at scale decisions and most of those decisions are made by humans. As you move down into more and more granular execution. It becomes very difficult to execute in the same way so we actually have to begin to lean on new ways to operate that’s where Predictive Analytics comes in automation comes in and all of those I believe are very actionable as we sit here today so hopefully Scott that was at least a highlight of one of the things that jumps out at me. Jason: [21:56] Wow you know it’s funny because that mask to micro thing comes up in a number of our shows we talk about it sometimes in the context of like she in that there’s sort of you know this old model where you know Mickey Drexler at the Gap would you no tell everyone what the cool clothes to wear is and GAP would sell a ton of that. That outfit and that the you know the interesting part of Sheehan is that they don’t sell a ton of anything that they you know, identify that Mosaic of consumer bases and make a you know small batches of a lot of different stuff to sell the all those different people. And it is funny I was doing an interview with a fashion reporter earlier today and she was asking me about the future of a. A athleisure company she was interested in and I sort of talked about that that trend from Mass to micro and she she thought I was from Mars. [22:50] Um and that brings up like one of my first questions about the research because you know I read the research I have a couple macro questions I want to ask but the. One of the things I always struggle with when I think about the future is trying to get the timing right and. Like I distinctly remember early in my career I worked at Blockbuster entertainment and we were trying to do video on demand like. Ten years before Netflix was invented and we had all these technical problems and we partnered with IBM IBM brought in this Chief scientist and he’s like don’t worry about any of those storage problems because there’s this new technology called the Blue laser in the blue laser is going to solve all these storage problems and. Like the only problem was the blue laser was 10 years away from being invented and so it, it did and other inventions solve solve that storage problem but not in the time Horizon we had right and and so there was part of me that felt bad like you know I’m talking to this reporter about that mask to micro-trend but like, is that really going to happen to athleisure fast enough that is relevant to her article. Seems really hard to predict like did you guys when you were doing all these interviews. Did you did you try to think about the dimension of time or how did you think about the dimension of of time in some of these transformations. Kasey: [24:11] You know I love that question I want to answer it in two different ways the first is you know when we talk about Mass to micro I want to separate the idea that the market. [24:20] Is already moving Mass to micro whether or not you know individual companies are okay so if you took that athleisure wear and you said okay let me go find the niche brands that are already appealing to you know, Niche micro segments on you know on whatever their favorite social media platform is you’re going to discover some I could tell you I’ve got a 16 to 17 year old in my house and I’ve discovered, new in particular athleisure wear brands that are appealing to them you know my son goes to the gym and there’s there’s these gym brands that have come up so I what I like to say is whether or not you do you think Master micro is viable for your company I would say the market is already moving that late second of all I’d say actually if you looked at the vast majority of the big, is look at the big retailers they’re already moving down this path they may just not know it. You know I talked about the explosion of Brands channels formats service models that’s already happening you know pick your favorite you know large retailer and recognize that the word omni-channel you know inherently means optionality, picking up curbside is optionally all of that is optionality now the problem for most of those companies have been there pursuing Mass to micro but they’re still trying to use a mass operating model, to execute micro and some of that you know it begins to show up in the financials pretty significantly now let me go to another another. [25:45] Mention here are another way to respond to your question because it definitely came up and it really the conversation about the metaverse this is the this is the one that I try and avoid but I’m actually going to put it on the table and tell you how I think about it because this very reason of like is it real when we’ll be Regal will we all wear goggles you know I don’t believe it I do believe it whatever that you know, that position is. What we did is we said well let’s look at this and you guys will appreciate this from our days back you know together on the board of directors that shot dot-org I always tell the stories about this because, whether or not you know we’re going to wear goggles I’m not going to talk about I’m not going to predict it I don’t know when it might happen but I do know and we just released a report this week. From our future of the consumer industry work around the growth of digital goods and services. [26:33] So we assess already that digital goods and services by this by the way I don’t mean digital access to physical goods and services actual digital goods and services now you know equates for about 3%. Of the consumers wallets, day three percent that may not seem like that much until you realize that apparel is around 3% and consumer electronics is around 3% now if you look at it that way it’s actually a significant number already. And you know if when or where a RV are any of those things really began to take off that number will only accelerate. So what I try and do the say hey let’s not argue about the form factor let’s not argue about let’s focus on what’s real and what’s real today is revenue, real Revenue that’s already flowing now the issue today is that the vast majority of that revenue flowing to digital goods and services, is not flowing to any of our you know what I would call traditional consumer industry companies so consumer spending beginning to fragment way flowing to new goods and services it will only accelerate. You know once my equation back when I equate it back to our shop that org days was you remember when most people were offline. And then when their office had high speed internet they’d show up in the show up at their office and they suddenly be online and that’s that was the. [27:58] The Genesis of cyber monday right and so I use that to say look there was a period of time where most people weren’t online and then suddenly they were and, and that accelerated sales and the same things true today most of us spend most of our time not you know wearing a headset, you know at the point in time where that actually becomes real that number will only accelerate so anyway so I try and have a different conversation. And try and demonstrate where and how you can track what is real about it. Jason: [28:29] Yeah the digital grids example was great and it’s funny because I as soon as I read that like I jumped into my Department of Commerce data I’m saying like what other categories are like similar order of magnitude and yeah it’s a it’s a bunch of giant industries that we spent a lot of time and and it is it is interesting because, digital Goods to me is this new label you don’t hear people talking about it that much but there are lots of other labels that have like digital in front of them. [28:57] Sort of feels like the label is expiring because the distinction no longer matters right so you know we all started in an e-commerce and today it’s really more. Commerce the in the industrial revolution they used to call factories electric factories to differentiate them from the ones that ran on Steam right and today it’s just factories like I wonder if we’re going to go through this whole evolution, where there’s this this new product called digital goods and eventually we’re not going to care about the distinction between the physical Goods in the digital ones and you know will be, 3D printing digital goods and all this other stuff it’s fascinating to think about the future which of course your, your report like instantly took my mind to but one of my big questions reading the whole report in aggregate is there’s some really positive optimistic things about the future in here but there’s also a lot of. Negative things and I’m curious like in the aggregate did you I’ll confess I read it and I felt a little depressed like I. And I like am I a typical in that regard like like is there is there a way in which this is a slightly Bleak future or am I just. Kasey: [30:08] No I think I. No I think it’s a good good observation and actually it’s part of the question like here’s a really interesting thing we had this workshops where we had these professionals you know from our industry join in and there’d be two tables. They’d all be presented with the same information in one table would would decide that the future is dystopian and dark and they’re very worried about where this is all heading. The second table have the same exact information and decide that there’s a utopian future. And within this you know actually as a ton of possibility and and you know great progress right now the question you know if I was to predict I’d have to say okay which one of those Futures is the right one and the reality is they’re both, possible they’re both pot like when you dig into the state of you realize both the YouTube utopian future and dystopian future are possible so then the real question is. What’s the difference. And that’s really where I love you know we’ve headed to say the difference has to do with the choices that we will make in the coming years that guide us one direction or another. In fact we refer to our report in our whole effort as what we call buying into better because there’s a lot of change in fact there’s. There’s more change that I see that it’s going to hit us in the next decade I’ll make the last decade pale in comparison. [31:28] And those changes are up against some real challenges with trust and planet and privacy that we have to Grapple with. And we actually have to buy into better meaning as consumers we have to be smart and make the right choices but also as Executives as owners of capital you know as Citizens we have to play a part, and we actually have to you know help, ensure that we’re making the right decisions as we’re navigating through to take us to the right utopian future you know I believe there is a utopian future I believe that we collectively just think about the audience here, on your podcast the agency that we collectively have Deloitte is a massive firm where a massive firm with a lot of influence and we look at buying into better as our own North Star as well what role will we play. So I think it’s the right question is it utopian or dystopian but really what’s more important are what are the choices and what role are we all going to play, in making sure that we’re navigating that future. Jason: [32:28] That that is totally fair I’ll be excited to hear your answer on that the the other thing that really jumped out at me like we’ve known each other for a while and I’m sort of a fan of your thought process and I like the fact that you tend to be a little cynical and I, I suspect I probably am to the I don’t suspect I know but the. I’ll confess I do this this presentation quite a bit where I debunked disruption where I talked about how I everybody always thinks like that whatever they’re working on is the biggest disruption in the history of mankind and that you know every little thing is some, when unique inflection point in human history and how like. Most of them aren’t that relevant in the in the overall scheme of things and so and so then you know I read your study in there we’re talking about all these things that are sort of, exponential change all these things changing faster than Moore’s Law and you know it made me wonder huh like. [33:31] Is this a unique Confluence of factors. You know is there something special about this time that there’s more of these interdependent factors that are changing so quickly that you know the world really is. Getting disrupted in some unusual way or like. You know has this been how we made progress like throughout all history and I guess I was sort of curious if you had a. POV how unique our current moment in time is. Kasey: [34:02] So I you’re right I start off as I said I’m a contrary I’m somewhat cynical as I start out but it has we’ve researched across these hundred some topics I realized. That I while on the headline I thought I understood some of these topics I thought I understood but only when we got out on The Cutting Edge really understood what was happening did did it really change my point of view I mean look if you you mentioned, you know chat GPT earlier in the call if you’ve paid attention to where that was six months ago to where it is today, where you know the the other generative AI things are you can actually see this idea in fact Stanford University through their AI index says, AI is now it’s not going at Moore’s Law it’s actually doubling every three months. [34:48] And if you and I assume that you’ve been playing with these tools and this generative AI That’s now available to us if you’ve been paying attention over the six months you can actually really see. The degree and the speed that that’s changing now meanwhile if you go into and spend some time like I spent a lot of time with our Healthcare practice because of the the convergence of healthcare and consumer which is a whole nother topic we could go into but if you begin to look at the breakthroughs that have happened just in the last 12 months, you know at the intersection of artificial intelligence and health if you look at it the advances that have happened with crispr which is Gene editing in the last year. You begin to see like there really is some inflection point that’s happening and it’s really happening at the convergence of these forces, you know I think too often we try and pick one and say oh here’s here’s one like drone delivery, okay let’s figure out what the implication of that one might be but the reality is it’s the it’s the convergence of these topics that actually begin to. At least for me brought me to a different place than I was when I started this this work. Jason: [35:59] Yeah and side note in preparation for the show I did ask Chad gbt what the the future of the consumer industry was and it came back with a one-word answer which is metaverse. Kasey: [36:10] I thought it was going to say hey there’s six forces and I said oh my gosh I’m out of a job. Jason: [36:15] Yeah we’ll see the thing is it’s chat gbt you know is this this model 3 engine is only trained on, like you know a bunch of material from 20/20 I want to, 9:21 maybe yeah and so so it was kind of impressive that it picked the metaverse and and of course next year it will it will have all your the the version for the engine will be much better and have your stuff in it. Kasey: [36:40] Hey I don’t know if you picked up on this on the report we within the report we’ve got the icons of the six forces. Those icons were developed by generative AI so we typed in text and were able to get the icons that represented 06 forces so when you look at the report you know there’s a little bit of an Easter egg hunt for you.

Scot: [36:58] Cool it lets a double click on a i a little bit so you mentioned generative so there’s the the graphic generative side and the verbal or textual these are all cool but what’s something practical listeners can take away so you know I’m I’m sitting at a you know a retailer e-commerce shop and I am director of something you know what’s their take away from this there’s diversity of of all flavors there’s a lot coming at you 100 things how do they How do they pull this into something in their day job. Kasey: [37:35] Yeah well there’s there’s a lot of use cases that I’ve seen that have been posted on Twitter, you know relative to hey how can I do my day job today differently and some of those have to do with creating copy some of those have to do with I’ve seen SEO optimization. [37:54] I’ve seen even complex things like taking a podcast like this and giving me a summary so I think there’s some real practical things that exist today but actually when I look forward what’s more becomes more interesting to me are, the built for use cases, and we’re starting to see those like there’s one of the Technologies is open source you know a lot of this is done through an organization where there’s a lot of control around it but there’s also Alternatives that are open source one of which have generative Ai and it you know went open source I think about six months ago and is already spawned something like 2000 you know built for use startups. So for example in e-commerce one of my clients who said once you know creating the content for e-commerce was like feeding the Beast. We have this big assortment we’re constantly changing, the assortment you know next spring we’re going to have a whole different assortment we need images we need copy we need attribution and that is just a huge Beast to keep up with. And in my mind I can very easily see that being a tremendous use case, for a built for use application that would allow us to and I expect that that will be coming soon that will allow us to move very quickly you know in that feeding the Beast scenario. Scot: [39:13] Tell it any other so we’ve talked a bit about the consumer and extech with a i any of the other six buckets you want to dive into that you think listeners would find interesting or actionable. Kasey: [39:27] Let me talk about one that that really stood out for me now yeah you have to back up a minute just think about the consumer industry for a minute but if you think about the convergence of Industries, and in particular the convergence of the traditional consumer industry retail even and Healthcare, you know really driven by the convergence of infotech and biotech. You can begin to see the starting to take shape today and our deloitte’s Healthcare practice looks at this shift that’s occurring so we’re there’s a shift happening with. You know from treating sick people to Wellness. And as that shift occurs what’s interesting is the money that’s spent you know today treating sick people is largely Insurance driven Wellness though is a consumer category. And in 2019 we estimated that that market in the u.s. to be a 700 billion dollar market. [40:22] And our Healthcare practice is estimated by 2040 it’ll be a five trillion dollar market. I just by way of comparison you know retail in the u.s. is roughly a five trillion dollar market so it shows the explosive growth and certainly if you look at some of the major retailers you can see the recognition of the importance of healthcare converging with traditional retail or Healthcare becoming a bigger and bigger consumer category now depends on you know. Yeah whoever The Listener is how they want to interpret that but what it tells me is with the Aging population longevity growth or even wealth inequality and who has money to spend on you know Wellness that it will be a significant growth Market in the consumer and I think there’s, real opportunity for many traditional e-commerce companies to think about you know how they’ll play as part of that you know growth opportunity. Scot: [41:19] Got it um how about you know your colleagues in the auto segment published a lot of really cool things and you kind of healthcare agree with you it’s gonna go through it needs to right it’s like so painfully obvious whenever you touch that system that’s, broken all over the place, so I’m excited that that one’s going to get disrupted and then selfishly how does your framework fold into the Auto industry. Kasey: [41:47] Yeah it actually works I spent some time recently with one of the major. Auto company with their CEO direct reports working through what we’ve discovered and what the implications are you know the things like Mass to micro, also apply their you know of course the Auto industry is going to go through a major transformation, where they’re moving from combustion engines to Electric but it’s not just like hey same car take out this engine put you know a new, electric one in actually is a radical change in manufacturing and what the platform is but there’s also this digital goods and services thing I mentioned before, because if you really look at where margin will come from and where Revenue will come from into the future you could begin to see you know you’ll buy the, the platform which will be the car you’ll have software which will be the digital goods and services that you subscribe to and you can see that today with certainly with the leading electronic or electric car company today is being able to subscribe to capability and you could begin to see that shift from, you know traditional Revenue to new Revenue models so there’s major transformation that’s happening there for sure in fact it may be one of the industries that that’s undergoing the most radical transformation within consumer but all of the same sorts of things that I’ve highlighted here, actually apply there as well. Jason: [43:11] I’m asking for a friend do you see any specific disruptions in how automobiles are cleaned coming down the. Kasey: [43:17] Yeah I’m thinking that most people will be getting us a spiffy subscription. Jason: [43:24] I think subscription is the way to go. Scot: [43:26] The good news is all you knowledge workers thought you were safe and it was the people out doing stuff but it’s going to invert on you so, AI is going to take the office worker jobs first a mill will still need people to clean things and move them around Force. Kasey: [43:41] Good point. Jason: [43:43] I don’t know we’ve talked about this on the show before but like you know whenever you get a CES and they show all these clever automations there’s always a robot making coffee. And what’s hysterical about that is the robot is always doing the good job the robot is always like. Pulling the shot and making the beautiful latte art on top of the coffee and then a poor human comes in behind the robot and empties all the coffee grinds out of the machine and I’m I’m like yeah it seems like we’re automating the. The wrong wrong side of a lot of these equations. Kasey: [44:16] Do you hit on Automation and that’s a topic I could go to if that’s. Well here because when you begin to look at the move for master micro I said earlier that the only way you can really make that move, efficiently effectively is to move from making, Mass decisions to making more granular decisions that are data-driven and then frankly our automated in their execution and so there’s you know there’s a good. Shift of automation that will happen in this next decade but some people predict that between 50 and 60 million jobs United States could be automated away in the next decade. Now keep that in mind that that’s in a that’s not a base of about 190 million jobs that’s a big significant number and on one hand there’s efficiency Effectiveness there’s granularity there’s you know. This master micro shift that’s all good. But on the other side there’s what we call Workforce extremes because we have to care about the people who will be you know automated out of their jobs. If that number is even close you know then we have to think actively about how do we ensure that. [45:27] You know that those employees find their ways to the new jobs and by the way some people can argue and I get this argument all the time hey in history every time we ever. Automated away jobs we create a new jobs and that may be that may be true. However a lot of this automation that’s occurring it’s I mean it’s occurring across manual work cognitive work and even creative work. So there’s significant you know there’s significant change on that front coming the thing that was as a retail you know, lover of the retail industry I think about those that those workers are also our consumers, you know we need we need a healthy middle class right we need a healthy consumer. Category you know in order for our industry to thrive so on one hand there’s a lot coming on the other hand there’s implications of that that we ought to be ahead of thinking about you know and worried about because there’s big implications that come down, from from that drastic of a move. Jason: [46:27] Yeah I mean to be honest Casey when I read your the whole research in whole that was my biggest takeaway is like hey two billion more people they’re all going to live live live way longer we have an opportunity to sell a lot more stuff , the those consumers just have to be in a condition in which they can buy. Um so I’ll certainly be rooting for that, I am curious though like what the future of this report is for you I do you envision, redoing it every year is this something you will revisit periodically and would you expect it to change very much from year to year have you thought about that yet. Kasey: [47:09] Yeah we have in fact I’m glad you asked that question because while we may seem like we’re here talking about a report we’re actually talking about a program what I mean by a program is for Deloitte in our consumer industry we’ve actually launched the future of the consumer industry not as a report but an ongoing program you know a center and office that will be continually, looking at the forces keeping this up to date, but also you know it’s a collection of research is collection of insights it’s collection of tools we’re actively serving clients bringing this content to bear and we’ve got all sorts of as workshops and application that comes along with it so that’s this is the beginning, of that as an ongoing program so you’ll be able to find Us online you’ll be able to stay up to speed, on the different reports that we’re going to continue to put out that that build upon this work that we’re starting with even I mentioned before the digital goods and services report that we just launched earlier in the week is one of the offshoots that come out of this research and there will be more. Scot: [48:16] Brickell so you’ve this is called job security it sounds like you’ve planted a flag and now you’ll be able to kind of keep growing from here. Kasey: [48:23] Yeah it’s look for me it’s cool like this is energizing is interesting yeah I love to be able to think about this in the context of the kind of work that you guys do the kind of work that I get an opportunity to do so you know I’m thrilled that Deloitte has given me the opportunity to do this energize the people that I have the opportunity to work from and learn from are just phenomenal, you know so I couldn’t ask for more rather than hey understand and help us make a difference. Scot: [48:51] To zoom back out you kind of at the top you said you know there was two tables and some ended up with the dystopian kind of view of things kind of a Hunger Games scenario and then the others were were utopian what do you think that Utopia looks like if we kind of pull all the levers towards the best possible outcome. Kasey: [49:10] Yeah I mean you can see a path in some of these forces that actually say Humanity will be you know much better you know the ability to address. Illness sickness the ability to you know create the kind of value that actually allows. You know the additional two billion consumers the two billion people that to live and thrive. Those things exist the ability to address education gaps you know every one of these things that you look at today in my saves – you go look there’s possibilities that are coming that both have to do with technology but they also have to do with changing values you know of of younger generations and their desire to address some of these issues. So there is real utopian possibility that lives in you know within these forces that’s right we really do call it buying it a better because we believe better, is an absolute possible outcome but we have to be active we have to understand the choices that are before us and then as Executives of companies we have to participate not just as, you know you know in service of. Shareholder value but we have to serve you know a broader stakeholder and make sure that we’re thinking about that. Jason: [50:33] I love that note of optimism and that is actually going to be a great place to leave it because we have Perfectly Used up our allotted time but I want to assure listeners we’re going to put a link in the show notes to the Delight landing page so you can get a copy of this first, report and dive into it yourself and I assume we’ll find all the following reports there is well so Casey thank you so much for taking time out of your schedule and sharing some new knowledge bombs with us. Kasey: [51:03] Thank you guys for having me again I always love getting together with you guys and talking. Scot: [51:08] Yeah and if listeners want to follow your socials where you most active. Kasey: [51:13] Well so I’m on Twitter at KL Oba ughh. I’m also on LinkedIn you’ll find the Casey low bar and and we will be continuing this conversation there and Publishing you know an ongoing thread of conversation and information if this is what’s you know interesting to you. Scot: [51:33] Very cool as Jason said we really appreciate it I sidebar with a couple of teenagers I thought you were gonna throw out your Tick-Tock but I guess I guess you haven’t really super like like Jason are you a little too shy for that platform I. Kasey: [51:45] I referenced I reference my daughter earlier as as being on the tick tube. Scot: [51:50] Yes absolutely well we really appreciate it and you know this early look for the Pod we appreciate you and welcome to the been on the podcast five times Hall of Fame. Kasey: [52:02] Well I guess I’ll see you the six-time sometime soon. Jason: [52:06] We look forward to that and as always in people got value out of this show you know the best way to repay us is to write that five star review on iTunes if you can log on the chat gbt you can actually get it to write the review for you and just paste it right in into iTunes and until next time. Happy commercing.

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EP301 - Annual Predictions, NRF Big Show, Year End Recap

This ended up being a slightly longer than usual episode, sorry! If we had more time, we’d make a shorter podcast (to paraphrase Mark Twain). So here are some timecodes if you want to jump ahead:

Recap of the NRF Big Show 1:27
Recap of 2022 Holiday and Full Year Results 22:43
2022 Predictions Scoring 30:34
2023 Predictions 54:51

2022 Predictions Recap Jason:

NFTs, Web 3, Metaverse, and Ultrafast delivery services are all overhyped and don’t deliver meaningful commerce revenue in 2022. Yes
Shein exceeds $30B in annual sales, disrupting apparel industry Yes
Adoption of BNPL services slows down to less than 15% CAGR in 2022. Yes
Amazon opens more than 100 Amazon Fresh grocery stores No
Last Mile evolves Veho, X-Delivery, shipium, or Instacart gets aquired No

Jason Total Score: 3 of 5

Scot:

Amazon launches a competitor to Shopify webstore, possibly via a headless solution on AWS No
Amazon wins ultra-fast delivery. Gopuff, Gorilla, or Jokr goes out of business in 2022 Yes
Metaverse gets lots of buzz but no revenue Yes
Livestream commerce goes mainstream in the US No
Fabric gets acquired No

Scot Total Score: 2 of 5

Jason pulls out the rare win!

2023 Predictions Jason:

At least 2 retail bankruptcies (besides Party City)
BNPL Consolidation (Klarna, Affirm, Afterpay. Sezzle) – at least one merges/exits US or BNPL.
Shopify launches an ad product such as a retail media network
Meta/Google/TikTok lose ad share to new social media platforms and retail media networks.
Live Streaming Commerce Still not meaningful in US in 2023 (less than 5% of social commerce in US)

Scot:

Amazon uses this 2022 setback/slowdown/reversion to the mean for a public resetting of expectations, but behind the scenes they take share and raise the bar on shipping
Shopify is acquired
An innovation in e-commerce powered by ai (gpt4) surprises us by how fast it’s adopted and how cool it is
E-commerce accelerates back to the mean in 2H after a mean regression in 1H. E-com returns 10-15% growth rates.
Sephora and/or Ulta move to a subscription model for new product discovery

ChatGPT

“based on trends and current developments in e-commerce, it is likely that we will see continued growth and expansion in the industry, with an emphasis on mobile commerce, personalize shopping experiences, and increased use of technologies such as artificial intelligence and virtual reality. Additionally, there may be an increased focus on issues such as sustainability and social responsibility in e-commerce”

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 301 of the Jason & Scot show was recorded on Thursday, January 19th, 2023.

http://jasonandscot.com

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is episode 301 being recorded on Thursday January 19th I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo. Scot: [0:38] Hey Jason and welcome back Jason and Scott showed listeners Jason I was looking in our in my podcast app I’m an iPhone user says looking in the Apple podcast app, we had a review in six months so I thought of the top of the show here we would ask folks if you enjoy the show we sure would appreciate a review if you are in that player you go into the app you find our podcast scroll down a fair amount because we have so many episodes about four Scrolls I would estimate and then right there you’ll see the Low Five Stars we would love a five star review or any review that you’d like to leave that would be most appreciated, we do this for the reviews so we appreciate it. Jason: [1:21] Yeah I would just add that makes a great New Year’s resolution because you can literally accomplish it 5 minutes after you met. Scot: [1:27] Yeah and you get a dopamine hit and feel feel better about yourself sand Jason and I will be very happy, Jason today we are going to talk about two of my favorite topics so number one you just got back from the NRF Big Show and then we are belated with our predictions and recap for last year’s predictions so we’re going to sneak that in here we’re still in January so I still think we’re kind of in the new year a little little close here recording on the 19th but I think we’re still in that window, so how I was not able to make it at in our F this year but you did and I look forward to hearing what you saw there. Jason: [2:07] Yeah yeah it was a good time obviously the biggest efficiency was your absence. But for any newer listeners that haven’t been there before National Retail federation’s in Trade Organization represents the retail industry and and this is their big event every year this is a hundred year old show, that is always at the Jacobs Javits Center in Manhattan in mid-January usually in the middle of a blizzard. Um so so a bunch of things worked in our favor this year during the last couple covid years the Javits Center got remodeled and so. The main areas where they do Keynotes and a lot of the big presentations and content are now like a new very nice facility that’s very comfortable. And it was unseasonable e nice weather so it was kind of like 30s and 40s and clear no no snow no no blizzard to have to fly home in. Scot: [3:05] That’s good. Jason: [3:07] So that got things kicked off on the right foot and then to me the most exciting thing was just the vibrancy, I don’t think they’ve published the final attendance number but I’m pretty confident it’s going to be just a smidge north of their 2020 attendance so, that you know given all the things that went on in the last couple of years being positive against your last pre coded year seems pretty good definitely felt like there was a lot of energy people were really happy to be there, and I was particularly pleased because. Last year was not a great year they tried to have the show last year there was just a big pain demick spike in New York right before the show so a lot of exhibitors. Publicly pulled out other exhibitors quietly pulled out and just didn’t show and so you know it was kind of this weird thing where they had. Um you know a somewhat empty Spartan giant trade Joe for where they you know they frankly made a bunch of exhibitors still come in spite of the fact that there weren’t very many, attendees for them to talk to, several of the Keynotes didn’t show up and came via Zoom so it was it was not a good event last year and I was a little worried that that you know people that were forced to participate last year would be resentful and less interested in coming back. But it appears like we’re back to normal. Scot: [4:33] This retail thing is catching on. Jason: [4:35] Yeah yeah it’s not going away. So a couple of the big trends and we won’t go into depth in any of these but you know maybe some of these will come up as topics in subsequent podcast. [4:49] They’re the last couple shows there’s there there have always been what I’ll call digital shelves like electronic fact tags everybody knows I always like to talk about video displays on shelf Edge smart shelf so that know, um what inventory they have on them and. They get incrementally better every year so there were a lot more of them this year they were all better and cheaper. For a variety of reasons I still don’t think 20:23 is going to be the year that they become. Super common in the wild but the tech is getting better a related Tech that seems like it has a lot of new vendors in this space is what I call in-store analytics so that’s using cameras and computer vision too, measure Shoppers in the store and kind of like Google analytics for your your store again I’m not expecting huge deployments this year but it’s, the computer vision technology is just getting more and more amazing and so that the insights that these things can get from relatively few cheap cameras keeps getting better. Um there’s a lot of automation at this show so you know there’s the usual. Auto store and perfect pick which are two of the big automated Warehouse Systems but there are a lot of other. [6:08] Startup automation things that could bring automated picking to store fulfillment or small fulfillment centers or. Pick to light systems and gloves like a lot of. Get more efficient about fulfilling omni-channel order stuff so automation was a big theme. Another thing that got a lot of space and signage at the show was what all broadly call headless Commerce, so Shopify made a big announcement right before the show that they were releasing a new offering called Shopify Commerce components and so this is kind of a. Upmarket headless version of Shopify Shopify has always been kind of a monolithic web app that you know was a super good fit for very small start-up companies, um and you know some of which have grown to be quite large on the platform, and they’ve always had a second offering called Shopify plus which was. Intended to be more Enterprise features but the plus mostly meant more Enterprise sales features not necessarily a lot more Enterprise, features in the in the platform and so this new offering seems like. [7:27] You know a pretty evolved set of apis and as a we’ve talked about in a previous episode of this show, fine but they sometimes called the mock principles, so they had a big booth that was mostly focused on this Shopify Commerce components, Salesforce has a very similar offering they already are kind of more enterprise-e and so they were there and then there’s a, I want to call my startup they’ve been around for a while now so I’m not sure it’s fair to call it a start-up but newer more modern Commerce platform. It’s called Commerce tools in the chief strategy officer, from from from Commerce tools Kelly has been on our show before they had a huge presence a big booth and sponsored a bunch of stuff so there were between Shopify Salesforce and commerce tools, you definitely got a strong headless vibe in the show and then for old timers, the trade show floor is divided into three sections there’s an innovation Center which is all new startups there we had a great Innovation Center this year was mostly International companies so I companies from Israel companies from France, there were very small startup showing some pretty cool Tech there’s the upstairs trade show for which is all the. [8:56] Kind of incumbent Legacy vendors the Microsoft’s the oracles the ncr’s, all the big players with a really big boost and then the more digital players that you know they might exhibit it shop talk or would have exhibited it at shop dot org in the past, they’re in the downstairs exhibit hall and it all this is not true but it felt like this year one of the rules that was in place to exhibit at the downstairs exhibit hall is you had to rename your url to end in dot AI. [9:30] Every every single vendor downstairs. Was you know some some execution of AI and some of them were super interesting and, I think we’ll talk about this later but I’m very optimistic will be a big part of the Commerce ecosystem this year and some of them are, you know pretty speculative and far-fetched so so you know a good breath of everything and then I’ll sum all that up that’s what the floor look like the content you know is mostly, some some decent key notes from from Big retailers and the problem with key notes from the CEOs of big retards is they’re not necessarily going to share anything. [10:14] Proprietary or new insightful like it’s kind of interesting to hear their their philosophies but like I don’t tend to learn a lot that I’m going to use, um in my day-to-day gig from the content sessions and in our f, um but what I do love is talking to all the people in the halls and aisles and by far you know kind of trying to take everyone’s temperature that I could I could get time with the overwhelming consensus was, this is 2023 is going to be a really uncertain year for retail that there’s a lot of, economic challenges that people are going to be really focused on profitability and a lot of the Retailer’s talked about how, um their budgets are getting reduced significantly that the focus is really going to be deploying that Capital against things that can have a short term. Benefit to their cost structure and help them get their profitability up and so I kind of interpret that as. We’re going to see a lot more a lot fewer investments in customer acquisition and front end systems and a lot more investment in back-end systems and optimizations. Scot: [11:23] Pickle I got a million questions on Automation in you know kind of the state of Art and my mind is still the key the system is there something out there you think at least on the you kind of mentioned in store but I’m thinking more Warehouse side anything there that’s kind of. Jason: [11:41] Yeah so there’s two big vendor like so Kiva is Amazon’s proprietary system and to my knowledge they don’t sell it to others yet do they. Scot: [11:49] No but it’s still kind of the state of Missouri. Jason: [11:52] Yeah yeah they certainly could have some point so so you know there’s kind of two philosophies of these like big fulfillment center automation. [12:02] Go go get bring the goods to a picker or you know you know so you actually move Isles which is what the key this system does it moves bins, um to a human picker that then pulls them out so the picture gets to stand still or these fully automated systems that like you don’t bring things in on conveyor belts and so there’s two big vendors, um there’s a store a vendor called Auto store which is like a, very dense set of bins that are stacked quite high and they’re shuttled around on conveyor belts so it’s a 3D delivery system of these these bins, and there’s a bunch of big retailers if you’ve highly automated your your fulfillment center in the u.s. like you’re probably using Auto store or their competitor perfect, and so both of those had full live demos at the show that where you know are super mesmerizing to watch because they have all these. [13:01] These bins flying around but then went there were was a lot of startups that were more Kevo like, so instead of like a conveyor belt that ends with your exact products you know in a bin ready to package, um these are things that are like lifting shelves and moving the Shelf to a to a picker so even in that Innovation Center there were several Israeli companies that you know we’re in a tiny little 10 by 10 booth, with the little robot that could you know lift up a gondola full of products and bring and move it around a warehouse. Scot: [13:34] Merkel and then from afar I saw Shopify really hitting the we’re headless to kind of train which I thought was interesting because they kind of have, you just kind of dip their toe in that water I read it as they must be hitting some headwinds maybe at Shopify plus maybe some churn and realize they had to go into that market pretty hard so I wonder if our friends at Fabric and some of these other places were starting to take some share from. Jason: [14:02] Yeah so I don’t know if it’s as explicit as taking share I think there’s this notion new companies are highly likely to start life on Shopify and it’s a. If a family member calls me and says I want to start a business and sell something online I’m sending him to Shopify it’s the easiest safest best best way to do it, so there’s a notion that those companies ought to grow up and you know either by something else or spend a lot more money with Shopify, and so I think a lot of people looked at Shopify plus and they said oh yeah that’s that’s for the startup companies to evolve into, and then I think a lot of people are looking at the these Shopify Commerce components in that same way I actually suspect that’s not the case, the overwhelming majority of startups that start on Shopify are are going to go out of business, right I just the attrition rate is super high and so most companies aren’t getting bigger and need a bigger platform, um the I think what they’re trying to do by having a mid-tier kind of mid-market offering is not so much help their existing customer base to grow its to acquire, um a new customer base that you know frankly has a little more proven business model and a little more stability to kind of help them with their Journey a little bit right and so, um I think that was the intent but far behind Shopify Plus. [15:23] Shopify plus never got a ton of traction and they actually had a pretty big staff reduction in Shopify plus earlier last year so. E-commerce components does feel like a restart like they’re tackling I think the right problem this time like before they were tackling, the Professional Services that they thought you know an Enterprise client would want in order to use Shopify this time they’re there they’re tackling the. The functionality and the flexibility that a mid-market or Enterprise client might want so I think this is going to be, an interesting play but I don’t think it’s so much that Bigcommerce or Fabric or Commerce tools, um stoled customers from Shopify I think it’s more Shopify want some of those customers in its ecosystem as well and obviously they have a lot of resources to go after them so that’s kind of how. How I interpreted it. Scot: [16:20] We will agree to disagree on the a. Jason: [16:26] As we’re about to find out from the predictions I am occasionally wrong. Scot: [16:29] Yeah we all are this is the The Humbling part of this program is trying to make predictions and this current world we live in AI everything was one of the things you have to have a DOT AI anything that blew your mind, you and I had chatted about you know we’re starting to see a eyes for example that’ll create product detail Pages where you anything getting some traction or is it all just. Jason: [16:54] Yeah so so I so a I think there’s a trend that’s super annoying to me I’m old and curmudgeonly is everyone knows but like, there are a bunch of companies that are decided to AI is cool and then they’re just desperately looking for a problem to solve with AI and so and sometimes they don’t understand the space very well or the problems or the economics of the problem very well and so there are a bunch of, AI companies, the I don’t find particularly interesting right like there’s probably 30 AI companies that are like we’re personalization engine to do better product recommendations with a i. [17:29] And personalized product recommendations is super important there are, 15 Enterprise products that have been using AI for 15 years and are the is the AI getting much better. [17:43] Yes but. Like the you’re not necessarily like bringing anything new to the party when you’re you know a small start-up in that space, um so there are you know some things I don’t get super excited about. The AI for inventory management is super interesting like these models that are doing demand forecasting that are doing kind of. You know most retailers kind of have a pretty simplistic model for for inventory balancing like you know what what inventory do I put in what fulfillment center how much extra inventory do put in a store for store fulfillment, things like that and now they’re using AI to make that much more robust, um AI promotion engines so you know instead of kind of a one-size-fits-all promotion where hey we’re going to do 30% off this product across the whole country, um we’re going to you know throw some business rules to an AI engine that’s going to decide like when and where to offer a promotion and it’s going to, factor in a lot more localized factors and personalization factors and so you know there might be deeper discounts and, in some stores and other some circumstances and others are even in someday Parts than others so so I think all of. AI to improve these existing business processes is super interesting and then the the new use cases. [19:12] I’m very convinced that the majority of e-commerce content the majority of product descriptions we read attributes we read are going to be written by AI in the future like it’s gotten really good there’s a bunch of benefits to having it read it. I’m about in the old days Channel advisor at a bunch of clients they created product content for and then they syndicated that content to a bunch of different retailers and one problem was that content was the same at all those retailers so from an SEO standpoint it didn’t look very unique, and one of the things that a I can do trivially is take your master product content and make 10 variants that are. [19:48] Equally human readable but are unique so that you could Syndicate different content to eBay Amazon and Walmart for example which is. Pretty cool and as we talked with mad about last week, you know Goodwill finds is using AI to onboard all their new skews pretty efficiently so I think it’s really good for that and then the last thing I’ll say is there’s a lot of super interesting stuff around computer vision so both, pulling product attributes out of pictures, um using the security cameras in the store to to do inventory checks and to do merchandise and compliance checks and pricing checks, um and stuff like that and using that that inventory to understand customer using those security cameras to understand customer Behavior better even using computer vision to do better loss prevention which loss prevention, is a really big issue with this show and there’s an explosion in organized crime this year and so that you know kind of, predicting crime events is kind of an interesting thing the days a eyes doing so like plugging a i into a camera is yielding I think a lot of pretty interesting use cases for retailgeek. Scot: [20:57] Yeah very cool did you get to see some of our favorite folks. Jason: [21:04] I did I did I saw a lot of past guests I think I made a joke on Twitter which we’re going to have to do a separate show about how sad I am about everything that’s happening on Twitter, but the. The most common thing that happens to me now is I have a loud obnoxious voice that everyone at this trade show can recognize yrg from this podcast and so everyone is super excited and I get tons of compliments I feel bad that you weren’t there because it’s kind of, it feels nice to have all these people recognized us and talk about how we’re you know an important part of their, there we can help them in their job so I really appreciate that and I want to say hi to everyone I, I did cross paths with at NRF it was awesome to meet you and thanks for for stopping and saying hello but then the next word out of their mouth is where is Scott because I’m way more interested in meeting Scott than I was in meeting you. And I have to say that you’re you’re too much of a big deal the coming in or out. Scot: [22:04] No just I’m allergic to the cold and had a little bit of work to do on my side the auto industry’s on a different cycle than the retail industry sadly. Jason: [22:15] Yeah but they are they are colliding have you like Auto Commerce is going to be a big thing. Scot: [22:19] Yes yes was almost all Automotive companies which is kind of out of never did not have that on my bingo card. Jason: [22:27] Yeah they’re going to have to rename it AES or something Auto Electronics Show. [22:43] Yeah as everyone knows my pandemic hobby is trenching US Department of Commerce retail data in Tableau and kind of annoying that in our F ended on Tuesday night, so try to get up Wednesday morning and fly home but I had to wait to leave my hotel room because the 8:30 in the morning Eastern Time on Wednesday the US Department of Commerce published, their monthly retail sales data and this month is particularly exciting to me because it’s the December data so that lets us do two things. Look at November and December together and kind of understand what happened in holiday and then it also obviously lets us Wicked January through December and start talking about, 20:22 as a whole year which lets me retire all my 2021 talking points so so that was exciting. Scot: [23:36] Recap of what what did we learn. Jason: [23:37] Yeah so that’s about a four-hour show but I’m gonna recap the two top lines in under 30 seconds so we’ll start with a holiday so if you add November and December sales which I would argue the best view of holiday is November December January, generate data is not available in a lot of people think of holidays November and December so if we just talked about November and December, and I’m going to take a narrow definition of retail for purposes of holiday I’m going to pull cars out, I’m going to pull restaurants out and I’m going to put gas stations out because it’s a super volatile thing that’s not very tied to Holiday behaviors so November and December sales were up, 5.2% versus last year so from 2021 which was a monster year we went up another 5.2%, now most people were disappointed when they saw that number, big for a couple reasons last year we were up 13.4 percent using the same definition of retail so. [24:38] You know a much lower rate of growth in last year and most people you know are having to comp against last year and they set their financial goals based on last year, and also in the middle of holiday like especially around Black Friday a lot of, third-party analyst publish a prediction they say we have Secret inside data we have credit card data and we think retail sales are going to be 9% or 12% or you know there were all these estimates, there were optimistic, all the digital guys came out and said digital sales are up significantly from the previous year and the inner F came out with these vague statements and said like more people are going to be shopping on Black Friday than ever before so you heard all this good news around Black Friday which made you think. [25:20] This is going to be a big holiday season and then and so you 5.2 sounds like a huge disappointment compared to some of that over exuberant, but to put that in perspective. [25:34] The historical average growth is four point four percent so 5.2% is meaningfully above the historical average, and I don’t want to say I told you so but all of you that attended my webinars about holiday performance, I heard that that I was predicting in that five to five and a half percent even even back then so so there’s a rare occasion of me getting it right. Here’s the piece of bad news about that whole thing that 5.2% was all inflation so if if you adjust those two months for inflation we were actually down 1.8% from last, so the big takeaway from holiday is. [26:12] It was disappointing it was much more difficult to make a profit on this holiday than it has the last several Prophets, so a lot of retailers came in a holiday with pretty robust inventory levels they didn’t sell through their inventory what they sold they didn’t sell it particular High margins, um and so that’s setting us up for a uneasy first half of 2023, retailers have too much inventory and and not enough recent profit so we’re likely going to see a lot of discounting and you know more pressure on on income as they kind of work through all that in. [26:47] So that’s the holiday Debbie Downer the full year is I think a better story the full year we sold seven point one trillion dollars worth of stuff which that’s the first time we passed the seven trillion dollar mark, that’s up 8.2 percent from last year again last year was a monster year, the best year in my my career of retail so, being up 8.2% versus that you know again is a really good story it’s a bad news is you pull inflation out of that and we were basically flat we were up 0.2. Um so through that lens 2022 was not a fabulous year but the one thing I would say is, what’s really interesting is where is retail compared to before the pandemic and cumulatively, retails up 31% from 2019 so so the full year of 2022 is 31 percent higher than 20, um an average year over the last 20 years in retail for a full year would be up 4.7% so. 31% is still almost twice what we would expect over a three-year kakkar so you know not a, knock it out of the park year but still you know very healthy industry on the backside of this pandemic. Scot: [28:09] So if we kind of you know there’s that famous chart you hate and then we reverted to the mean does this mean we’re kind of back on the meat. Jason: [28:19] Because it’s wrong and I get to make fun of it. Scot: [28:21] Do you love to hate how about that are you hate to love I don’t know and the so we reverted kind of back to the mean do you think that this kind of resets and we get back to that kind of traditional growth. Jason: [28:35] I still think there’s some factors yet to play out so I’m not sure we’re going to get completely back to normal for 2023 I think we’re going to, we are still seeing some residual pandemic effects and the main residual pandemic effect we’re seeing is. The spending is still skewing to experiences more than Goods so there was pent up demand for experiences, so we’re you know we’re we’re possible we’re seeing people invest more in experiences and less than Goods, but we’re also starting to see a lot more economic uncertainty especially in the bottom two quartiles and so you know you’re starting to see even kind of lower middle class people, change their purchase Behavior you know you’re hearing in Macy’s earnings that they’re saying their consumers start starting to make some, you know economic trades in their purchase behaviors and so a lot of that’s going to be. Kind of cooked into this 2023 so I don’t think we’re quite back to kind of perfectly the mean but I do think the, the ratio of store sales to e-commerce is likely to look a lot more normal this year than it has the last couple of years. Scot: [29:47] Pretty cool and this is the one that doesn’t really give us e-commerce data. Jason: [29:51] Yeah there’s some loose e-commerce data in there which is why I didn’t quote it but next month they will publish the queue for e-commerce data so that will give us. A full year of e-commerce, you know we’re starting to use these T numbers instead of B numbers in e-commerce. Scot: [30:21] Got it cool we’ll have to do a big show on that one and you can just have a two hours a day spewing data. Jason: [30:28] Why I can describe my charts it’s soup there’s no more fascinating podcast than listening to a dude drone on about a chart. Scot: [30:34] Yeah that he can’t see alright world will put a put a pin in that one and come back to it, on the all right so let’s talk about predictions so I had to go back and one of our many interns research this it was back on episode 284 where we did our predictions and as is our custom we like to rate and review the prior Year’s predictions and then lay down a stake for the next year so if we go I guess you’ll kick it off so you’ll go through my predictions and I’ll say how I did and you’ll kind of chimed in and then we’ll flip. Jason: [31:10] Awesome and are we going to do off of yours and then all five of mine is that the easiest way to do okay. So we’ll start with your first prediction Amazon is going to start getting serious about a Shopify competitor in potentially double down on headless. Scot: [31:27] Yet this was a Miss as far as I know you know what I didn’t see coming was Amazon has had a bit of a rough year in and especially the back half of 22 you know they’ve done some layoffs they’ve, shuddered a lot of their physical stores they stopped their plans for big grocery expansion. I’ll get that get that out on the record here early and yeah they’ve even started shedding warehouses so I think you know what what’s happened is in this post there’s been some really fascinating articles where, turns out they had this automated inventory system and its name is Scott ironically with one t and it. They trusted this thing so wholesale lie that it just went kind of Rogue and did not see the downturn you know this. Track attacking back to the mean and it kind of went Bonkers and so it’s a little bit of an interesting case study of AI gone wrong and that has them having their hands very busy with their Core Business and they have not had a chance to punch Shopify in the nose and in some ways they may not have to because Shopify also had a lot of wind come out of it sales. Jason: [32:41] Yeah yeah I agree and I’m inclined to give you a note that too but if I were making an argument that you got it partially right the argument would be that they rolled out a really interesting feature called by with. And we talked about on the show we had a beta tester on the show that was super bullish on it and it’s kind of a trojan horse that creates them interesting. Problems for Shopify that like frankly I’m still not sure shopify’s figured out what they’re going to do about but that went from a pilot program to full deployment. The week before in our F and it was a major feature of Amazon’s booth and it’s weird they branded the booth AWS but like. The booth was talking more about by with prime than it was a WS and and you know they’re not they’re not in the same divisions Within. [33:31] Um so you could argue by with prime is partly a Shopify competitor, but in the interest of me staying competitive in the predictions I’m not gonna not giving it to you and I will say, of your Amazon commentary is certainly true, but be a little careful like you know people tend to look at some of that and go oh man Amazon’s really flailing like they’re really feeling you know it’s a huge thing for them to cut back on their fulfillment capacity and you know cancel some leases and just remember, they bought more fulfillment capacity than anyone else in the world has in a single year. The year before so it’s it’s not like they’re getting out of retail. Scot: [34:15] You’re spoiling one of my. Jason: [34:16] Find that people over over read into the you know that accurate – news but they think it’s it’s a more material part of Amazon’s business than it is. Scot: [34:27] Yeah I integrated that into one of my future predictions. Jason: [34:31] All right so so we’re going over one I like it so far I’m winning that your second prediction is Amazon puts a hurting on go puff and others go puff gorilla and Joker. Don’t get out of 2022. Scot: [34:48] Yeah I’m going to score this one a win I don’t I think somebody’s out our business and I think go Puffs on its last legs if it’s did it do a Down Round and layoffs and I don’t. I certainly haven’t even used it I don’t know if it’s I’m sure it’s still around but I feel like it is on its last legs and I’m increasingly here in North Carolina like in Chicago you’ve had this for a while I’m increasingly getting offers that say Hey if you if you throw a little bit more in the cart you can get this thing overnight which has been kind of you know I feel like Amazon is really starting to shorten that delivery window in this post covid world. Jason: [35:26] Yeah so I’ll give you a yes for that I do think a lot of the instant delivery companies like pulled out of markets or flat went out of business or left the US in 2020 so I think that’s fair. I’m not sure go puff is publicly position themselves as quite as dire, as you did I could be wrong but they you know they’re the biggest player left standing and and I think they have some some positive and negative indicators. The one thing I would quibble with is it’s not clear to me if they are if all this instant Commerce not working is because Amazon put a hurt on them or whether, it just wasn’t a good business model than enough customers were willing to pay for. Anyway right so I’m not sure if Amazon was the direct cause of all that pain or not but I do secretly think, Amazon has much better service levels than a lot of people realize you live in a wonderful place but it’s. It’s probably not a tier-one market for Amazon I talk to a lot of people in cities that The the vast majority of their orders are delivered same day and certainly the vast majority of stuff I ordered from Amazon, I get that order in by noon and it’s it my doorstep before 10:00 that night and so that still is different than this instant delivery but. [36:49] I think Amazon’s service level is darn impressive and I think you know that certainly you didn’t want to be an investor in instant delivery in 2022. So I’ll give you a yes. Scot: [37:01] Yes Pooh okay. Jason: [37:06] So your third one is metaverse lots of demo videos no Revenue. Scot: [37:13] Yeah think I nailed this one the Facebook has had a lot of Pi interface for spending an inordinate billions and billions of dollars on the Oculus the sales have dramatically underperformed even you know even moderate to light expectations there’s no real use case that’s popped out of here and then just generally and then certainly if we look at our e-commerce world there’s really not much going on here so this one’s been kind of a dud I’m a little bummed because I love AR and VR I just don’t think we’ve kind of come up with the use case I think the wild card on this technology is there’s increasingly detailed rumors of Apple having a device and if anyone can figure this out I think applicant but until they do, I think we’re not going to see a lot of metaverse updates. Jason: [38:01] Yeah yeah I think this is a category that to me like if people are familiar with the Gartner hype cycle it fits it perfectly like. There definitely is a chance that there will be a version of The Meta verse that’s very meaningful at some point but right now it’s wildly overhyped. One could quibble with your in precise language like you say no revenue and of course there are some, some novel examples where there’s a little bit of Revenue and the one that has meaningful revenue is for the kids is real box where you know it’s. Game Revenue it gets its you know ingame credit it’s not like you know people are shopping for real world of goods in the environment so there’s a few things but I certainly think the spirit of your things exactly right that it’s, it’s wildly over-hyped and not. A financial driver in the in the near future and I would even argue nobody can even agree on a definition of what the metaverse is a it sounds singular to fight this pack that it’s it’s quite poor rural. You know a lot of people think the metaverse has to be on web 3 which means it’s open and, Roblox is the example most people use the meta verse which is not on web three and you know a lot everybody thinks of the metaverse is VR and a lot of definitions of metaverse so Ike. Do not require VR so I don’t know I’m cynical in the short term for sure so I’ll give you a yes. Scot: [39:27] Okay. Jason: [39:29] For live streaming goes mainstream in 2022. Scot: [39:36] Yeah, here I was hoping to kind of weasel out with the mainstream so I will point to some successes so what not is a very collectible oriented Marketplace that is all live stream and I think they’re gnd is north of a billion it may be closing in on two or three so that’s pretty mainstream and then I’ve read probably 20 articles in the last 10 days about Tick Tock e-commerce and every time I dig into it there’s no data it sounds like it’s just new so I was hoping to take credit for that in some way but don’t think I can so I’m going to probably score myself a no on this one. Jason: [40:18] Yeah so tricky like I think there’s some use cases where a live streaming has become a thing and collectibles, is certainly one and it does I guess toy depend on what you meant by mainstream here’s the thing the most generous definition of social commerce all social commerce in the US last year was about. 60 billion in total sales and live streaming was likely less than 1% of that 60 billion so I. [40:48] Social commerce isn’t that big a piece of Commerce and live streaming is in a very big piece of social commerce so I through that lens, I feel like it’s not a big thing and fun fact none of the Commerce on Tick Tock is wives. It’s so people do I think confused short form video with live streaming, um and so I tend to think live streaming is overhyped in the US it does work in China but what people don’t understand is, that live streaming in China is, flash deal-sales like all of them come with a significant price offer and the reason that you you want to watch that stream when it’s alive is because, that offer has scarcity attached to it and that offer is not going to be available two hours after the video plays so you have to watch it while it’s being broadcast in order to get that deal, um and you know none of the u.s. versions have really been that that deal oriented and without that deal why have live streaming when you could just record a short form video and, you know 100 times more people watch it over the subsequent two weeks or three weeks or whatever so so for all those reasons, I feel like live streaming has been a little overhyped in the US and I agree with you why I probably didn’t go mainstream this year. Scot: [42:09] Yeah I don’t know Tick Tock could be live stream it’s kind of there’s a stream. Jason: [42:16] But it’s yep are you watching it when the person talks I mean that’s what it boils down to or is it recorded on a server and you watched it days later. Scot: [42:23] I don’t Tick Tock I don’t want I don’t want my get brainwashed. Jason: [42:26] Yeah spoiler alert it’s not last. Scot: [42:29] Okay. Jason: [42:33] There is a live flavor on Tik-Tok but it’s been quite small. Scot: [42:37] Yeah I’m two for two so I’m Batman 50. Jason: [42:40] So you’re to noes to yeses and then your final prediction, is that fabric which is a an e-commerce platform / Marketplace and and the CEO Fazal has been on a show a couple times and you were predicting that they would. What says fabric acquisition so that could mean either that they made a big acquisition or they got acquired. Scot: [43:04] Yeah it was being acquired. Jason: [43:07] Yeah that’s what I said. Yes and I met him at the show and I can confirm that he’s still at fabric. Scot: [43:14] How are they doing. Jason: [43:15] Really well well I think they feel like, there are well positioned and benefiting from some of these headless trends that we talked about and we had a good chat Faso as a longtime veteran of the industry and ran e-commerce at Staples and and some other places so he’s always fun to talk to. Scot: [43:33] Here’s a head-scratcher so facile likes to be called Faisal and then we have a guy at 50 that wants to be Fazal so so and you know you know how it is like I know it’s I cannot get it right because I always it’s 50/50 coin toss but it always lands the wrong way so it’s. Jason: [43:52] Yes I’m familiar with those dilemmas I also really struggle with fabric because his company is called Fabric and then there’s another company called fabric that make micro fulfillment centers for grocery e-commerce. If you like you can have two companies with the same name in roughly the same space. Scot: [44:08] I give him. Entrepreneur credit because he raised a boatload of money when valuations were super high which was smart if it’s enough to get through to the from the peak through the valley to the next week so we’ll see how it goes for. Jason: [44:25] I’m knocking on wood you just can’t hear it because I’m such a good audio editor. [44:39] It’s kind of your historical average right now I don’t know I’m. Scot: [44:42] Usually do better than half yeah it. Jason: [44:43] You’ve done better actually I think that’s a down year for you I think it’s up here for me and a down here for you. Scot: [44:48] Post covid it’s hard to predict what the what’s going on in the world. Jason: [44:53] And and as we have learned doing five years of these as hard as it is to predict something happens it’s also timing is so tricky like very often we predicted something just in the wrong year. Scot: [45:04] Yeah I gave up on Amazon competes with the other shippers and that one still I still think it’s coming. Jason: [45:10] Hundred percent there’s a weird cognitive bias where like after you’ve been wrong once or twice you hate to predict it again even though it probably would be smart the. Scot: [45:18] Yeah yep. Jason: [45:20] I’m with you all right well let’s see if I can hang with you at all. Scot: [45:21] Alright let’s see how you did yeah so your first prediction was you love web 3 you’re going to mortgage your house put all your money in FTS and this token that you were super excited about that was going to the mood called FTX how’d that work out for you. Jason: [45:40] It worked out better for Michael investor Tom Brady than it did for me. Scot: [45:44] Well I don’t know he’s in pretty rough rough time right now. Jason: [45:49] Neither of us are having our best years. Scot: [45:50] Butts. Jason: [45:53] I’ll be different reasons but I feel like you might have slightly misstated the spirit of my prediction. Scot: [45:59] Oh yeah I misread this so it says in FTS web 3 meta 15-minute delivery will be Duds less and ft dollar transactions will happen in 21 verses 22. Jason: [46:12] Yeah so I was down I didn’t think any of those things would be a big deal this year I guess one of those kind of overlap with you because you also didn’t think instant delivery would be a big deal. And I don’t think any of them were a big deal we’ve covered them pretty exhausted lie but in order to make this a fair prediction I tried to put something that was more measurable and so I said in Ft transactions will be down in 2022 from 2021 and. I got to be honest I looked it up before the show and so the good news is I’m right. In Ft transactions gmv for an ftes and in the u.s. in 2021 was 25 billion 25 Point 1 billion and this year it was twenty four point seven billion so just barely down and I have to be honest, I feel like I dodged a bullet because. The way you buy an mft is with a cryptocurrency and the two main cryptocurrencies are each less than half their value. From the beginning of the year and so you would think like, in Ft transaction should be way down just because the value of the underlying currencies is way down but you know apparently like despite the fact that it’s not a mainstream thing it grew enough that I was I almost ended up being. Wrong on my on my number but that’s a long-winded way of saying I feel like that’s a yes. Scot: [47:32] Got it cool so we’ll give you a yes prediction to here in North Carolina we call it Sheen you fancy City people call it she in your prediction was that they would do over 30 billion more than double the previous year so since we’re a year off so you predicted in 2022 they would double a guest from 2020 1.15 billion you check this close and I do so I’m gonna have you self-regulate this one. Jason: [48:00] Yes I nailed it like almost to the penny except that you know they’re not a public company so we don’t we don’t really know the revenue but that estimates for for 20 21 where 15 billion so I predicted 30 billion in 2022 they did a raise in March or may of May of 2022 and they disclosed during that raised that halfway less than halfway through the year they were already at 16 billion in Revenue, year to date, so I was tracking really well and they’re doing another raised right now as we speak and their side note taking a ginormous haircut on that race so the, the May raise was that a hundred billion dollar valuation the razor trying to do right now is it 64 billion, um but they disclosed in the in the deal docks for this raise that they finished the year at 30 billion which is, means that their sales significantly decelerated in the second half of the year but it means my prediction was exactly right. Scot: [49:04] Very good congrats on that one. Jason: [49:06] Yeah and we could be out of time and not do the other other predictions if you want. Scot: [49:10] Well there’s one country showing let’s jump into this one so your third prediction was buy now pay later which we call B and P L is going to lose momentum it had 29 percent growth and 21 and you said it would slow to sub 15 and 22. Jason: [49:28] Yeah and so it depends on exactly what math you’re using but the actual growth rate in 2022 is 48.6% so is that is that more or less than 15. Scot: [49:39] I find that hard to believe. Jason: [49:41] I do too I was surprised. Scot: [49:44] Yeah no I think I’m gonna give you this one because you know the stocks on all these are down clar NE is on life support and I don’t know I feel like these guys the the largest, kind of tie up was Peloton and buy now pay later and you know Peloton is had a really rough go of that in 22 and took all you know down the biggest buy now pay later operator with a firm so I feel like he just was a yes. Jason: [50:17] Okay well I’m not gonna argue with you I feel like they got a lot of, negative momentum for a variety of reasons in in 2022 and right now we’re seeing their valuations go way down because their default rates are starting to go up and what I’m noticing is, they’re all trying to Pivot out of buy now pay later into other, other retail services but like depending on how much of a stickler you might be like they still apparently sold a lot of stuff on buy now pay later last. I’ll take the yes or at least I’ll take a half a yes. Scot: [50:48] I’ll give you the win but I’ll scold you for bad predicting like never get specific with percentages. Jason: [50:53] I know I know well I was I feel like so many people make these like lame predictions that I was trying to be super specific but I agree that was that was dumb alright thanks man you should great all my stuff. Scot: [51:02] Now this next one is kind of a Whopper so this is this is kind of my favorite so you predicted Amazon would open 100 grocery stores how’s that one going. Jason: [51:15] It’s great they opened one store and that store opened 365 times. But if you’re doing store count. I missed it pretty substantially that I think they have 44 stores in the US and 17 stores in the UK so well short of 100, the end and I’m way less optimistic that they’re going to invest in that that concept, now than I was a year ago when I made this prediction so that’s definitely a no the only fun fact is compared to any other retail Concept in Amazon this one did pretty well because they literally closed every other one, and they’re they’re laying off a ton of the retail people like right now as we speak unfortunately so. So I think that’s a clear no it does not seem like the immediate future for Amazon is in brick and mortar. Scot: [52:07] Yeah yeah they’ve really pulled in the horns on that one. Jason: [52:11] Fun fact then this means nothing no one should interpret this but Amazon close their bookstores in 2022 and Barnes and Noble was opening new book store some joint too so I think there was a time when we would have said that could never happen. Scot: [52:25] Yeah one of these is not going to be going well okay your last prediction was that last you there would be a last mile delivery acquisition of some kind you mentioned instacart v0x delivery and ship iam. Jason: [52:41] Yeah and none of them were acquiring so I think, I miss this I mean if you go deep cut enough I found there’s a couple like four million dollar transactions that happen but none of the name ones did anything there they did some fundraising the the premise behind this, this prediction last year was, that one of the ways that a lot of e-commerce sites deliver packages is not exclusively through FedEx UPS in u.s. post office, that increasingly they’re using a Federation of a bunch of small last-mile companies and that often there’s a middle man that’s helping aggregate all those small a smile companies that make it easier to ship with them, and so my thought was that’s becoming a more important. [53:27] Part of the e-commerce echo system that somebody’s going to try to make a big play there and kind of roll some of them up or acquire some of them and and you know kind of add them together and make something more valuable, um and it didn’t happen last year and what’s interesting is, Fedex rates and UPS rates are going way up this year like one of the conversations I had with a lot of e-commerce sites, last year was that their last mile costs are going up at an untenable rate so this. This methodology is becoming more important and more popular so this is a classic example, if I were smart I should probably take this this prediction and double down again on it for this year but spoiler alert I did not do that I just took the no and I moved on. Scot: [54:12] All right so out of your five you had sixty percent so you had three correct and to wrong so you you win the year so congratulations you get the virtual trophy you get an mft, ironically you get the nft the Jason Scott exclusive one of one in Ft. Jason: [54:38] I’m super excited about that for all our listeners I only accept in ft’s that are minted on proof of stake blockchains I don’t accept proof-of-work blockchains because they’re an ecologically. Scot: [54:51] So it’s Solana for you all right I know we’re Up Against Time the shows always go a little long so I’m going to kind of lightning round my predictions for 2023. [55:15] All right so number one Amazon uses the this 2022, perceived setback that I think’s way overblown you kind of mentioned it at the top and, I think what’s going to happen is sure e-commerce is going to revert to the mean but under the hood I feel like they’re going to be taking share at a really aggressive clip, the reason to borrow on shipping the selection of things that are near you is going up, I have through my day job I can see that they are making a lot of good changes with last mile delivery they’re still putting a lot of effort into that and improving it and making it better all the time so so basically I think they’re going to you know if I have to, get a little more specific I think they’re going to take a fair amount of share in 2023 from the rest of e-commerce so they already are like more than half of e-commerce and I think they grab a chunk so that’s kind of how I would measure this is what percentage of e-commerce Amazon has and I think they’re going to take, pretty good chunk. Jason: [56:19] I like it cool. Scot: [56:20] That’s my first one number two is I think Shopify is going to be acquired you know so I think they’re doing this headless thing the first party piece hurts them and a lot of you know Facebook so that’s a natural Binding Together they’re there we’re going to talk about it in a future show but they’re kind of they have never really executed on this idea of a Marketplace they’ve had a lot of weird cultural things where they talked about getting rid of meanings and then like their hole. Admin interface was down for days it feels like something’s going on they’ve had a lot of people a lot of turnover they’ve gone totally virtual I’m not a fan of that I think it’s hard to be super Innovative and have to whatever the world changes have to hop on a DSM calls to figure out what everyone’s thinking so I think I think they’re they definitely we’ve hit Peak Shopify probably you know in 2021 and this is when it starts to be time maybe some people say hey this wouldn’t be a bad time to to tap out here, we’ll see. Jason: [57:24] Wow that’s awesome one just quick curiosity one problem is the valuation like while it’s gone down a lot is still pretty high like so the pool of acquirers is pretty small or are you thinking the valuations going to keep going down low enough that there’s. That more people might take a shot at it. Scot: [57:42] Yeah I think I think even at this valuation there’s probably three or four acquirers and I think the valuation could go down further. Jason: [57:48] All right cool I like I love the big bold ones. Scot: [57:51] Yeah you’re going to hate this next one so this one is where everyone thinks AI is hype I’m thinking there’s going to be a big innovation we don’t see it from these new AI engines specifically right now the state of the artist G PT 3, I know people have seen GPT for and they all can’t express enough how game-changing it’s going to be so I think there’s going to be something in the e-commerce world not this is like so it has to be kind of a big idea so I can’t be just like a chatbot or like another recommendation engine but I think there’s gonna be something kind of, big here that’s hard, it’s so different that it could be hard to I can’t tell what it’s going to be but I think something big is going to happen here that kind of makes our heads explode so that’s my prediction that we actually see a really, disruptive piece of technology kind of AI that impacts the e-commerce world. Jason: [58:47] Okay I like it I don’t have a other than it’s going to be higher so you hard to measure but I guess we’ll know it when we see it. Scot: [58:56] Yeah. Yeah and then since we’ve got great each other gives you a lot of fodder to push against ich number for e-commerce is going to accelerate back so I think and the first half will have these recessionary wins I’m a eternal optimist you’re typically on the pessimist I think we’ll have a soft Landing maybe we don’t have much of a recession and then in the back half will be kind of through this post covid Hayes hopefully I think part of this prediction in Furs that inflation will will kind of get under control and we’ll see e-commerce go back to kind of its average growth rate which has been historically 15 percentage so that’s my prediction there. Jason: [59:38] Okay yeah I think they’re a bunch of people that are like kind of e-commerce growth is tapped out which is I think they’re wildly wrong so I certainly take the bullish side of that one for you. Scot: [59:50] Yeah and then this one I have to give props to my daughter I was she was looking over my shoulder and I was doing these and she said I have one and I said you don’t understand the stakes I’ve got to be Jason because I did bad this year and she said I don’t care I’m 16 and I spend a lot of time at Sephora and Ulta this is her speaking not me I also do because I’m with her but now she can drive so I’m spending less time there and I think they’re going to come out with some kind of a subscription model so, there you go I don’t know any specifics but that is her hot take. Jason: [1:00:21] Okay and and by that you don’t mean they’re going to transition their whole business to a subscription you mean they’re going to add some kind of subscription offering okay. Scot: [1:00:28] Yeah yeah and you know I was thinking you know what was that one there was a box that was Beauty used Beauty Box every over the name of that. Jason: [1:00:38] Yeah there. Scot: [1:00:39] I don’t think I made it yeah and I said you mean like that. Jason: [1:00:43] Box is that what. Scot: [1:00:44] Birchbox well very good man yeah old school way to pull that one out and she said no it’ll be more like I can go to the store and they’ll I can I can pick up kind of like they’ll pull stuff for me that comes in and I could just go to the store and it’ll be already there for you. To understand. Jason: [1:01:05] Clarifying question because far be it for me like I want to learn to like and your daughter certainly have the future behavior that neither of us understand yet. Is she thinking like that in the same way that Birchbox was kind of a discovery thing she’s thinking this is some kind of. Discovery thing of new products because I actually think Sephora already has a like you know if you use this amount of moisturizer will automatically send you a new thing a moisturizer every three months. Scot: [1:01:35] This was tied more to influence your site so I think there’s these influencers and they each have kind of staked out you know there each store has a set of influencers and I think she’s starting to see them come out with seasonal products kind of like a yeah and I think that it’ll be a subscription to that kind of thing. Jason: [1:01:52] That makes total sense that would be new and I. Could seem cool a lot of the traditional subscriptions lately have not done as well as some of us might have expected but so yeah this this will be interesting kind of like the next gen of those Discovery boxes. Scot: [1:02:09] One thing I did notice in my last six I think this is for they have a end cap that says inspired by Tick-Tock and it’s always empty. And as estimate I was like are they she’s like oh every time they put something there so I was up and I was like wow that’s pretty amazing. Jason: [1:02:28] The Tik Tok made me buy it in cap. [1:02:38] I’m 100% with you social commerce is a thing and it’s mostly not about people ordering stuff on Tick Tock it’s about people discovering stuff on Tick Tock and then buying it from Sephora. Scot: [1:02:47] I know I was trying to get some partial credit. Jason: [1:02:51] Yeah I like it though all right I think those are great. Scot: [1:02:54] And then in the spirit of my third prediction which was a I will change the world I actually asked chatgpt to make a prediction and it said.

Chatgpt: [1:03:04] Based on Trends and current developments in e-commerce it is likely that we will see continued growth and expansion in the industry with an emphasis on mobile Commerce. Personalized shopping experiences and increased use of Technologies such as artificial intelligence and virtual reality. Additionally there may be an increased focus on issues such as sustainability and social responsibility in e-commerce. Scot: [1:03:30] And when it said that I was thought I thought you were punking me I thought you were on the other side of the chat because I was like that’s exactly what someone at publicist would say. Someone with a really long title like eight words that’s the exact kind of synergistic linguistic word salad that they would they would throw out. Jason: [1:03:52] Yeah there’s nothing super tangible in there but it sounds really good That’s a classic chatgpt answer. Scot: [1:03:58] So one way my my one prediction could come true as if you’re replaced by an AI so I’ll just I’m not that’s not a prediction is just one way I could cheat my prediction. Jason: [1:04:08] So fun fact is some people know I have a Forbes column and my my most recent Forbes article was about the demise of e-commerce being overhyped. Often I read those articles from scratch myself sometimes I write an outline or a first draft and I send it to a pupusas copywriter and they send me back a first draft and then I edit it and. When I do that I have to do a lot of work because of the copywriters are really talented writers and use proper English and I’m really. Less sophisticated so to put it in my. In my voice I have to change it a lot so this most recent Forbes article I had chatgpt writer and I said write a Forbes article in the voice of Jason Goldberg that has this title and makes these Five Points. Um and so it didn’t really do any research for me it didn’t like pick any of the answers because I gave it all the answers in my prompt and the data I wanted to support it. It was kind of like I handed it my outline and had it right the first draft in my voice and it was way closer to exactly what I wanted then the ones I get from the copywriter so I probably will never write a first draft from scratch again. Scot: [1:05:25] Does that mean that copywriters going to lose their job. Jason: [1:05:28] No she’s gonna move to higher value stuff from now the actual smart people to do some good with proper English. Scot: [1:05:36] Unrelated we going to have a new new podcast host. Jason: [1:05:42] The yeah that we’re way over on time but like the the really scary one is these awesome avatars that can make, I can learn your voice and then sound perfectly like your voice are now out in the wild from several companies including Adobe and, and I conveniently have 3:00 of my own voice and your voice on wreck so I think I can make the two of us say anything we. Scot: [1:06:07] Yep I think again. Jason: [1:06:09] Awesome all right well those all seem like good predictions that seems like you have a very viable chance of coming back and getting your nft trophy back for me, I will whip through mine, I suffered greatly because we are recording this late I wrote my predictions of the beginning of the year and I said Party City and Bed Bath and Beyond are going to declare bankruptcy, and unfortunately pretty soon declared bankruptcy yesterday in Bed Bath and Beyond hasn’t cleared yet but they’ve announced publicly that there, they’re likely to so I can’t really use that prediction but I’m going to say that there are going to be at least two other retail bankruptcies besides Party City in the in the space this year, um you know I think Bed Bath and Beyond is likely to declare bankruptcy but I also think we might see some of the kind of model-based apparel retailers or. There’s a few other other retards I have my eye on so I do think we’re going to see a little bit of attrition in the kind of traditional brick-and-mortar retailers. Um so I’m starting off with a positive note. Scot: [1:07:16] So retailers go out of business you win all right. Jason: [1:07:20] Yes that’s I’m yes I’m betting on. The second one I’m in a way doubling down on my buy now pay later I wasn’t sure you were going to give me credit for last year so. If they were hurt and swelling down last year I think at least one of them has to go away this year so like I’m not sure anybody goes away via a. An actual bankruptcy but I could see a roll up or merger or acquisition of some of these guys so I’m saying at least one of the top four, Kleine a firm after pay or says they’ll don’t don’t exist as a standalone entity at the end of 2020. Scot: [1:08:02] I think that’s pretty pretty safe. Jason: [1:08:07] All right in full disclosure I had a really unsafe prediction there that I changed to this. My third prediction may be opposite of you you think shopify’s gonna struggle I’m I don’t necessarily disagree with that it’s interesting to think they might have peaked last year, um but a offering that they haven’t made that they’re crazy to not make and I am pretty I’ll be shocked if I don’t see this year is. We see some kind of, aggregated retail media network from Shopify so you’re one of the million stores on Shopify you can opt into showing ads, on your store and advertisers instead of having to buy ads from Individual stores that would all be too small and scale to be meaningful, can buy ads from a aggregated Shopify interface that then. Get distributed to all those sites like very similar to like Google AdWords but in the Shopify echo system. Every other retailers kind of monetizing their traffic, we’ve seen some other products now we’re shopify’s aggregating stores so there’s that shop app there’s now an aggregated search in that so I just think it’s a no-brainer that Shopify to try to defend themselves from, from Amazon that’s making a fortune on retail media networks is going to try to launch an ad product in 2020. Scot: [1:09:33] Yeah we have a guest coming up a little bit of a tease what we call in the podcast Biz at ease we have a really interesting guest that’s going to talk about an R MN. Jason: [1:09:45] I love it will conveniently I feel like they come up somewhat in my next prediction as well which I think in in aggregate metal Google and Tick-Tock lose advertising Revenue in 2023. Um so we’ve talked a lot about the the negative, mobile privacy impacts on meta and Google Tick-Tock has actually been the most robust fastest growing, platform of the of the traditional social media networks and 2022, but I actually think they’re going to run into more and more concerns about the Chinese ownership and these like partial bands and all that sort of notes and there’s a lot of new, opportunities for advertisers to spend their money so I think these retail media networks are starting to take real dollars Microsoft launched a retail media Network, at NRF last week and there are new social media networks that you may be familiar with through your kids but that most adults working our industry have never heard of, that are now getting quite large and out and growing more rapidly than the tick-tocks of the world and that’s things like be real, um I think by the time at all Nets out I think the big three met a Google and Tik-Tok have less less share of the add digital ad space, next year than they did this. Scot: [1:11:08] Kumar you big on be real. Jason: [1:11:11] I am not because it wouldn’t be real for a over-aged dude to be on be real. Scot: [1:11:18] Okay good so you are. Jason: [1:11:21] Be kind of creepy. Scot: [1:11:21] By not being on beer. Jason: [1:11:22] Exactly the way for me to be realized to stay far away from it but I like to watch age appropriate people that are using it, and then my fifth prediction there’s a little salt in the Scott was wrong about live streaming is that live stream e-commerce still won’t be meaningful in 2023. So and I’ll make it like slightly more measurable going back to my that stupid way to predict in the future comment from earlier so last evening still isn’t going to be 5% of social commerce Revenue next year. For all the reasons already talked about like it’s an itch it. [1:12:02] There’s a great use case which is 121 Commerce as sales people helping people in their home that’s a live streaming I think there’s Collectibles and Flash sales and you know some of QVC is live streaming stuff like that but there’s not going to be enough to really move the needle, and I think marketers would be a lot smarter to be investing in in social discovery and the influencers that your daughter is talking about at Sephora, then they would be to make a live streaming product in 2023 and I did not have chat gbt make any of my prediction so I thought just for fun. Right if I were Scag Scott Galloway what would my, my big shocking prediction be and I thought because he likes to do contrarian things and so my foe bonus prescription some predictions, is that Jeff Bezos comes back to take over Amazon this year. Scot: [1:12:55] Yeah that’s he’s really dropped off the radar I may not be tracking it but I haven’t really heard from him for a while he was last seen on a boat in a bathing suit. Jason: [1:13:03] Midlife crisis and I feel like it’s almost over I feel like the stock would get a big bonus if he came back he handed the reals rains 2nd jassy on a specific day in May which was the anniversary of when Amazon was founded, and so I think it wouldn’t be surprising to see him maybe not like. Show Vandy Jesse out but maybe he comes back as CEO and Andy keeps the president title or something like that. Scot: [1:13:32] This is what Bob Iger did it doesn’t he kind of gave the reins to his dude left and then did nothing about talk bad about him and then the first sign of weakness came in and kicked him to the curb so that’s you know it’s good for the ego it could be part of this midlife crisis. Jason: [1:13:45] No I do think that was inspired by Disney I will say. Jeff and Andy seem way less acrimonious and more collaborative so I don’t think it would have that same I picked you as my successor and now I’m going to stab you in the back and take my job back from you kind of vibe. I did see an interview with Andy Jesse shortly after that Disney thing and the interviewer joked he said you seem like you’re a lot safer than Bob Iger. We have certainly lived up to our reputation as being long-winded we’re a little bit over time but this is a super fun episode we’ll put all the predictions in the notes so you can you can see them if you don’t want to listen to the whole thing and I’ll put a note up front that if folks want to jump the skipper first 30 minutes of updates and banner and get right to the predictions that you can do that as well, so I want to thank everyone again for putting the time in and all the other great comments and feedback we got at the show but you know if you could do us one extra favor and write some of those great comments and feedback you gave to me live, in a iTunes review we would certainly appreciate it. Scot: [1:15:00] Yeah and thanks everybody we appreciate you staying tuned for our predictions would love to hear your predictions tweet them to us LinkedIn Facebook or for Jason you can be real at him and he’ll watch someone else read that and until next time... Jason: [1:15:16] Happy comercing!

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EP300 - GoodwillFinds CEO Matt Kaness

In this interview, we cover the sale of ModCloth to Walmart, Matts's subsequent work at Lucky Brand and Afterpay, and his new role as CEO at Goodwillfinds.

Goodwillfinds.com is an e-commerce site, which sells previously owned merchandise, which has been donated to Goodwill. We cover many of the tactical challenges (onboarding SKUs, product content, fulfillment, and curation), as well as the opportunities of this new "CircularCommerce" space. We also get some of Matt's predictions about what's coming next in digital commerce.

Episode 300 of the Jason & Scot show was recorded on Wednesday January 4th, 2023.

http://jasonandscot.com

Episode 300 is an interview with Matt Kaness, CEO of Goodwillfinds.com. Matt was formerly on episode 79, when he was CEO of Modcloth, which later sold to Walmart.

Transcript Jason: [0:23] Welcome to the Jason and Scot show this is the much-anticipated episode number 300 being recorded on Wednesday January 4th, 20:23 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 and Scot show listeners Jason not only is this the first show of 20:23 it's a big milestone for us with episode what better way to celebrate than having one of our oldest friends for both you and I personally but also to the show back for an update Matt kaness he was last on the show back in episode 79 I think many listeners will remember that one and certainly your mom who's one of our biggest fans and back then he was CEO of ModCloth, a lot has changed since then so we're looking forward to getting an update some of the highlights Matt help sell ModCloth to Walmart he was exact chair and interim CEO at Lucky Brand he's on several boards yeah I've been advisory to several companies and since September of 2022 he has been CEO of goodwillfinds.com Matt welcome back to the show. Matt: [1:35] Great to be here guys thanks for having me. Jason: [1:38] Oh my gosh Matt we are really excited to catch up it seems like if you factor in the pandemic your last episode was about 15 years ago if I'm and so happy I'm happy to report we've added a bunch of listeners since then so before we jump into it can you kind of remind the listeners about your background and how you got in e-commerce. Matt: [2:02] Yeah have you too I like to think about my career or having two careers to date the first one was, very foundational for what I'm doing now but very quantitative, process-oriented mechanical engineering patent law Manufacturing, Ops Consulting things that had nothing to do with retail or fashion or e-commerce and then I. [2:32] Fell into the category when I was a full-time consultant at Burton Snowboards about 16 17 years ago, and fell in love with lifestyle Brands and have, try to stay in that lane for the majority of that time period since, from Burton Snowboards I went onto Urban Outfitters was there for close to eight years up sensibly and I had a growth roll my last title there was Chief strategy officer and then from there I went to ModCloth, where I was the CEO for three years and was running the company when we sold it to Walmart I will say that, I've been in hindsight found myself attracted to these amazing consumer lifestyle brands, that are experiencing inflection points either in their business or in the industry when I was at Burton snowboarding was really for the first time finding a mass audience crossing over into, the Olympics the next games and, when I was at Urban it was the rise of Web 2.0 and I got to ride that wave my entire time there and really, I'll be on the Forefront of pioneering you know what everybody know of calls omni-channel. [3:59] ModCloth the founder of their Susan Koger was one of the pioneers of inclusive fashion and so I felt personally accountable to try to scale that and I think we, if once the industry specifically plus size women's fashion and you know today you look around and it's become pretty normative, for Brands to design into extra extra small to 4X and I'm really proud of the work we did at ModCloth being on the front end of that and then. I do some Consulting work at after pay where buy now pay later was really just becoming a thing, we're younger consumers were focused more on debit versus credit products so with really fortunate to get connected with that team and enjoyed, partnering with them and being an advisor and then you know what I'm doing now at Goodwill where secondhand is really having a moment, in the culture and getting a chance to come in and lead a ground-up startup for the Goodwill Network and helping them to. It's a digitized so to speak and you bring this new Marketplace into the world, it's just for me it's like the next chapter in that really fortunate career second career that I've had. Jason: [5:23] Very cool and I know some of those roles were Bay Area based but you are a Philly guy correct. Matt: [5:29] Philly guy born and raised I'm probably on the short list of people who have moved back to Philly twice. I was in Boston the first time when my wife became. Preggers with our oldest and we wanted to be closer to family and then the second time was when we were in the Bay Area after I left Walmart, we had a break in the action and our oldest was about to start high school and we decide we want to be back here. For the high school years but we've lived all around and I'd obviously travel a lot for work so I have an affinity for the bay area as well as some other places around the country but but Phillies the hometown. Jason: [6:14] Yeah but I'm assuming it's Philly sports teams most importantly. Matt: [6:18] I have been an eagle season ticket holders 2000 yes. Jason: [6:23] Awesome and for people that don't know Philadelphia and Pennsylvania as a whole is a is is a weird e-commerce concentration Point like there's a lot of e-commerce kind of was born or gravitated in the area so I think of like Mark Rubin and Dick's Sporting Good and in Pittsburgh and urban obviously was a huge player there was Urban your first like hardcore e-commerce experience or were you doing a lot of e-commerce at Burton. Matt: [6:56] I was not at Burton Urban is really where I started to cut my teeth on e-commerce. Direct to Consumer more than e-commerce it was really about this when I got there this billion dollar Consolidated Enterprise across there are three main brands, Urban Outfitters anthropology and Free People and the business had started as a catalog, division of what was you know let's call it 95 percent of the sales came through their store Channel. For retail versus direct to Consumer and so when I got there or there was a there was a. [7:43] 100 million Consolidated direct-to-consumer business which was split between catalog and e-commerce, but it was nascent it was not a strategic focus and then you know the founder of their dick ain't really had. This put a natural understanding of consumer behavior and where the industry was going and he had a vision for how to scale the business multi-channel and so we were all, trying to make that that future reality every day for the eight years I was there and we had a lot of success going back to your point about Pennsylvania and Philly first round capital, one of their there I believe their original headquarters and then one of their major offices, is in Philly and so I think I think a lot of it stems from their presence as well not just decaying and Reuben and some others, but also Philly from a talent perspective is kind of like a six suburb or borough of New York, where you get a lot of folks in New York and then they realize that. It's just the standard of living the cost of living is so much better in Philadelphia and so you get a lot of transplants to come down to Philly as well working in e-commerce. Jason: [9:11] Yeah and I want to say I met you I think we all met on the shop dot-org board when you were at Urban later in your your tenure Urban and some of my Fondest Memories another good friend of the show Billy met who at the time was at Abercrombie is the two of you like heckling each other about like your two brands. Matt: [9:34] Yeah like that was that was really fun for me because you know Urban. Um was pretty insular you meaning that we were so obsessively focused on the customer, and on the fashion trends and on what we were doing internally, that we never really thought about competition so we didn't spend a ton of time looking around the industry, so for me that was that was kind of a an introduction to what else was happening across the industry and then Billy occasionally would call me and say. Hey you guys make me look bad because you just had another great quarter ecomp rowing and you know your your results are now The Benchmark that I have to deliver against. But you know what I what I found in that shop or Community which is now part of NRF, is that it was not very competitive it was very collaborative I couldn't believe. [10:46] How much everybody support each other and wanted to share strategies and ideas and Etc and I think that's one of the things that really drew me into this career path on the digital Commerce side, versus pursuing merchandising or. We're kind of the brick-and-mortar offline space is it's just how, how great that the digital Community has been in the US that I've experienced so that's one of the one of the things that I try to do now is to make sure that. Making myself available I'm kind of giving back and spending time with folks and helping them along and sharing ideas because I know that you guys and others certainly do that for me way back in the day. Jason: [11:32] Yeah I feel like we all have done that for each other and I feel like we've all obviously benefited greatly from that community, and so then you leave the Eagles behind and you go join what at the time was a Founder led a venture back pure-d to see is that, a fair characterization for Vermont cough if when you. Matt: [11:58] Yes my father my father is a pure pointy Taylor yeah. Like 10,000 uniques on the site all third party. The company was vertically integrated so homegrown Ruby on Rails codebase e-commerce. Order management system warehouse management system all the way down to the call center and the warehouse it was, um pretty pioneering on the web services side as far as. [12:35] Look it was an early social commerce player as far as leveraging Pinterest and things that you could do with. Facebook and some of the other platforms Tumblr to engage customers and get them to participate in the shopping experience we were one of the first to integrate, ugc from customers into the shopping experience into the carousels on the website, um we had personalization that was driven by customer reviews that were captured in the website versus outsourced to a bizarre Voice or the like so it was the technology is pretty pioneering, the business was was very underdeveloped and the brand I felt was. Had a lot of opportunity to broaden its appeal when I got there so it was a little bit of a turnaround, financially what I'm joined which having now done this a few times there's always a reason they bring in an outside CEO. Jason: [13:44] It's not because things are just going awesome and they just want to share the awesomeness. Matt: [13:47] Yeah I can't I can't think of a single time that CEO in a business that's humming and doing great he says you know what let's bring in somebody else to do this so I. Jason: [13:57] I think Andy jassy is saying that about Amazon right now by the way. Matt: [14:02] Yeah yeah yeah what I mean there's there's a there's a lot of chatter about looking at. It was on the Facebook and Tesla and what those Founders were doing the last couple years selling stock so I think they kind of all knew what was about to happen. But you know just quickly on ModCloth I'll say that you know we were able to quickly come in. [14:32] Turn around the business financially but more importantly we pivoted it to what then was called a DM BB model, a digitally native vertical brand model which was just meant that the vertical piece that you were procuring designing selling your own product or exclusive product versus, third party which you know in the world of Amazon it's really hard to scale a business that you know what you're selling you can find on Amazon or other larger marketplaces, so we build out a design studio and sourcing operation weary platform the entire Tech stack we developed, a showroom concept similar to what we're being bonobos had developed and tested that and rolled that out and had a really aggressive growth plan against that we went out to raise money and her wound up, getting an offer from the team at jet.com that 6-month previous had, I've been sold to Walmart and they came in and made an offer and the board accepted it and so we sold it. And and I stayed on at Walmart for a year and oversaw our integration into that that ecosystem. Scot: [15:51] Cool the that was kind of a chain reaction right where you guys several companies they Acquired and did you play a role in kind of that roll up. Matt: [16:01] We were like the third or fourth of six or seven Acquisitions and they did within a year and a half two year period. And then as part of my year there I did get involved in some of their business development MMA, conversations and and I did spend a little bit of time helping them, on one of the further Acquisitions but you know they what I learned about Walmart when I was there is. They have such a strong culture they have a real clear view of who their customer is and why they're serving them and you know I would tell you that. The Acquisitions that spray that they went on those two years was really a catalyst for. Something that W Mellon said at a meeting that I attended where he talked about convenience. [17:03] Being valued as much as low-cost in the kind of the online or multi-channel retail environment versus pre-internet, and so they had to find a catalyst under Mark Lori to accelerate their the cultural change, to understand how customers writ large were valuing convenience as much as low-cost when their Heritage had been, Yoda Point technology to make improvements in supply chain and sourcing and Merchandising so that they could always win on price now they had a win on price and convenience, and so though the individual Acquisitions You could argue whether there was an Roi on them or not against the purchase price. I would say that. Internally it was a massive success in creating that kind of cultural change that Doug. Mandated from. Mark and and then you know I was only there a year and I left but just watching what progressed and if you look at the moldable on Walmart stock I think it's hard to argue that it wasn't a success. Scot: [18:18] Yes tricky with Acquisitions you can't just look at the you know the interior ModCloth business you have to look at the whole halo effect and the stock price yeah there's a multi-faceted way to look at these things that's kind of complicated. Matt: [18:32] Yeah I think any business that they could grow if you could grow organically in definitely I think most businesses would do that there's a reason why companies you know use MMA to your point. Scot: [18:46] Did some point I think I saw a ModCloth working to the stores where you there for that. Matt: [18:53] No no that I left before any of those kind of process integration initiatives occurred. Scot: [19:03] Yeah and then didn't they do they sell it back out do they spin it. Matt: [19:08] Yeah they sold it back out there were some after I left there were some further leadership changes that occurred and and they wound up the best thing it and selling it to I want to say it was a fermented New York. Scot: [19:23] Like a private Equity Firm or another. Matt: [19:24] Yeah I think so yeah. Scot: [19:28] Did you didn't want to jump in there and take it over again usually they call the previous CEO I bet there's an 80% chance you got a call. Matt: [19:37] No comment. Scot: [19:41] All right we found something you don't want to talk about good it's part of my goal on this show is to see if we can we can find that you have any family safe Mark Lori stories I've spent a fair amount of time with him he's a he's a pretty wacky dude. Matt: [19:56] I mean I didn't spend that much time working for him but I mean man like talk about somebody who just has total belief in himself and the team and what's possible, and so much energy for. For Commerce for startups for Innovation so I mean it's it was contagious working for him, um working for his team's I wanted to takeaways I had for my time at Walmart and my time working with. [20:32] With Mark and his jet team is I just didn't have that kind of passion for the mass-market the way that, you had to have to be successful working at a Walmart or working at a jet before the acquisition, yeah I love the specialty space I love you know the Branded premium space I love, Yoda kind of the Middle Market where it's not based on price and it's not luxury it's somewhere in between. I just find that that it's super creative there's lots of opportunities for differentiation. There's always new things that you get to learn but you know Walmart I got there was a camera don't quote me on the exact number but. [21:27] Like there was a conversation about like how many millions of American flags are they going to sell between Memorial Day and and. And Fourth of July. [21:38] On one of their promos and I was just like I couldn't even fathom the scale of having to move that many units and so, yep so for me it was kind of a validation of the lane that I've been in and and enjoyed being in and so when I left. Eventually wind up going to Lucky that was kind of part of the calculus on my part was to get back into the into that that category that Wayne of specialty. Scot: [22:07] My one of my first Mark Laurie experiences I was at Jet and he was telling us how the Company motto was billions or body bags and I was like that's kind of a weird way to motivate, and then I talked to several employees I was like how do you like it here and there like billions of body bags that like they were just like it was a mantra like you know that they were just so focused on it was either going to be 0 or this huge outcome and sure enough it was billions. Matt: [22:31] Yeah there's there's definitely I mean I think think he was a successful High School athlete so there's definitely a lot of rah-rah with with him in the team it's that's not my personality I. ModCloth one of the investors accused me of being two column in the boardroom. They said you know Matt if you had slammed on the table a little bit more you know and I'm sitting there like like. That's the that never crossed my mind trying to make an argument to do something required me slamming my hand on the table. Scot: [23:14] A tantrum yeah. Matt: [23:15] My voice yeah but maybe that's Versa tween you know a founder and yeah an operator. Jason: [23:23] Scot was definitely a table Slammer. Matt: [23:25] I don't believe you. Scot: [23:26] Like man I have an engineering background and they drummed that out of us in those four years. Matt: [23:33] Totally yeah I think you're right I think the scientific method does not allow for that that level of emotion that come into into the argument. Jason: [23:44] Yeah but I will say a lot of mechanical things can be fixed by hitting them with a hammer I will, the so I'm super grateful that you guys didn't throw Mark Glory under the table because I at the moment have to totally pandor to him because his new business he has Starbucks trucks that will drive to your house and deliver coffee to your house, so I like I feel like I need to stay in his good graces, but so so the sale happens you transition out of ModCloth you've you've got kids in college and or in school and no source of free clothing so I'm guessing that's what drove the, you're interesting lucky brands. Matt: [24:28] Yeah well I got to say. When I worked at Urban my wife definitely took advantage of the anthropology discount. [24:43] And I act funny funny and true story, when I was considering the opportunity at ModCloth I was having a couple other conversations in the in the fashion space. And I showed my daughter who at the time was probably about seven or eight I showed her the apps for the shopping apps for, the three businesses that I was talking to and I won't say who but there was one in particular based in La that she was like Dad no way she was like you cannot work selling that fashion. But she approved of ModCloth and so so I got her endorsement so yeah when I went to Lucky it's really I wasn't necessarily looking. You're back into fashion as much as I really thought that there was this route there's a unique opportunity with lucky they were. Over a billion in gmv which is to say the direct to Consumer wholesale and the value of their licensing business in the market was over a billion dollars. So brand revenues and net revenue is like call it 650 million and it was independent. [26:08] And there were not a lot of businesses at that scale. In the u.s. that still were independent versus part of a conglomerate. [26:21] And we're had already gone public and so I had been friendly with one of the partners at Wintergreen. Who called me about the opportunity and after spending some time with them talking about it I said. You really need somebody in LA full time in the arts district where they were headquartered and I'm not moving to LA and moving actually back east and they said. Hey would you come in and manage the company to get us through holiday while we won for somebody. And also give us a strategy like a like a financial model a business case three-year strategy. And so that's how I initially got involved there was more as like a board advisor interim manager and then. By January of twenty I'd really seen this amazing Lane. For an older Millennial younger Gen-X. That we could reposition Lucky Brand to be a cause marketer the company did a tremendous amount of good work in Downtown LA taking. Old Denim and. [27:50] Giving it. Nonprofits that work with the homeless population there for clothing to for installation. And then other other efforts to help that population, and so I felt like we could reposition lucky to not mean like going to the casino getting lucky but meaning gratitude. Like I feel lucky I made it I have the ability to spend a hundred dollars in a pair of jeans and I want to support. [28:27] This this amazing company that does all this good work and so. That I had this vision for how you could reposition the brand the business was running like it was 2005 as far as. Go to market so there was a lot of heavy lifting that had to be done around digital transformation around merchandising around. Rationalizing the stores there was way too much discount so there's a lot of work to do, but I got really excited about the opportunity and wound up agreeing to stay on as exact chair in January 2020. And part of my remit would have been to hire a CEO and partner with that individual and I had to kill people in my network that I thought would be great for it who be willing to move to LA. But two months later the covid walk down start. And then it turned into something you know completely different than we were just trying to survive we lost ninety percent of our revenue and that April. And we wound up. [29:43] Making it through to July August that summer but at that point yeah the damage had been done and the private Equity Firm decided to. Sell it to a party that had been interested in the business for a number of years which was authentic Brands group out of New York so I stayed on to oversee that process and then once the deal is done I. Said that was a lot of work I'm exhausted and wound up turning down the opportunity to stay on with a b g and left but, I got to say I'm really grateful thankful for the team that I had there because they were amazing, to work with during such a difficult period that that Q2. And early summer of 2020 it was it was really really challenging to be in the market and I learned a lot about myself as a leader from it. Jason: [30:46] Oh my gosh I I am sure you did I'm laughing though because you think about all the work involved there and so you decided to do something easier in your next gig like oh I don't know like starting from scratch business in the middle of a really old non-profit. Matt: [31:08] Well I gotta say you know after after the lucky experience. Um I really felt drained I didn't have. The passion for retail for e-commerce digital for. Brands for fashion like I had for the previous you know well 15 years and. I was fortunate that I have the ability to do this but I basically gave myself 2021 off. I've been sitting on a few boards I did some Consulting work I had been Angel Investing for a few years so I had a number of startup Founders and CEOs that I was mentoring and Advising, and I just said to myself I really need to get re-inspired I need to like, get back out in the market broadly see what's happening see where the Innovation is occurring and and, get excited but also get lucky because a lot of these things from a career perspective is based on timing I was really fortunate that. [32:27] I went to Urban when I did I was really fortunate to be part of, ModCloth the journey during the years that was there the year that I was at Walmart was a really critical year in the Amazon the Walmart Battle. Um amazing timing too. Be available to do Consulting work with the after pay the exact summer that the founder moved from Australia to San Francisco. So you know I'm acutely aware that you can't control timing and, and yet the kind of put yourself out there so that was my plan last year and in doing so what I realized was I'm like I get the most energy and I do my best work when, back in the phase of a company where it's. [33:22] Focused on growth and Innovation and so no more turnarounds the end of Lucky business was a turnaround. ModCloth was a pseudo turn around, so I just said you know I want to get back to you know that stage where it's really about solving for customer needs and Market positioning and Prague service Innovation and deploying technology, and then a couple that with also wanted to get in a part of retail where I can learn. And you know secondhand what's happening right now the this whole cultural phenomenon around thrifting, and you're the pioneering work of a thread up and a real real Poshmark deep op-ed see ya the last decade, that was the that was the heavy lifting you know those Founders you know basically creating the category, but now there's a critical mass now there's a consumer acceptance so I don't see it as it as a, as hard as maybe it looks like from the outside it's I think it's the timing is great for the Goodwill Network to Rally around this new platform for us. As a separate entity to stand up this new company to launch this new Marketplace. [34:48] There's definitely engineering challenges to figuring out how do you successfully profitably scale. Um second-hand and vintage when you know every item is unique and we have a distributed model where our sellers are. Various. Goodwill members across the u.s. so we're not centralized so there's definitely some some challenges but to me that's part of the fun that's part of the learning. Jason: [35:18] I can imagine I want to take just half a step backwards to make sure the listeners are tracking with exactly what you're doing now because I think it's super interesting so, formal title is CEO of goodwillfinds and goodwillfinds is a new offering from Goodwill that is selling Goodwill Merchant previously owned Goodwill merchandise via a website is that the in my clothes. Matt: [35:44] Yeah yeah so I think it's worth kind of spelling out the context a little bit because it took me a little bit honestly to fully understand it and grasp it. Goodwill has been around for over 100 Years everybody knows Goodwill it's an amazing nonprofit franchise. There is a I call it a holding company I don't know that that's the right. Firm but there is a parent company that owns the Goodwill Master license in Metro DC and they have. License out the brand to I believe the numbers 155, individual territories across the u.s. and each of those territories have, Goodwill organization with their own leadership team their own operations around treasury their own board of directors obviously they vary in. Size and location and specification and you know mix the revenue and all those things but they all share the same Mission and the mission a Goodwill is. [36:57] To enhance lives for the Dignity of work, and it's my older brother was born with a disability and I've watched him go on and off disability a few times in his life and I tell you, that he's his best self when he's working. So when I first got connected with the folks at Goodwill earlier last year it really touched my heart like I really. I wanted this to be successful for them because I know how important their mission is but as I got to learn more about the network. [37:37] Of 155 Goodwill's and more about the opportunity and there are six founding. Good we'll see EOS that came together to organize this new separate entity called goodwillfinds where a virtual Delaware company. And those six are the ones that are the board that I report to and they've been working on this for years they were, ready to watch this last year and decided that they needed to hire a CEO, to come in build a team set up the company oversee the launch so I joined pre-revenue and we're now in our fourth month of selling, the consumer response has been. Unbelievable sales are more than doubling month-over-month it's it's really. A unique opportunity to build something that is not only. [38:39] In a part of retail that is innovating and growing and scaling rapidly but it's also doing it for this amazing Mission and you know really trying to redefine what does. Nonprofit in the circular economy look like to deliver social impact at scale so I feel like that's the Mandate that I signed up for and the team that I'm building. And the business model that we're designing right now to go with the marketplace are the is the execution of that but the bigger Vision here is to create this platform that not only. [39:24] Overtime all 155 Goodwill members will have access to be on as sellers but that. For the first time we'll have decentralized marketing funnel brands. Strategy content messaging 1p data and then. [39:48] But technical roadmap that were able to deploy that will integrate with the store operations and the back of house operations that will allow for scared investments in technology that all the good wolf can take advantage of. On the consumer side I think all the players and secondhand have the same goal which is to make the. [40:10] The option to buy second-hand versus new so compelling and so convenient and so exciting and cool. That more and more consumption dollars go towards second hand and move away from New and by, doing that, it has this incredibly measurable impact on the environment in creating sustainable. Impact and then in our case you add to it. The fact that every net dollar that we collect from our sales go back to the location where the Goodwill was the item was donated to fund the Goodwill programs I mean it's I feel like we're pioneering, this new this new kind of business model for circularity and so all that to me is like super compelling super interesting, and I'm really fortunate that this opportunity found me. Scot: [41:19] Cool hearing you talk about it I can tell you like to build stuff the channel visor we had a lot of customers that were kind of in this General space the challenge with this use Consignment World Is You Gotta you know I'm sure these Goodwills are getting, they're only going to sell online a fraction of what comes in so you got to figure out what what things do you want to sell in the store versus online you gotta create digital assets which are the descriptions and the pictures and then you gotta you know imagine you're not going to send them to a central location so then you've got to create a shipping method that works down at the store level how are you guys solving all those problems at scale. Matt: [42:00] Yeah well I'll tell you a couple of things and you're exactly right there's a ton of operational challenges we have a couple things going for us one. These Goodwills already have the physical infrastructure they already have, donation centers they already have Micro warehouses that are already selling online as a three-piece seller through Amazon and eBay and some other Regional marketplaces, so they have a lot of these physical operations setup, so we're leveraging that and we're not having to deploy Capital to do it. That's 12 there's a there's a maturity in the technology vendor Market you'd be surprised at how many. Providers are in the space to automate. We have a partner that we work with that leverages Google Lens technology and Leverage is the Einstein a I was Salesforce that allows us to, take a lot of the heavy lifting out of item creation we have vendors that we work with that. [43:15] Take images of items three-dimensional scans that send it to and Outsource in India where descriptions are being written for these items you know so there's, and I'm learning this right but you'd be shocked at how much software deployment automation deployment already exists. [43:38] So we're managing that to deploy in a way that integrates into these existing operations at and. The other thing that we have an advantage of is because we are nonprofit. [43:53] We're selling primarily me exclusively right now but overtime will be primarily selling donated items which have. Is this not a zero cost of goods but it's a near zero cost of goods. So we have room in the margin line to play with value-added services on each item, if we feel like there's a lift that we can justify with that you know with respect to photography with respect to. Metadata on each of the items with respect to Howard thinking about tagging, there's a lot there's a lot of players out there that we're evaluating right now and we watched with. [44:42] Over 100,000 unique items back in the first week of October. Mid-December we were at nearly 200,000 items. And our roadmap is to have a million unique items in our active. Catalog by October of this year so this entire endeavor. Has been from the start designed for scale. So we feel like that's giving us an advantage because we're able to do some things that, other startups that are venture-backed that are having to start from scratch with a lot of that infrastructure that have a cost of sourcing and and Supply acquisition that we don't, it would be financially prohibitive for them to make some of the Investments that we're making right now. Scot: [45:43] Yeah it's interesting to hear you say you're using some of the AI Jason's not a believer in AI but I'm a big proponent. Jason: [45:50] Haha I haven't said a word on this whole podcast I've just been using my AI Avatar. Scot: [45:57] Ugh. Matt: [45:58] For the record this isn't Matt talking this is Matt's chat TPT talking. Jason: [46:04] Yeah we tested both in the shed she'd Beatty was much more Salient so we went with that. [46:17] Yeah so it's interesting to me mad because, you mentioned a lot of the early Pioneers in our e-commerce and by the way just from buzzword Bingo like are you re Commerce person or you like do you have a favorite label for what you're doing now. Matt: [46:34] Yeah I'm. I'm back in the the interview circuit right now trying to get the word out about what we're doing and promoting the Goodwill Mission so I'm still trying some phrases on I mean yeah RI Commerce is definitely. [46:50] What. The buzzword but I think what we're doing at goodwillfinds and and in partnership with the Goodwill network is really about circularity you know in my mind's eye. Getting a Marketplace standing up a new Marketplace from the zero. You know it's the old Beezus flywheel the back of the napkin that I think about every day and in my version of it their supply demand admission and without the mission we don't get supply. And the better job we do partnering with our members sellers in acquiring the right Supply and and listing it. In a high-quality way, you know then that allows us to be able to meet demand in the market which the proceeds from those sales go right back to the Goodwill where we got the donation and there's the kind of the flywheels complete, and one of the stories around that and this is what we have to do a better job. [47:52] This year versus last year's to get these stories these amazing stories about the Goodwill Network out into the world, the more successful we are Google finds meaning the more that we're able to sell and scale demand. The more people each of the Goodwill sellers have to hire in their e-commerce operations. Because they're doing the listings they're doing the pick pack and ship on the on the outbound but those jobs are higher skill and they and they pay better. And so it actually accelerates the local mission. [48:27] The more successful we are because they have to hire more people and bring more people and train them into these higher value jobs that then they go get placed somewhere else they can go work within. The digital economy you know the digital retail industry and so we really I really think about what we're doing as pioneering circularity. We also are talking to some retailers and Brands you want to partner with us on they're both on the demand and supply side and part of it is because we're a nonprofit that there's a tax, right up Advantage for them but it's there's also this, PSG component to the large corporates that they have to think about especially in, in apparel where they had to think about you know what is their end to end environmental impact and. [49:27] It's it's really I can't believe the timing of this but it's really a moment right now not just with consumers but in the industry and so that's another aspect of circularity where you have. Yeah it's not Nike so but I'll just use them as an example to speak of Austria of Lee imagine Nike telling their full price customers. That they can buy second-hand Nike at goodwillfinds.com. Or imagine a Chanel it's not Chanel so I'll just use them electrically but imagine them. [50:04] Wanting to use us as their authentication partner so that when you find second-hand should now at goodwillfinds.com versus a real real or somewhere else, you can you can you know that you have this objective third-party authenticator that you can partner with to control, the the brand experience in the second hand market so it's, I'm really excited about the possibilities and and we have a really big vision for what we're doing I don't I think we Commerce to me feels, like a term that soap a little bit Limited. Jason: [50:41] Totally fair so maybe circular Commerce its, it's interesting to me though like so we've had a bunch of those Founders from the circular Commerce. Brands on and like their fundamental problem is not your fundamental like their biggest problem is sourcing, the goods by getting people to send them stuff and then when they curate it they're mostly interested in, luxury designer so they end up with a relatively poor yield and they don't have. [51:13] Any monetization or you know frankly like a ecologically redeeming way to deal with, all the goods they get that aren't they don't meet their criteria so it's like you you seem like they're like through the Goodwill Network you've got all these stores to put Goods in you've got a bunch of you do have luxury consumers that are searching for vintage and value but you also have more pure value consumers you it just seems like it's a really interesting fit because you saw some of the, problems that are endemic to the re Commerce guys you've got the first gen, Val you guys like the you know the fast fashion guys who are you know of course making stuff cheap but it's a psychological disaster and they only sell like half of it and the other half ends up in a landfill and all that and then you've got the, discount guys who I think is the funniest of all I don't know if you follow this but Burlington Coat Factory, right before the pandemic shut down their e-commerce and they shut it down because they fundamentally couldn't solve what you're doing like they couldn't figure out how to cost effectively make, product detail pages for all the super thin inventory that they had and so it just interesting like, because you built this business on top of the Google Network it feels like you got a nice sort of Head Start in the in all three corners of that problem if you will. Matt: [52:36] Yeah Jason so first off I know a lot of the players the founders execs at those other places and, again I want them all to be successful because the more successful the category is it's a tide that will lift all boats and I think we're all being led by the consumer who is voting yes yes yes, I also think that the consumer, um is not just the the deal Seeker the value Seeker but it really is a trend ribbon, style driven younger consumer who if you think about you know the. [53:19] Tick Tock and Instagram and this this viral social world that we live in where you nobody wants to look the same, wearing the same things that shopping vintage and second-hand is actually a way to differentiate yourself and show your, your individual style so it's there's a really interesting marriage there between second hand and kind of social morality, and what's happening there and then there's also a tell you a more affluent customer or aspirational customer who could Shop full price and does Shop full price but they really care about, about the impact in the narrative and they want to talk about the story, where they bought it not just what they bought and so there's it feels like there's this really. [54:15] Great timing of all three customer segments and then the last thing I tell you is compared to the Discounters. Do I have read about some of them struggling, with figuring out e-commerce and I think I've read the rational rationalization was that it's hard to do Discovery online versus in the store. What I would tell you is that what we're doing augments the in-store thrifting experience at goodwillfinds, now if you're shopping Goodwill at your local store. The assortment is very limited it's what just showed up that week or that month as far as donations go but, you can do that because there are certain categories of people like to touch and feel or try on because fit matters or Texture and finish and, and material matter you know how home goods and furniture and the like one of those big bulky items that you know are easier to buy and store but to be able to couple that with. [55:29] Now shopping you know I don't want to say the best but the that e-commerce. Assortment of other Goodwills across the country. We're now you're getting access to donations from New York to LA Seattle to Miami, Chicago to Austin and I mean wow like what a treasure Trove to be able to shop your Goodwill store and go online and get access to all these thrift stores in one place, in our case I think it's a massive value add and. Given the fact that the Goodwill brand has been around for 100 years and already has tens of millions of customers shopping their stores you know our primary focus to start is how do we, how do we complement the in-store shopping experience to those tens of millions of customers to convert them to be multi-channel customers with the brand, and at the same time how do we compete in the market too. [56:38] Solicit this this these other two audiences that I mentioned the style and Trend driven younger consumer that's looking for vintage that's looking for. For differentiated as well as this this aspirational and more affluent customer who loves the loves the purpose loves the mission loves the story of circularity and wants to participate. Scot: [57:03] Cool sounds like your you're fired up and it's going to be exciting to watch the progress we're running up against time but while we have you you've been that this over 15 years the whole e-commerce retail thing what are some of the other Trends you're watching other than this circular kind of recycling element anything anything interesting on your radar for example do you think the digitally native vertical brand thing has played out or is that still got legs any other trends that are interesting to you. Matt: [57:36] Yeah well on DM BB which just a an iteration of DTC. Did you see to me was always a go to market strategy was never a business model. Scot: [57:47] Yeah. Matt: [57:49] The the early players the first movers in that space who did the, you know go to the source and sell an item at the wholesale price versus the retail price because you're cutting out the middleman Zappos is kind of one of the one of the pioneers of that, um That was a momentum thing I've always viewed and again kind of sticking to my knitting here in this specialty premium you know Market space. I've always viewed, yeah the brand equity which is what we're all striving to create and grow and maintain. It gets generated by picking an attractive customer, that you want to obsess about and I don't and attractive I mean somebody that you think is a viable there's enough of them and they're viable to have a long-term relationship with. [58:56] And obsessing about them to the point where you understand their needs better than they and you can create differentiated product and service, where, they fall in love with your Solutions with your customer experience and they want to tell their friends and then you couple that with the right distribution, so that you can find more people like them which allows you to scale in an efficient manner and direct-to-consumer now going back 15 years, was just the new go to market to find more like-minded customers to ones that you already had so urban urban already had amazingly strong brands with a lot of brand equity, so what we did writing the Web 2.0 wave was really just figuring out you know how do we, how do we reach the same or similar customers and give them a better experience a different experience online than what they experience in store, and then Mark what was the opposite I got there and we had no physical experience and so the exercise was how do we take this brand love that exists. [1:00:07] At this website and and translate it into a three-dimensional experience that, the existing customers would love but would allow us to expand our market and introduce the brand and more people so I yeah so I don't I never saw DM BB by itself as a sustainable business model. [1:00:27] As far as other Trends in the market today I when I left Walmart I did a talk. [1:00:37] Where I said I felt like it was an amazing time, to start a brand and I really meant it and I really believe that the market was was so like there's so much sameness in the market that. That there's a huge opportunity for four new brands coming to the market Leverage The technologies that have matured and and really differentiate against the incumbents I tell you sitting here right now after. I feel like consumers. [1:01:12] Have now accepted the fact that their multi-line store is where they shop for everything. The whole idea of this retailers essential and that one's not and those shutdowns for a year plus I think really changed consumer. Perception of where's viable to shop the where it's not and I and so I think the bigger players, have a massive advantage in this market especially this year with inflation continuing going into a recession I think it's I think this year is going to be really hard, for smaller players to differentiate and survive so that's more from a consumer lens. From a technology lens I'm sorry to say Jason but I'm a big believer in AI, and I think it's early days and what I counseled a lot of folks who are earlier in their career is find a mega technology trend, in the market that you can get passionate about learning that you think is early Innings and ride it. [1:02:17] I certainly did that with e-commerce I was. They're early with the that whole Social Mobile Local, moment you know that was existing after the iPhone and Facebook launched, I'm I feel like marketplaces are like halfway up the s-curve I feel like there's still a lot more room to grow and so I'm working on that technology curve right now with goodwillfinds. But I would say that I don't I'm not a Believer it in web 3.0 today it feels like, the.com in the late 90s where it was five years too early, there just weren't enough participants to make it viable I think web 3.0 in whatever form it takes is five years out before becomes something that you could commercially work on. And then you know I'd say I think the subscription in. In a lot of categories is having a lot of success right now which is less about technology and more about, business model but that's that's that's an area as well that I think is worth exploring for a lot of businesses that are trying to figure out ways to monetize Their audience. Jason: [1:03:40] Matt that is awesome, basically we're mostly aligned I'm 100% with you on a I I'm also with you on web 3 / metaverse being too early the one thing I'm gonna just for the record disagree on is I I can't public admit that marketplaces are thing because that'll that'll go to Scott said too much if we admit that. But, it's going to surprise no one mat that has happened again we've used slightly more than our allotted time so we're gonna leave it with those words of wisdom from you as always if listeners found value from this show we sure would love it if you'd jump on iTunes and leave us that five star review but Matt, so awesome to reconnecting and congrats on everything you're doing it's it's fun to watch and and put your point like it's also adding a heck of a lot of value to the world. Matt: [1:04:33] Guys I really appreciate the time always great to reconnect congrats on the pot I'm a huge fan and let's do it again at number five hundred. Scot: [1:04:44] Sounds good Matt if folks want to find you online or you on the on MySpace where do you hang out. Matt: [1:04:52] Yeah have you heard of Tumblr no. Um yeah I would just say if anybody needs to get ahold of me reach out through Linkedin and my contact information is there. Scot: [1:05:06] Sounds good we really appreciate taking time and good luck with the new Venture sounds really exciting. Matt: [1:05:11] Thanks guys. Jason: [1:05:12] And until next time happy commercing.

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EP299 - Thanksgiving Week 2022 with Rob Garf of Salesforce

A discussion of Thanksgiving Week 2022 from a retail perspective with Rob Garf, Vice President and General Manager, Retail at Salesforce. This is Robs' fourth time on the show, having previously been on episodes 110, 248, and 282.

Thanksgiving week 2022 will go down as one of the most complicated holiday weeks on record. With covid impacts still in place, a global economic crisis, supply chain disruptions, labor shortages, new retailer discounting practices, and new consumer behaviors we have a lot to unpack.

This episodes covers a wide range of topics around the most important shopping week of the year. We make liberal use of real-time data from Salesforce Shopping Insights HQ, which tracks how 1.5+ billion consumers are shaping shopping trends. You can see a real-time holiday dashboard, powered by Tableau so you can interact with the data yourself on the Salesforce Holiday Insights page.

Episode 299 of the Jason & Scot show was recorded on Tuesday November 29th, 2022.

http://jasonandscot.com

Transcript **Jason:
[0:23] Welcome to the Jason and Scot show this is episode 299 being recorded on Tuesday November 29th
2022 the day after Cyber Monday 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 and Scot show listeners Jason it wouldn’t be a delicious turkey five if we didn’t have our regular holiday guests robbed our van
Rob is the vice president and general manager
I think it’s total maybe longer than yours a retail at Salesforce let’s see those two forces that’s like eight words so you need to get to work this is Rob’s fourth appearance on the Jason Scott show he was here for episode 1 10 to 40 9282 and back for number four here and episode 299
Rob welcome back.

Rob:
[1:15] Gentlemen it is such a pleasure to join you today I can’t wait to talk about cyber week.

Jason:
[1:21] It wouldn’t be a several week if we weren’t talking to you Rob and as a I feel like a special bonus for me two of the three people on this podcast have received a 10 out of 10 rating from room Raider.

Rob:
[1:33] Hmm who Could That Be Well I know you did it because you have a sweet pillow that shows it off.

Jason:
[1:39] And I think I feel like you got up before me.

Rob:
[1:42] I think so you know I gotta tell a really funny story quickly if I can I was doing early on in the pandemic a webinar I think it was probably with.
Business Insider and they brought like a staging expert online and I thought I had the best background I had like a.
Something like my wife got me for my 40th birthday long time ago by the way I like 1910 or 1920 National Cash Register in the background I felt all good about that and she totally.
Blew up my room and thankfully she did cuz I turned out on top with a 10/10.

[2:18] I know I probably shouldn’t have given that away but I felt pretty cool about it.

Scot:
[2:21] Jason had a team of 10 people at publicist set his up so don’t don’t don’t listen to him.

Rob:
[2:26] Either and he probably gets like product placement dollars as well as a influencer for all the cool things he has in the.

Scot:
[2:33] And they came in from France.

Jason:
[2:34] And side note on that the jury is out on whether giant marketing holding companies can actually help your sales but they can for sure help you win Awards.

Rob:
[2:43] Congratulations.

Scot:
[2:46] Well Rob weird.

Rob:
[2:47] Scot the trifecta anyways we digress.

Scot:
[2:49] Well yes some of us I guess my day job I’m like I don’t know not really working on my room.

Rob:
[2:55] Actually you are about to say you’re actually working or aren’t ya.

Scot:
[2:59] Well yeah the so in case even though this is your fourth time around let’s there’s definitely we always pick up millions of new listeners so let’s if you could recap
the data that you guys have at Salesforce where it comes from and then you know we’re recording this the day after Cyber Monday you’ve got some hot delicious fresh data will jump in after you kind of give the high-level overview in case people aren’t aware.

Rob:
[3:25] I can’t wait I’m loving it we’ve been swimming through this data for a better part of the we can’t wait to share it with your crowd your audience yeah so by way of introduction again Rob Garf here.
With Salesforce I came to Salesforce by way of the demandware acquisition which is about.
Six years ago I spent five years prior at demandware on the GM for retail what that means is I oversee our product.
And solution strategy along with our industry insights team and that’s what gives me the great pleasure of talking cyber week and actually providing insights and intelligence for our customers all year long
and the way we do that is all the data that flows through the platform we bubble that up we obviously strip out all pii data.
And in its aggregate form billions of billions Shoppers it gives us an amazing read and pulse on the industry and we publish at throughout cyber week on our shopping insights HQ it’s an interactive dashboard,
built on Tableau and it really allows our customers the broader industry to understand what’s going on in digital and be able to Benchmark themselves.

Scot:
[4:32] Frequent thanks for that summary
so let’s start with the kind of the elephant in the room I get this question and Jason does a lot as well you know I’m a CNBC junkie and all they talk about is inflation and recession so so anything kind of in the macroeconomics showing up in the data that you’ve seen.

Rob:
[4:51] Yeah absolutely and I think it’s important to understand this holiday while the global numbers look really promising much of that if not all of that growth was concentrated.
In the u.s. there’s a bunch of headwinds happening for various reasons across Europe and UK along with Australian and Zealand but the US consumer who was really happy this.
Cyber week and we’ll talk about the data but yeah in terms of inflation are shopping index which the shopping insights ahq is built off of,
has been showing an average selling price increase for the last seven quarters and that’s been pretty steady and so,
that’s definitely played a key role in this holiday season in that much if not all of the growth that we’re seeing,
is driven by increased pricing not necessarily people buying more,
product and I think that’s a really important distinction now what I will say and I’m happy to say this in the first time we’re seeing a leveling off of that inflation globally
over cyber week it was only I say only a three percent increase which is promising as we’re looking forward to the new year.

Scot:
[6:02] Yeah I think it’s Cressida at least the macroeconomic around 10% so so 3 is 3 is a pretty good.

Rob:
[6:09] Yeah exactly it’s promising.

Scot:
[6:12] And then that ASP increase is,
does that account for mix shift so like you know if people buy more luxury goods than our and then another segment goes value could that factor into that ASP or you normalize for that in some way.

Rob:
[6:27] We normalize for that because to your point obviously average order value for luxury versus value segments are going to be different but we really normalize that look at it across the board,
and so it’s taking into account of the various factors based on segments.

Jason:
[6:44] Yeah and as the resident Debbie Downer it’s.
We always want to have simple sound bites to describe this weekend like all of these Trends to me are super complicated because you just highlighted the,
conflicting Trend that like we have inflation goods are costing more / we’re probably going to talk about discounting later to help Goose holiday sales which of course brings prices down and when people are nervous about the economy
they shift to more needs which have higher inflation than the wants and it seems when you really dive into it it’s really complicated kind of
inflation seems different on online versus offline and category by category.

Rob:
[7:25] Yeah it is complex you’re right there’s not a single kind of soundbite answer although if we stay on long enough I’m sure I’ll come up with one or two.
But you know you’re right in terms of the discount right so if I dive into that for a sec Jason to put a little color around it we saw for the week in the US there was a 30%.
Average discount rate globally it was twenty-seven percent and we can talk about how that looks your rear and how it looked,
compared to 2019 but even with those large discounts and by the way those are large discounts compared to any normal day.
During the year we’re looking at 15 16 percent discount rate so it’s you know in the double of what we typically see,
the reality is the reality is people are still paying more for a particular product than they were two years ago so people are feeling really good obviously that average is 30 in the us but we all saw over the last couple days,
40% 50% even yesterday 60% in the massive amount of emails that I got trying to push and really.
Incentivize people to actually click the buy button so my point here though is even with these high discount rates people are still spending more for a particular product than they did a couple of years ago.

Jason:
[8:42] Yeah I like to say 40% off is the new 30% off for this holiday.

Rob:
[8:48] Yeah I mean my father was in retail growing up so we would get discounts at the various apparel and Footwear companies he worked for and he always would joke that my mother would save us so much money we’re going to go broke.

Jason:
[8:58] I love that we might come back to this counting but I do want to zoom out for just a second.
Traditionally Black Friday is the official heart start of the holiday shopping season here in the u.s. is that even true anymore.

Rob:
[9:15] Well certainly retailers don’t want that to be true they want it obviously to be pulled earlier and earlier in the season and that’s another story line that we’ve seen here you know we actually saw a little bit.
Of holiday happen over the summer don’t forget and I know you two wouldn’t of Amazon Prime day or the first Amazon Prime day and for those retailers not named,
Amazon we saw a 21% year over year increase looking at the second week of July compared to the second week of July two thousand twenty one so there was a little bit,
very little pull forward and then of course people getting retailers Brad’s wanted to take advantage of the halo effect of the second.

[9:56] Prime day that happened in October and once again we saw a little bit of a bump interestingly enough some of the larger retailers front ended that with Weekend sales and that pulled a lot of growth during that time you know the weekend before Prime day in October,
but the reality Jason after a couple years of spreading out of that demand earlier earlier for various reasons which we can talk about,
there was so much of a concentration that happened,
over cyber week meaning and based on our data the pulling forward of the couple of percentage points to earlier,
in November really we’re taking back,
this year and were put back in cyber week and it all came down to discounts it all came down to Consumers being really patient.
Not seeing what they liked in terms of the lackluster deals and waiting for.
Cyber week which really contributed some very positive growth particularly in the US.

Jason:
[10:57] Yeah it’s super interesting because as you pointed out Amazon added a second sale day which I think they technically don’t call Prime day right is like Prime Early Access today.

Rob:
[11:05] Right right right get behind the Velvet Rope and be able to get some early deals.

Jason:
[11:09] Exactly and Walmart Target and others all counter programmed against that with big sales but it cut it kind of feels like all that got defeated by the fact that
consumers are well aware that the discounts are going to be deep this year and it almost seems like they may have decided to wait for deeper discounts.

Rob:
[11:29] Yeah yeah we call this and I’ve said it before on the show but I gotta do it right it’s an annual tradition,
discount chicken right the idea that retailers go into the holiday season with a really well thought out.
Plan for the promotional calendar and by the first weekend they typically rip it up and call inaudible.
And really try to chase the deals and you know that’s what happened this year contrary or in contrast to last year if you remember I know you do gentlemen.
Because you track this closer than anyone you know their inventory inventory scarcity issues there was high demand so retailers didn’t feel compelled to Discount they didn’t we saw the lowest discount rates.
In recent history last year and so retailers thought that the consumer was reprogrammed reconditioned and they would buy earlier the problem was,
the Retailer’s didn’t come to the table with the biggest discounts again discount chicken the consumers are going to wait it out and wait for that.

[12:29] Best deal and finally the retailers came to the table during cyber week and the consumers answered,
in kind you know again last year was probably the first year that retailers won the game of discount chicken this year consumers you know,
fought with their leverage and wait and they ended up winning and got some really good deals again 30 percent discount rate in the US over the course of.
Thanksgiving it really peaked at Black Friday with 31 percent in the US so they really finally came to the table.

Scot:
[13:04] Wow,
you know we were reading all about last year all those cargo ships were sending off the coast of Long Beach where it is and then you know I’ve heard a lot of retailers in their commentary talk about being overstocked,
do you think do you think that played a role in these big discounts is just retailers or just kind of we got a really clear the shelves out kind of thing.

Rob:
[13:27] Absolutely absolutely both in the store and in warehouse space they got spooked a little bit right in terms of,
them waiting it out didn’t quite work and so
the Retailer’s really had to step up Scott to your point they don’t want to go into the new year with too much inventory they really needed a free up both inventory and cash now of course they did that.
At the feet of margin right because you see I don’t care how great your margin is alright some probably are that great particularly in the luxury segment but 50 60 70 percent discount or you know I saw some it was
50% oh and by the way we’ll give you an extra ten percent just to make it sound like they weren’t really giving away everything but the reality is.
Really margin took a hit because of the deeper discounts that retailers just had to do and to your point they have to free up both the inventory the Shelf space and the cash.

Jason:
[14:26] Yeah I think even Makin where’s I’ve had a number of clients come to me and say hey we’ve got too much inventory but even worse
it’s the wrong inventory that like a lot of that stuff that we
ordered for mid-year all the Home Improvement and outdoor furniture stuff that they were trying to get four last year is all in stock now and so what even further incentive fising retailers to discount.

Rob:
[14:52] Yeah yeah and I give credit to some of the big box players who took a hit over the summer recognizing they tear Point Jason had the wrong inventory
and they did something about it they tried to clear it out earlier they were public about it and they took a hit but I think they’re going to come back strong you know it’s interesting I was a,
analysts back in the day and one of our Focus was on supply chain and Mr research was known for supply chain got acquired by Gartner for their supply chain and industries practice,
and you know always tracked the gentleman how Lee who came up with the bullwhip effect the idea that,
you know any shock in the supply chain will just have this ripple effect that could last,
quite some time I got it conceptually heard some examples of it but we’ve been living that over the last couple of years you know going from inventory scarcity buyers getting really excited thinking of the demand would really.

[15:47] Keep steady and then when finally dear points got it came through the port of LA got through the domestic supply chain it was the wrong product or enough people had bought,
you know a new monitor or TV or a desk or some cool background to get you know 10 out of 10 on rumerator and the demand wasn’t there anymore so you’re right I mean some of the things,
in terms of replenishable products sure they have a long shelf life they have a long turn
but some don’t they have an expiration date and retailers are struggling with that and certainly,
coming back around it is driving the discount strategy it’s not over either will continue to see probably not the same heightened levels but now that we have an extended holiday season because,
of create a fulfillment options will see some more discounts it’s not the end of it.

Scot:
[16:34] Yeah that that’s a good segue into kind of talking about the shape of the holiday so last year sounds like you saw the data we started a bit earlier and maybe maybe we kind of ended around after the turkey five or kind of came off a cliff there seems like this year
consumers waited they won discount chicken and then we’ve had a robust turkey five
maybe walk us through the days we’ve talked a little bit about Black Friday Cyber Monday anything else you want to hit there and then what do you think happens kind of post.

Rob:
[17:07] Yeah absolutely to round it out actually and just give that perspective for the entire shape as you talked about the anatomy of the Season as a bunch of my customers talk about.
Um there are some kind of pretty nervous people in the industry coming out of the first two weeks of November the last two weeks of October and the first two weeks,
of November you know sales kind of words Riri we saw a negative seven percent during that time again little bit of a spike the first.
Week in October because of prime day and then it really leveled off quite dramatically 27 percent decline,
globally and so we’re really worried is this a trend is this going to continue in really what it told us is,
that cyber week becomes back into Focus again people were willing to wait people are willing to be patient waiting for those deals
you know what we saw for cyber week with again a higher concentration probably around 25 percent of all,
digital sales will be when it’s all said and done over the course of cyber week in the way we look at it sales force is,
the Tuesday before American Thanksgiving through Cyber Monday so we put another two days and it just to make it a full week but we can slice and dice it anyway,
you want especially on the dashboard via Tableau on our shopping insights.

[18:30] HQ but for the overall cyber week for us we saw nine percent growth.

[18:38] And for Global we saw two percent growth.
That again as you can tell because of the global number largely buoyed By Us sales Black Friday really strong us we saw.
12% in the US and we saw.

[18:57] 3.5 percent growth globally that’s Black Friday Cyber Monday we saw eight percent growth in us and we saw four percent growth,
globally so very strong what we also saw by the way is healthy traffic we even saw healthy traffic.
Earlier in the season so what that told us is people were interested they showed intent to buy but they weren’t given the right incentive to actually purchase so you know there’s a demand there’s.
Need there’s a want earlier in the season because of the traffic we saw that traffic stayed pretty steady both us and globally,
throughout the week as well and obviously that turned into higher conversion rate because people are actually now buying.

Scot:
[19:47] Cool and then from your day to do you think Cyber Monday was the biggest day we’ve ever had is do you guys pontificate on them.

Rob:
[19:54] Yeah we do we do we actually saw a turn of the corner about 3 or 4 years ago where Black Friday.
Digitally became the largest day and really what that was,
primarily driven by many retailers were actually shuttering their doors
both on Thanksgiving either part of or all of Black Friday and they were encouraging people to shop online that was a great altruistic message from a brand perspective
but it was also great you know to actually give their Workforce some time off,
as well and so n obviously Drive traffic towards digital while providing great deals,
online the other piece to it that really helped drive that change was mobile.
Really the huge increase in Mobile we saw a mobile traffic this year through the course of cyber week account for about seventy nine percent.

[20:52] All traffic and so people were on the go it was more accessible.
And they either did more of their shopping during Black Friday or actually what we started to see and it really came into Focus this year buying on the couch in the later days after Thanksgiving meal.
In the u.s.a. people got sick of their family needed to digest a little watch football and they took out their phone you know they either got distracted or
I don’t know if you’re a marketer inspired by something they saw on their phone and they started shopping so that’s my long way saying we actually see Black Friday of a higher concentration a bigger,
overall sales volume for online then Cyber Monday.

Scot:
[21:38] Interesting okay and then there used to be this big disparity between mobile traffic and sales so used to be if you had 80% traffic you could knock that in more than half or is that number closed into you guys track that.

Rob:
[21:50] We do we do yeah it hovers around 60% of orders and that has progressively gone up up until about.
How long have we been,
going through this pandemic up until a pandemic because what happened is people are actually at home they weren’t visiting their friends and family they weren’t as much on the go so they actually went to their computer
during Thanksgiving you know for me I spent the last couple years out by my fire pit and,
you know came in from the cold and went to my computer instead of my phone to check out the latest deals on Thanksgiving or.
The day after two Black Friday so we did see a dip.
Last couple years in Mobile because people were at home but it spiked back up this year both traffic and orders and I give you know retailers credit because,
and I know Jason you spent a lot of time with your customers thinking about customer experience and design and really breaking down that friction between inspiration and purchase,
you know retailers are getting much better at making it easier to actually not only find the product they want on their phone but make that purchase.

Scot:
[22:58] Okay so that brings us up to Cyber Monday and then you kind of hinted that you think they’ll be some more discounting seems like if consumers One retail chicken you can’t you can’t kind of go
off of it right so if you’ve got this inventory left you’re going to have to either discount further at least keep the discounts on is that what you think is going to happen.

Rob:
[23:17] Yeah exactly I mean we typically see a little bit of a dip coming off of cyber week to just.
Retailers take a breath analyze what they have what they did how their margin looks and then get back at it a little bit but we we are going to see perhaps not higher rates,
because retailers I’m sorry consumers are getting really,
crafty around price adjustments so it’s not only dipping further into their margin but it’s creating more operational expenses and headaches as well for the retailer and so I don’t necessarily anticipate,
higher discount rates but a steady drumbeat of discounts particularly those retailers that have physical stores and can extend the shipping cut off window by offering,
store fulfillment options so you’ll see you know a real leaning into discounts promotion.
Overall just attracting people hey you haven’t missed the window yet you can get that last gift for
your cousin or uncle or family member and oh by the way you don’t have to pay for it and you’re more guaranteed to get it because you can pick it up in an around the store or will get it.
To you through some sort of last mile delivery that is shipped from the store.

Scot:
[24:35] I think one takeaway is
you know so Jason’s hearing there’s some concerns about revenue and stuff and then you know I’m hearing discounting could be a rough earning season as we kind of come out of the holiday if all this discounting is go on but at least I guess they’ll start the year kind of having flushed out all this massive inventory.

Rob:
[24:54] Yeah yeah you know coming into this year we do our predictions all the way back in June and we kind of look at the data what we’ve seen what the storylines are and.
Start craft the narrative we were big Partners in that a couple of years ago where you coin ship a get in and you know we were both early on seeing man there’s some issues with this surge going on in the capacity issues with.
The carriers but you know one of those storylines or the main storyline just last June was.
And here’s comes your soundbite so get ready are you ready to rumble.
I just set way too high expectations sorry about that but you know we’re really concerned that margin will be the Grinch That’s deals,
Christmas and to your point we don’t see that until the February timeframe after the Retailer’s close out their fiscal year and start reporting again some retailers got ahead of it and caution what this is going to look like but I’m.
Anticipating that will be a key storyline come February Scott.

Scot:
[25:57] All the who’s in Whoville loved prophets a lot but.

Rob:
[26:00] Oh nice I like it I like it and we haven’t even talked about returns yet right because that’s I know that’s one of Jason’s favorite topping that’s going to certainly come into play as well as we talk about margin.

Jason:
[26:12] You guys are bringing me down and actually I’m afraid I might want to bring us down even more because,
I would say like I came into this holiday season thinking hey top binds going to be okay because of inflation because of you know pent-up demand a variety of things but that you know the story was going to be about profits as you guys just perfectly laid out
um and then you know the Cyber weekend happen and Rob’s been on every news program I’ve watched for the for the last 12 hours
and you know they’re also citing these like Salesforce vanity stats right that like oh my gosh e-commerce was higher than it’s ever been before which is not shocking right like.
And then the internet came out with a study today more people went shopping this weekend than ever before which again.
There are more people in the United States than ever before so that’s not that’s not shocking I have in talking with retailers,
they’re more guarded like they all did scenario planning for like sort of good good weekends and bad weekends and they’re all like talking about being on the low end of those,
scenario plantings I know you have great data for the online portion of spending but you know 74 ish percent of all this spending is in stores I know you have some signals for the in-store sales but do you.

[27:38] Like are you confident that this was a really strong turkey 5 I’m I’m not clear if it was or wasn’t.

Rob:
[27:46] Yeah I think it remains to be seen if we’re defining it as Jason we should be.
Retail in totality and the fact that a vast majority of sales still happen in the physical store right and we’re seeing that traffic.
Is up but oh by the way it was Don the last couple years so what’s that comparison set right is it actually up from 2018 or 2019 I’m not,
convinced it necessarily,
is and so we don’t track that but we look at smart people like you Jason and Scott and some other friends in the industry and the word on literally the street or the mall or whatever strip center anyways I digress,
is that it was the physical traffic a bit lighter and so we can say that.

[28:37] Also online sales were strong but I also to your point want to temper that by if somebody or a retailer was reading this in almost any country in Europe.
They probably wouldn’t believe that headline right because it just you know they’ve been visiting head wins,
not only during cyber week for the better part of this year and so most categories saw a negative growth,
throughout Europe and you can see the data specifically by each country,
on our dashboard and so it to your point earlier Jason it’s not a sound bite that we’ll be able to tell you
the entire story right and so it was positive I’m feeling pretty good about the sales and
you know the retailers I’m talking to who are forecasting closer to Fat flat not fat flat,
growth were pretty happy but I think it still remains to be seen in terms of stores what that looks like margin what that’s going to look like and if you’re a global brand how does it look in totality.

Jason:
[29:44] Yeah for sure,
decided I’m going to make a prediction most of the good store traffic data is about three days leg so we don’t have it yet but I think what I think you called it exactly right I think store traffic is going to be up from last year but still below,
2019 levels and what’s confusing it is there’s a few Pockets there’s a few a malls that did really well this weekend as they always do and so I think journalists went to these a malls and saw a bunch of people
and they you know they’re talking about how it was a robust in-store holiday but I I am going to be eager to see that that store data which brings me to my next question
a lot of people use your tool set for Boba so I’m imagining that you got to see.
Some of the trends in both us and like did that reveal anything in terms of people that might be going to store to pick up orders.

Rob:
[30:37] Yeah I think that’s interesting and it also talks about Jason like what are the new metrics given this new world like do.
Bo piss or curbside orders count as traffic I don’t know you know the consumers come in close.
To the store or they’re going to the pickup area within the store in many cases they buy more product so I think again if.

[31:00] Weaving in those stats it helps definitely the online traffic I don’t think by the way many retailers are looking at it that way just yet and I think it’s an important factor to consider.
But he has your question yeah I mean I think.

[31:16] Bo pasts and create a fulfillment options from the store are helping Elevate traffic and driving people to brick-and-mortar based on our data what we saw is botes usage.
Overthrew we’ll call it cyber weekend we saw close to 10% growth compared to earlier,
in the holiday season what super interesting what we typically see is the lead up to a big holiday like for instance we looked at Halloween for the two days leading up to Halloween we actually saw.
Double the amount of,
Opus orders because people realize they didn’t get the costume or the candy or whatever other ornaments that they needed and they knew it wouldn’t get shipped in time they also want to make sure it would be available if they actually purchased it.
And they did both this the other really interesting thing is throughout cyber week and again we look at that for the full seven days but even no matter how we slice it it’s high what we saw is and this is u.s. specifically by the way,
retailers that had bo piss they offered it grew online Revenue by 38% more.

[32:33] Then those without this creative fulfillment option and so it does speak to.
How important the store is to your digital business right so you know another stat.

[32:47] Why not I’m on a roll that I’ll say is.
Our research shows that 60% of digital orders are influenced by the physical store whether that’s where demand is being generated or demand,
is being fulfilled in this case it’s being fulfilled because somebody’s buying it from the comfort of their own home and it’s convenient and they’re able to pick it up with the confidence that the product would actually,
be there so again the new rules of you know both how do you provide the incentives to the store associate how their role is changing and how you measure,
Effectiveness because of such the interplay between digital and physical is super interesting to be a part of.

Jason:
[33:29] Yeah that to me I saw that stat about the bow purpose retards that offering boat best outperforming returns that don’t and,
that was super interesting and kind of tragic Rob because I don’t know if you’ve noticed this but so both this isn’t universally offered by all retailers
more retailers were offering both pissed last year than this year like everybody scrambled in the pandemic to come up with some version of bow pose and
a number of them turned it off either because they didn’t have a robust implementation or they couldn’t hire enough labor this year to support.

Rob:
[34:05] Yeah yeah it’s less about a technology.

[34:09] Project or initiative and it is to your point it’s about operations and you know part of the reason people turned it off you mentioned some of them is.
They couldn’t get down the operational efficiency we’re seeing more retailers lean into Automation and,
more productivity to really refine their fulfillment operations and it’s not easy it’s not just about having.
The right amount of labor but it’s having them focused on the right tasks based on the time of day and what.
The priorities are and that’s not easy to do at all especially you know when consumers are standing right in front of the associate and the associate is you know tasked with having to make a call do they.
Fulfill this.
Bullpen disorder because they have to within 15 minutes or do they serve the consumer who explicitly came in the store because they wanted to be in a physical space and talk to a human.
And get some knowledgeable service so it’s my long way saying it’s not easy
those retailers that have been able to move from Scrappy which many did to scale really thinking about how to automate some of the processes,
how to really focus on efficiency and productivity will be winners because they’re not only helping with loyalty serving the consumers who want to shop that way but also thinking about the margin pressures they’re feeling otherwise.

Jason:
[35:35] Yeah that totally agree and I can definitively answer one thing I rarely I’m almost always guessing but in terms of whether both is counts a store traffic or not
I have no idea whether it should count or not or whether returns would like it to counter not but I can tell you when it does and doesn’t count
most retailers in America have a device on their front door that counts how many people walk in the store and it excludes employees and so two companies sell those devices sensor Matic and Retail next and they both publish
Anonymous store traffic data so if you see data from either of those companies it did not include dopest but Place Rai is the third company that provides that data and they use the GPS
in the consumers phone which does Campo.

Rob:
[36:23] Yes.

Jason:
[36:24] So in three days you’re going to see data from all three of those companies and it’s not going to agree and that is why.

Rob:
[36:31] That’s super rich I’ve been that right there that is the best nugget of the last however long we’ve been talking that’s.

Jason:
[36:37] Six hours.

Rob:
[36:38] It feels like it I could talk another six though that’s the fun part but that’s Jason that’s super interesting and that’s the type.
Data you know it typically use whichever one helps tell the story you want but understanding the differences like you just dissected is so important.

Scot:
[36:54] Cool let’s we’re getting towards the end so we know you had a long day but one of my favorite things about your data is you can peel the onion on categories
I have a sixteen-year-old daughter and I can vouch for the
Beauty and athleisure categories but did you see those kind of pop in any other categories up or down that you want to talk about.

Rob:
[37:15] Yeah absolutely well again there is a correlation between performance and discounts at least from a top-line perspective and so yeah we saw some strong performance in health and beauty for sure.
We also saw in consumer electronics.
And we also saw it in actually General apparel and Footwear as well believe it or not particularly on the Footwear side we saw it because people are actually putting on shoes and sneakers again and getting out the.
You know world again whereas I guess I can’t live in my slippers or flip-flops anymore actually when we looked at the data by actual product,
we saw flip-flops actually had some of the largest decline that we saw your every year because again people are getting out in the world again.
The good news is two by the way again to plug the shopping insights HQ you can slice and dice by I think it’s at least nine if not about 12.
Categories and see what it looks like for orders and sales and the like along with traffic as well.

Jason:
[38:27] I did.
Notice so I’ve been playing with the dashboard a lot and side note as you know my pandemic hobby as I learned to have well so it’s super exciting for me that you you are publishing the data and Tabla,
it does seem like some categories popped that like.
Had been underperforming for most of the pandemic so like you know Electronics had not been a very bright spot but it does seem like they they had a pretty decent weekend like do you have a,
am I seeing that data right and do you think like that that might mean they’ve turned the corner or do you think that that could be a holiday anomaly.

Rob:
[39:07] It’s hard to say because again discounts drove so much of the buying there was such a correlation between discounts and sales and so it’s a little hard to say and it’s really interesting to understand to like some of that.
Binge shopping that we all did over the pandemic and it subsided perhaps over the last 6 to 12 months,
and then in gift-buying times you’re seeing a pop again so I wouldn’t necessarily stake the claim on this is now what’s going to happen for the next 12 months in terms of demand for these categories,
because a lot of it again is correlated to Discount a lot of it is correlated to what people have pot over the purchased excuse me over the last couple of years.

Jason:
[39:51] That’s totally fair so let’s pivot to how they paid for it you alluded earlier to buy now pay later traction like
can you share what you saw in the data and where there any other interesting Trends in terms of payment methods.

Rob:
[40:06] Yeah totally this was kind of fun because we put it in there
as we did each of the mornings early early early particularly those that are on the west coast thank you to the team by the way
I should have done this at the beginning but it’s not just me I have the fun part to have this conversation with you and speak to so many people about this including a lot of retailers not just
today but we have through the rest of the holiday season we have a way to go.
But it’s make possible through the team that brings these data and insights to life and,
the reason I say that is we are trauma through the data one morning and we got the normal like what the sales look like what does traffic look like what are the hot categories biggest discounts,
and then Kayla Schwartz on my team who really is the master behind the shopping index was that.
This is super interesting around buy now pay later because of the Divergence between orders.

[41:04] For buy now pay later and at the average order value and what I mean by that is specifically we saw.
A five percent this is throughout the course of cyber week.
In the u.s. in particular where we saw in the increase of 5% year-over-year,
of orders with buy now pay later and by the way this is after,
a couple of years of really nice growth so five percent based on the bass is really we consider noticeable however on the other side we saw.

[41:37] Average order value for the same transactions decrease by five percent so it’s indicating to us.

[41:46] Again you know this better than anyone buy now pay later really was hatched as a finance option for.
Bigger ticket items home appliances television couches and other Home Furniture but what we’re seeing is a turning of the corner.
Because of the ubiquity and he is and also I think the desire to finance and spread payments over the course of a given time period rather just at once for lower price for less expensive goods and gifts,
compared to 2021.

Jason:
[42:21] Yeah I will say you know a lot of the retailers that are like looking at the economic snapshot for next year and I really concerned about.
The consumers discretionary dollar they’re they’re kind of concerned about this you know.
Acceleration of buy now pay later and other credit means as kind of a an early indicator that the consumer might be overextending themselves.

Rob:
[42:47] Yeah I mean we don’t look at that very closely but it is fairly intuitive to see it that way that people are leaning on.
Newer creative finance options over the holiday and what does that mean for the subsequent quarters will be keeping an eye on that really closely for sure.

Jason:
[43:05] Yeah so we are coming up on time Rob there’s one other topic I just wanted to touch on with you you know you you alluded to capacity concerns in pass holidays and of course you know we’ve talked a lot on the show about ship again
um I’m kind of worried about a new thing this year.
With the moat with this really prevalent version of discount chicken if a bunch of consumers are thinking they’re going to wait till the very last minute.
To get the best discount we have all the usual things in place we have like a fragile inventory that might start running out.
But we also this year have lower labor levels like stores tried to hire less people and they weren’t able to hire all the people they tried to hire UPS and FedEx didn’t get all the people they want so I’m a little worried if consumers way too long
that we you know might have another ship again in situation on our hands where there just isn’t enough labor capacity to get all these orders out the last week of the year.

Rob:
[44:04] Yeah that’s a super interesting point one that I haven’t dove into very deep but I’m with you Jason that’s going.
Potentially be an issue I mean I’m a sample size of one but I see it any time I shop or any restaurant I go in there not taking reservations or they’re not limiting reservations based on tables there.
You know basically limiting it because of waitstaff and so,
that’s true too in the physical store when the associate is being asked to do so many things now right it’s not just about scanning and bagging at the cash wrap,
it’s you know they’re becoming social media managers that are fulfillment experts there live streamers so you’re stretching them thin.
Capacity gets issue by the way the other interesting thing that we didn’t touch upon was returns we saw such an increase of returns heading into cyber week than we ever have in our thesis is that.
People who bought product earlier in the season.
Star the better discounts and we’re doing price adjustments in way of returning a product and then buying it back,
at the cheaper price so there may be earlier returns that are playing and usually that’s not,
a storyline that we talked about until you know January at NRF right but now it’s actually happening more so add that to your Litany of things that will create capacity issues.

Jason:
[45:30] Oh my gosh know for sure and you know it’s already a distant memory but with all those early sales that people tried to do
one of the things that may have gone unnoticed is a lot of retailers also extended the return window because the fear was will never get people the holiday shop early if they don’t think
that gift recipients will be allowed to return the gifts so a bunch of these sales are on more liberal return policies,
then ever before and again you know the economist are like come January we could be in stagflation and you know we don’t know what returns might even look like in that kind of economic environment so it’s,
it’s a concern for sure and that on that happy note Rob we’ve used up our allotted time.
Because on top of everything else during this show I received about 1,000 emails from the Salesforce marketing cloud with even better deals than Cyber Monday so I’m gonna,
after to go a little early so that I can get some more shopping.

Rob:
[46:28] Go for it please do shop on of course Salesforce Commerce Cloud websites if you may.

Jason:
[46:33] I didn’t know there were other kinds.
But in all seriousness Rob it’s always a pleasure to talk to you about anything and for sure to talk about the the holiday sales
loyal listeners will know the number one piece of feedback we get is they like to hear more from Kayla and from Michelle and I have to keep telling him that you always insist on coming.

Rob:
[46:54] Hey that will happen they are amazing I gotta say though before we go Jason Scott first of all as I mentioned before I love doing this like seriously this is.
Highlight it’s our Super Bowl or dare I stake a World Cup given where we are right now go us but you know.
More than anything I just really appreciate your friendship it’s so amazing to have friends like you and the retail industry
and the amazing Community we have and I also love how humble you are in terms of you asking me these questions
but the reality is you’re so on top of what’s Happening Now and in the future and I really value that so A big thank you all around.

Scot:
[47:34] Boom and you just secured yourself a fifth spot there you go
Rob thanks for joining us on Twitter you are retail Rob Garf you’re very active on LinkedIn I’ve noticed we will put a link to the hub of activity in the show notes thanks for joining us.

Jason:
[47:54] And until next time happy Commercing.**

View Details

EP298 - Amazon Q3 Earnings

Episode 298 is a recap of Amazon's Q3 2022 Earnings Report.

Episode 298 of the Jason & Scot show was recorded on Friday October 28th, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show
this is episode 298 being recorded on Friday October 28 2022 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason Scott show listeners
Jason wouldn't be a Jason Scott show if we didn't have a Little Star Wars talk I have a confession,
I'm really digging and or I think the rest of the Star Wars universe is out there hating on it but I'm really enjoying it I really
I liked the character from Rogue one and it's been fun seeing kind of a slower more character-driven Star Wars so have you had a chance to watch that at all.

Jason:
[1:07] I have I have and I'm with you now I'm not sure I was with you at the beginning it took me a little while to warm up to it.
But definitely the last three or four episodes have been a lot more engaging so now I'm eager for the next episode to come out.

Scot:
[1:24] Yeah and then when I haven't seen it it's getting a lot of buzz those tales of the Jedi which this is kind of from the right before A New Hope ERA with and or and then tells of the Jedi goes back to the prequels so talking about some of the characters there and then clone wars and stuff so that's on my list of things I'm going to do this weekend.

Jason:
[1:41] Fun I watch the first episode of that this won't be a problem for you but we're like oh cool another animated Star Wars series this would be great to watch with our seven year old and it's.
A little dark it's a little it's a little adult for a seven-year-old.

Scot:
[1:57] Had to fast forward some places.

Jason:
[1:59] Yeah we had to be ready.

Scot:
[2:01] Well thanks for joining us everyone we wanted to talk to this is the you know we're in this critical part of the retailgeek
calendar where we're barreling towards Halloween we got Q3 behind us and we're
were basically into the holiday season so we wanted to update everyone on some of the releases that came out here from the big
companies specifically Amazon we're going to take a deep dive into that but I always think it's interesting to kind of see the setup longtime listeners will remember that
one thing I think both Jason are proud of is we identified at Apple's changed privacy called IDF a some people call it a TT
I'm just going to call it I DFA to keep it simple as this huge problem that no one was willing paying attention to and we are still feeling the ripples for that.
What's been Jason two years now two years later 18 months.

Jason:
[2:51] Yeah it's crazy.

Scot:
[2:52] Yes so it's gotten it's gotten really crazy so so this the lead up to Amazon started with Snapchat as if we clean does
and I say this I've said this for the last three quarters.
Horst the so not only do their you know they had this period of time where they felt like they had stabilized but it's very clear the management team has no idea what's going on with idea if a they don't have a solution in Wall Street has kind of lost all.
All hope and then their quarterly calls are just total Bedlam like it's a nothing I've ever seen before so.

[3:24] If you're an entrepreneur and want to see what a reason not to go public go to listen to one of the Snapchat Wall Street colors they do not go well.

[3:33] And then so that was that was kind of a bit of a train wreck but not surprised that this kind of like the third Trainwreck so you're kind of used to it
I think the one thing that started the spook Wall Street was Google came out on the 25th and they basically their results were below expectations and they
YouTube specifically they have their segments we talked a lot about the Amazon segments but they have a they have a search segment a third-party search segment like a
first party search didn't call this but they have the I guess they call it the network which is Google off of Google so that would be like the Apple search experience that they have the Google search experience than they have the YouTube and all these other things
within the alphabet family
well the YouTube one is under a lot of pressure and it's not really clear it feels like it's duly suffering from idea of a problems like advertisers are not being able to track the efficacy of those YouTube videos anymore
but then also The Tick-Tock you know so you would know better than I do I only have one 16 year old and a
ten-year-old nice to reference but seems like everyone under a certain age and even over,
even creeping into our age group is just spending hours of looking at Tick-Tock videos so that has become a huge problem for YouTube because there's only so many hours in the day and if you're looking at Tik-Tok videos during all of them you're not watching YouTube
do you have any insights into the tick tock world.

Jason:
[4:57] Yeah no I actually think it might be interesting to explore a Tick-Tock deep dive in an upcoming episode because it it really is
the social platform that feels like it's grabbing all the oxygen right now I thought the audience engagement
is way up there's you know there's been a bunch of interesting Evolutions about
segments of the audience that are using Tik-Tok is their primary search engine which is interesting and surprising I think to a lot of people
Google is certainly trying to position Tik-Tok search is a viable competitor to Google which you know might have be true have be.
Antitrust and then.
Also true that we have been on these recent studies recently that a lot of Millennials are using Tick-Tock primary as their primary source of news so that's another.
You know Factor but it's just winning a lot of entertainment minutes right now.
Which also by the way means it's winning a lot of advertising dollars because the advertisers want to go where the engaged eyeballs are.
That's been a big thing.

Scot:
[6:06] Yeah the other thing that's interesting and I didn't put this in the show notes just occurred to me both Android and Apple are seeing softness in their App Store revenues.

[6:16] Specifically in the game segment so there's two schools of thought there one is
there's so one of it is the idea of a his rippled into that where the games are not getting as many new customers because they're not running as much advertising because they can't measure the efficacy of it
this one's interesting because this could be an indication apple shot themselves in the foot with IDF a most impact we've talked about on this show have been beneficial to Amazon where you know crushing Facebook or hurting Google
that's obviously kind of you know those are the Nemesis nemus I the Nemesis of
of Apple but this is one where you're starting to see it actually impact them in I think they called their services Revenue so that's one school of thought the other school of thought is in a
yeah I don't give us enough data on this is that know it's Tick-Tock because people are just sitting there watching so many technical games it's replaced
deployment of casual games so people aren't paying playing these addictive little Candy Crush type games and Clash of Clans there they're watching The Tick-Tock videos so so it's interesting to watch these consumer behaviors are changing very
quickly in this
post covid World in interesting ways and it's hard to tease out exactly what's going on but there's definitely you know some some big changes out here that I think will Ripple into our listeners in the retail e-commerce world as well.

Jason:
[7:38] Yeah it is I do think both of those things are factors I also think there's another interesting.
Thing happening with the the game revenue from the app store's I feel like their history is repeating itself a little bit,
if you're super old-school like you and I you remember all the old console-based Wars right like Nintendo vs. Sega and Atari and in television and one of the themes that played out on those platform things is.
Often one of the platforms would be super open and invite a bunch of Publishers to make it really easy to publish titles and so there would.
Bi huge dearth of titles but they would mostly be of low quality and then another platform would make it really hard to publish titles which would really restrict the.
The amount of titles that were available but they tended to be better and over the history of video games the latter strategy has always won,
that way when you have too many crappy titles eventually like the audience is get disenfranchised and they leave the platform.
Does feel a little bit like that is what's like the App Store Revenue became so lucrative for these guys that they made it super easy for everyone to
bring titles there's no more discovery on the platform because there's the signal-to-noise ratio is so poor that the only way you would discover a new game title would be via.
A Facebook ad which no longer works right I can sew it all of this is kind of coming to roost it feels like.

Scot:
[9:03] Got it yeah the and then so
that got everyone kind of wonky and then Facebook / meta did their release and that was just that was that went from their last Q2 was kind of concerning and then this was kind of a train wreck so there
expenses are running rampant they are spending a lot of money on virtual reality and they're seeing no revenue from that that revenue is way off where it should be they are announcing they announced like did you see this the pro headset which is like
twelve hundred dollars and it can track your your arms and feet and even your facial expressions or something it's super fancy but.
You know they're not seeing any engagement from people buying the Oculus I guess they don't call that anymore buying the devices and.

[9:52] The Medical West buying the medic West or any of that kind of stuff so then you would think they would get on there and say alright Q3 was rough we're going to
we're going to moderate this going into the queue for they're like nope we're going to double down and it's got actually get worse in Q4 so that that freak people out Jim Cramer on CNBC MSNBC Junkie,
he had the previously days he said that you know he predicted they would come to their senses and do a little layoff and this kind of thing and it was the opposite and he got on TV and apologize to the viewers and got kind of emotional there so that was that was interesting and you know day
there they seem,
totally distracted by the metaverse and not really didn't really have much commentary around ads it's off a fair amount they're due to IDF a as well and then.
A bright spot was then yesterday morning so this is Thursday morning
Shopify announced and they had a little bit of positive news what did you see there Jason.

Jason:
[10:51] Yeah yeah they actually had a meet and beat all around,
the you know revenue is up 22 percent.
You know there's a bunch of different metrics at Shopify these days because they have like the recurring Revenue they have the attachment sales attachment sales were are particularly interesting in this is,
how many of the various Shopify Services each Merchant uses so are they using shop pay are they using
Shopify fulfillment the the POS system all these things in the the attachment rate went way up which is encouraging for Shopify
and the Marquee number is probably total gmv going through their system and that was up by 11% so it was 46 billion dollars for the quarter,
um
and you know the Shopify is really been beaten up the last few quarters in and you know had a lot of down quarters and a lot of it was like,
e-commerce got overhyped and Shopify overbuilt and now that reality setting in they're getting creamed and so they're the
the guidance was pretty low and Shopify had a pretty solid quarter and sailed by it so I think their stock has had a nice little boost as a result of that.

Scot:
[12:12] In shopify's coming out liar because they do this pre-market announcement which is kind of the new fashion because there's so many companies that do aftermarket that you don't get the analysts that you want on your call so they've moved to kind of a morning,
announcement so they did Thursday morning and then that set up Amazon it wouldn't be a Jason Scott show without.

Marker 01 Jason:
[12:31] Amazon news your margin is there opportunity.

Scot:
[12:43] Well that other way the way I would characterize this one is a missing lower so from a Wall Street perspective they're always kind of thinking how did you do against our expectations for the current period and then how did you do for our forward-looking expectations so
so Amazon missed current and then actually lowered kind of missed the future as well.
Let's dig into it there's mostly mostly a lot of headwinds which does not bode well for an e-commerce or retail holiday here in the fourth quarter but let's dig into it and there are some there are some positives in here that will pick out
so also as we record this the stock's down 10% which you know Amazon is one of the largest
capitalized stocks out there at over a trillion dollars so 10% is a hundred billion dollars in so a lot of a lot of money sloshing around and it was.

Jason:
[13:33] It's like two Twitter's.

Scot:
[13:34] Yes yeah it is.

[13:36] Good enough and if it's down to Twitter's today and it was down as much as 20 percent in after-hours trading so so really
really kind of a tough report here the other caveat before we dig in is
I don't know if most people track this because unless you went on an international trip or had some international business you would know but one theme we're going to talk a lot about is Europe so your
how's the.
Geopolitical issues with the Ukrainian situation there and then they have an energy problem because they get most of their energy from Russia so they're having energy,
it also are suffering from similar inflation trends that we're seeing there's a worse because the energy is
orders of magnitude worse than we see here in United States that has created a currency fluctuation very unusual so so it used to be that.
You know dollar was worth euros worth of many dollars and now that is inverted or like parody there and the pound is these currencies are at.
Multi-year multi-decade lows versus the dollars so the problem when you're like Amazon and you have a pretty big chunk of your Revenue coming from International entity like that when you compare your periods it creates a financial Exchange headwind.
I will report all these numbers without that but it is
created you know the absolute dollars of Revenue and whatnot are off even more due to that currency headwind that that's out there.

[15:04] So let's look first it Revenue.
Revenues came in at 120 7.1 billion Wall Street was expecting a hundred twenty seven point four billion so that point three billion was the myth that's three hundred million dollars that's.
Into to that Ridge retailer that's pretty cataclysmic that's actually pretty small from a personal standpoint and you know I think if you looked at the financial exposure and whatnot it largely
can be explained there the one of the bright spots will talk about is North America Revenue so this could actually bode well for listeners that are have almost
just pure United States exposure
the revenues were up 20 percent year over year which is pretty impressive in an acceleration from last Q which was 10% now they did have a this right Jason they had a prime day that that was that was an October 1.

Jason:
[15:54] Yeah I think that's going to be in the queue for numbers.

Scot:
[15:56] Yeah okay so that's without.

Jason:
[15:57] And and we don't call it Prime day we call it early Prime axis.

Scot:
[16:00] Yes the thing that we will not be called printing the artist previously known as permanent so so that was good and then you tracked e-commerce data closer than I do that that's got to be.
Pretty significantly above the Census Bureau data right.

Jason:
[16:16] It's it slightly above that so we don't have Q3 e-commerce data yet so we only have that non store.
Sales data and it's it's in line with an OnStar sales data but the e-commerce data is usually a little lower so next month will get that and I do have a feeling that.
Amazon's Q3 is going to outperform the the industry's e-commerce.

Scot:
[16:42] Yep and then where is retail where did retail end.

Jason:
[16:46] Pretty high also the this I'm going to buy time while II.
Pull up my number but this is kind of the so year-to-date retails up 9.1%.
So I didn't I didn't do a Q3 breakout but.
Overall spending in North America by consumers has remain robust which like has shown up in the Amazon earnings and shown up in the.
The Shopify earnings which is you know I think somewhat surprised a lot of people because with all the
the economic news people are kind of expecting that consumers would tighten their belt and it seems like they've changed what they spend on but they're continuing to spend so far.

Scot:
[17:34] Yeah yeah so that's that's right spot and then to kind of pair that in
with a dark spot International revenues were down 12 percent and that's when you take out the impact of foreign currency so Europe is definitely in what I would call an e-commerce / retail recession you know
have a lot of empathy for folks their power bills are just surging and they're having to decide you know do I do I pay my for my heat or do I buy a pair of shoes online or whatever it is so so I think we're going to have really rough
q4q on here for anyone that has exposure to Europe now Amazon to their credit did manage their expenses and beat on the bottom line here so it was less they were able to kind of take this downward Trend and manage their expenses and so it wasn't a.
Double A Miss Revenue Miss profit so it was a Miss on Revenue lower Revenue than expected but then also they kind of made it up
Bob with efficiencies that being said you know it's a
this is pretty interesting so so FedEx is one of the first companies kind of say hey we think we're heading into a global recession then everyone else said we don't see it and then so this is another data point that kind of says yeah there's something really going on and we're really starting to see it in the data here
so

Jason:
[18:50] And you know there was a Jeff Bezos tweet like a week or two ago that was like kind of his own POV and I think it was batten down the hatches.

Scot:
[19:00] Yeah yeah so you'd imagine being on the board he sees the other thing that's interesting with these big companies as they get a fair amount of time to do this you know so we're.
You know they've got another month of data that they're looking at so that we'll talk about the fourth quarter so there's
reading the body language it feels like it's getting worse so we'll talk about that
but on the bottom line so all that was the top line and kind of the interior parts of Revenue let's look at the profitability operating income came in at 2 .5 3 billion versus 2.94 billion so that's a
point for billions of 400 million which again isn't isn't a massive number but percentage-wise it's about a 15 to 20 percent Miss so that.

[19:42] Really big percentage Miss on the bottom line of expectations so yeah so that's the you know it was a Miss on the top line Miss on the bottom line so so overall Miss and then we'll talk about the lower
I did see a couple interesting details the two I picked out that I'll kick it over to you Jason third-party unit so this is a metric that's near and dear to my heart hit a new high of 58 percent of units so one of the things I
I in my mind that Amazon has a sliver that they can pull and send more
dual s1p and more 3p if they want to drive profit over Revenue so that there's a trade-off there higher they have a high margin high margin
low Revenue high margin business High Revenue low margin business and they can kind of like dial between those and it feels like that
pulled that dial over towards the 3p side that could also be supply chain issues there's a million things that go on there
the thing that was interesting is Amazon goes through these what I would call invest in Harvest cycles and during covid they invested a major amount they almost doubled their fulfillment for,
and today they signaled the Wall Street in Q2 that they were going to go through kind of a harvesting phase where they were going to stop adding capacity in fact they've actually.

[20:56] You know they've shut down somewhere houses they sold some so that they've actually started this this kind of,
harvesting mode from all that investment where that's reflected is in the symmetric they release called shipping expenses which they measure as a percentage of online store revenues it was 37.2%
and that's an improvement this quarter over last quarter's 37.9% so that's pretty impressive especially you know the sales grew through there so so to be able to grow the 20% we're talking about and reduce expenses is very impressive
on the call they said that they were able to squeeze out a billion dollars in operation Improvement in the quarter and that they were pretty excited about that but they actually felt like they had missed their
tear internal goal by 500 so we're going to do 1.5 billion and they came out with a billion so I suspect we'll see some of those things come in the fourth quarter they did say that that thing that we will not call Prime day
cause I was a little bit of a challenge because you know
they are so you're sitting there and you're like putting the screws to things and you're really figuring out and then suddenly you have this day where you have a record number of orders come through and it that makes it hard to do so they that was a speed bump in that,
any other little tidbits you saw in the big picture before we dive into some of the other pieces.

Jason:
[22:11] Yeah mine we're probably a little more frivolous frivolous than yours but we always talk about you know how Amazon hates the profitability metric and they you know they talk about Gap profitability not being.
Like that relevant and how much more that Jeff Bezos likes free cash flow well another example of that hitting home for me was in this earnings call they kind of talked about the last couple quarters of,
of their profitability and what a huge impact,
the value of the rivi on stock was on it and it like literally was like the most influential thing in whether you know they they were profitable or not,
and so you know rivi on had a better quarter this time than last quarter and so that that materially changed Amazon's profitability.
So it's just it's funny because they're they're not solely owned by Amazon but the Amazon is a major investor like that that's a.
Kind of X Factor and their earnings that may have been previously obvious to you but then the way more important one.
So you know the their first season of rings of power wrapped up two weeks ago and everyone in the entertainment industry has noted that they really haven't come out and bragged about any audience measure metrics from that show.
And we know Amazon likes to brag about its winds so the assumption is that it was a little underwhelming from a performance standpoint and then in this earnings.

[23:40] They reference that they got nearly a hundred million viewers for the show
so that probably means they got less than 90 million viewers or they would have just said 100 million but well,
generously say they got a hundred million views eight episodes of the show
that means they averaged about 12.5 million viewers per episode and to put that in perspective HBO has said they got to north of 29 million.
Views per episode of House of the Dragon so.
You know compared to a normal TV show those are all good numbers but these are you know the world's most expensive TV show so it does seem in this first season that HBO is better at getting an audience for their.
Their Blockbuster TV shows then then Amazon is so far.

Scot:
[24:29] I've heard better I haven't watched either I'm saving them for a holiday binge but I've heard more positive Buzz of from House of dragon than the rings of power but I don't know.

Jason:
[24:40] Yeah I mean I think both are totally watchable I enjoyed both there's this weird don't you know there's people that have such a love for the the.
Both Worlds that you know the TV shows fall fall short of people's expectations and so I like I have a feeling for like huge.
Um you know Cannon lovers of Lord of the Rings that like you know they might have been a little extra disappointed but if you kind of just come into it cold and say hey is this a good.
Piece of of fantasy fiction and is entertaining to watch I thought it was pretty good.

[25:16] And then the last thing and you alluded this little bit the early Prime access is not in the Q3 numbers but they do reference it in the earnings and.
It was a a successful event like it's very clear that it did not.
Come close to approaching the level of success that Prime day typically has or even that the prime day in October a couple years ago had.
Um and you know so there's been a lot made a lot of media has written about oh it's a failure because it's not another huge.
Spike like Prime day I'm not actually sure that was the bar or the goal
you know Amazon like every other retailer has a lot of imperfect inventory at the moment and I'll and it seems like they got a chance to sell through a lot of that at this event and so like you know I think.
How you judge that event has a lot to do with what you think the success criteria of the event was but
that that's another sort of tidbit like they certainly didn't come at you know if it had been a home run it would have been one of the top Six Bullets at the at the beginning of their their earnings press release and it was not.

Scot:
[26:30] Yeah this this kind of goes to the changing consumer Behavior another thing that didn't chat with you before we prepped his again I watch a lot of CNBC.

Jason:
[26:40] Audience members are going to be surprised to find out that we ever prepped.

Scot:
[26:43] Are very light prep the both CEO of hurts United and of think it was American or Delta Airlines
they'll talk about these new patterns they're seeing and travel wear and then there's not a great name for it yet but what's happening is people will go on a personal or a business trip and they're staying longer and because so many people are
working working
you know remote they'll go and do they'll go on like let's say you had a business trip somewhere you and your significant other could go to that and then have fun and then stay three more days into the next week so what used to be like little snack size trips like two or three-day trips both for personal and business have turned into these six eight ten day
type trips.

Jason:
[27:29] Yeah it's work Leisure I'm naming it but yeah.

Scot:
[27:32] Yeah there you go so you know so then people are spending a lot more money on that which I think could be part of you know
people only have so big a wallet and whatnot so yeah so it's gonna be interesting to see how this holiday sets of it's going to there's so many changing behaviors I
it's going to be a lot to pick out of this one.

Jason:
[27:54] Yeah no for sure I do think.
Again you know people are talking about all these economic headwinds you ordinarily that slows consumer spending way down so far we haven't in North America seeing,
consumer spending slowdown but what they've spent on has toy changed a your point it is still more.
Sort of like experiences and pent-up demand for things that people weren't able to do,
during the height of the pandemic and it is you know they're spending more of their wallet on on needs instead of wants as the needs have gotten more expensive due to inflation so write to me the most common story we're hearing is.
Revenue looks pretty strong but profitability really sucks because we're we're selling the wrong stuff and we don't have enough of the right stuff in stock.

Scot:
[28:42] Yeah nursing will you dug into the AWS and adds what did you see there.

Jason:
[28:49] Yeah well you you mentioned up front that the stock the Amazon stock really took a hit after the earnings and it feels like that was two things.
Their guidance that we'll talk about in a minute but also.
I think the street was really spooked by the kind of slowing rate of growth of AWS you know for a long time a device has been the crown jewel of Amazon.
In terms of you know a big Revenue number that's growing super fast and is wildly profitable,
so AWS sales for the quarter where twenty point five billion which is a big number that's up 27 percent or 20 percent of you adjust for currency which again.
Like.
In most cases you go to someone and say hey you've got a highly profitable twenty billion dollar quarter business in a grew by 27 percent this year from last year how do you feel about that,
you feel pretty good but wall Street's expectations were that they would grow by more than 32 percent.
And so it was like a significant Miss and if you know you look at the recent history of growth of AWS I mean you go back to 2021 it was.
Thirty-seven percent growth 39 percent growth 40% growth 3733 and now 28 this is the first time it's dropped into the 20s and so I think there's a real fear on the part of investors that like.

[30:11] Is the law of large numbers finally starting to catch up with this business and do you know do investors have to reset expectations about.
What a WS can contribute to the pot going forward.

Scot:
[30:25] You lot of people have been predicting a slow down there because of the larger law of large numbers but it's always sad when it happens.

Jason:
[30:32] Yeah yeah and I don't know what the answer is because I'm on one hand it seems totally intuitive that it would slow down it's such a big business.
That there is a strong argument that as much money as that generates it is shocking what a small percentage of the world's compute is.
Cloud still and so it doesn't there it's easy to craft an argument.
That we're still in the first inning of the world migrating to the cloud and so a hypothesis is not that like.
The fast run rate for these cloud services is over but that businesses spending to move to the cloud has slowed down because of the economy right and that you know as as.
The there's more economic dark clouds you know Amazon has certainly cut back and and tried to contain cost every other company in the world is doing that and often that means,
that migration to the cloud project that they were planning you know has to take a backseat so so some of that could be in there as well.

Scot:
[31:35] Yeah and I saw.
In the called excited energy cost so AWS also had some pressure on the bottom line and they cited energy cost and then I got to imagine this European recession you know the a lot of the
the energy around a WS comes from startups and startup formation as always.
Low during recessionary period step yes so if we do get a global recession it's going to be under pressure but I think the long-term addressable market for it's just massive so we'll see.

Jason:
[32:06] Exactly but the good news for Amazon is they secretly have a better business than in the US
which which is the bloody ads business right and so we've talked about this for a couple quarters you know this used to be buried and other that you know a couple of quarters ago they had to disclose it for the first time.
Um and you know so it was another good quarter.
For the ads business it grew 25% 30% of you adjust for currency.
So they sold 9.5 billion dollars worth of ads this quarter.
Which is not as big as a WS but the margins for ads are way better than the margins for AWS because you mentioned you know the cost of goods for an ad is essentially zero.
But there's very expensive electricity required for each unit of compute that a WS cells.
So you add up the last four quarters of the ads business and it's now a 36 billion dollar business.

[33:11] Which is another remarkable business I've done the math of a foreign of you kind of you know impute income from from AWS and ads ads has already surpassed AWS in terms of total.
Income contribution.
One slight wrinkle for our listeners in the world of retail and commerce right now like one of the top topics that keeps coming up over and over again as retail media networks every,
every retailer has seen this Amazon business and they're launching their own version of it call the retail media Network and investing heavily in it.
And every brand is struggling with how to deal with all these retail media networks and if they're a good investment and how to deal with them so that.
It's a huge topic right now and I would just point out that well.

[34:02] The bulk of Amazon's ad business is a retail media Network Amazon is bigger than a retailer right and so.
The ads Revenue the Amazons talking about does include.
Thursday night football and Lord of the Rings and you know at which in a lot of other things that Target does not have right so I just.
Want to remind people that it's not really apples-to-apples to compare.
You know Amazon's you know kind of 40 billion dollar annualized run rate against.
You know and say that gosh if if they're getting you know this many dollars per.
/ retail gmv dollar than everyone else should be getting the same because it's not really Apples to Apples.

Scot:
[34:54] On the Amazon ads I saw this interesting article was titled Google's pain is Amazon's gaining which I thought was cute and it talked about how if you annualize that
you know this is a 40 billion dollar line for Amazon which makes it a third the size of Facebook now
and a sixth the size of Google so we've we've we've on the show we've been talking about this and I remember when it passed Snapchat and then Twitter so it's really there's a day where it could close in on Facebook because
it's,
the Amazon site is growing very rapidly Facebook seems kind of lost in the jungle focused on virtual reality and not fixing their core business so those lines could cross pretty quickly which would
give us this new duopoly of Google and Amazon as which three years ago if we had said that people would have thought were crazy.
You think we're crazy but yeah it's crazy.

Jason:
[35:48] It totally could I would say one caveat here there is a big difference at the moment between Amazon's ad business and like meta and Google's ad business.
The Amazon still gets a lot of traffic by buying ads on Google,
so you know that that the other big ad platforms are all organically earning their traffic and then they're monetizing it
Amazon does kind of by eyeballs at wholesale from Google and then sell them retail to two brands on Amazon so there is a bit of Arbitrage that's happening there now as they create more,
loyal Amazon Prime customers and more you know viewers of all their Entertainment Properties that you know it'll be more apples to apples but and I haven't looked this quarter but last quarter
you know they you know on a or a quarter ago it on an annual basis they spent about 17 billion dollars on ads so.
The the bottle out of traffic that they then result.

Scot:
[36:50] Cool so that that kind of wraps up our Q3 highlights so then let's zoom out and at the top I mentioned you know that Am That Wall Street looks at kind of the current quarter in the future quarter so that was Q3 so it's kind of a miss and then
the whenever a public company like this updates the current quarter they also update our outlook for the future quarter which in this context would be fourth-quarter calendar fourth quarter
so Amazon guided to 142 148 billion for the quarter so that would imply about it 4.8 percent year over year growth at the midpoint,
now they don't give us guidance on North America international so there's imagine inside of there you would still see North America growing.

[37:32] Fifteen to twenty percent and then you know the non North America they called the non-domestic business having a headwind and that's where you get this 4.8 would be the Delta there.
But what's really bad about that is Wall Street prior to this report had thought they would do 155 billion so let me say those numbers
clearly Wall Street thought that Amazon would do 155 billion in
in fourth quarter and now they're saying basically 144 so so that was a pretty big lowering of expectations and then also on the bottom line Wall Street thought that would do five billion of operating income and Amazon said well 024 the midpoints to that's a change of three billion dollars so
Wall Street didn't like that but you know if you're
if you're you know jassy and you're running this thing you want to lower expectations because it makes it easier to beat them in the long run if you part of the Amazons DNA is to be a much longer thinking kind of company so you,
typically if that's how you think you'll take some short-term pain for long-term gain so you know some folks feel like,
maybe the kitchen sink this thing and they knew third quarter wasn't going to meet what everyone wanted say thought this is a great time to go ahead and rip the Band-Aid off and really lower into the fourth quarter other people look at that body language like I mentioned and they say wow.

[38:48] You know it maybe it got worse especially in Europe in the fourth quarter and maybe that's what caused them to really kind of Ratchet this down we won't sadly we won't know until January February when they release their results but
you can count on us here at the Jason Scott show we're going to be tracking the holiday we have some really great content planned for you this is when we kick into overdrive and really
track things going on so we have a lot of content there but it's not a great set up heading into the holiday would you agree with that Jason.

Jason:
[39:15] Yeah I definitely think this is a strong warning sign for people that are bullish on the the holiday,
I do you know kind of overall I looked at this whole thing and I say you know as an interesting earnings call.
Not a heck of a lot in this earnings call was.
A result of internal stuff going on in Amazon that like it very much reflects the macroeconomic trends that.
That are happening to Amazon and those same macroeconomic trends of course.
Happened to everyone else as well so it's interesting you know Amazon has become a very useful sort of.
Indicator for where the economy is going and you know the economists have been arguing quite a bit about where it's going so it's interesting to see some data.

[40:14] Yeah so this is where we will leave it today if this was valuable for you we certainly would love it if you jump on.
To iTunes and leave us that five-star review make sure you've got your podcast player dialed in to download our new episodes because you're not going to want to miss.
Some of the the play-by-play of holiday.

Scot:
[40:39] Thanks for joining us everyone we hope all of your holiday Q4 results exceed your expectations and.

Jason:
[40:46] Until next time happy Commercing.

View Details

EP297 - GroceryShop 2022 and News Episode 297 is a recap of the GroceryShop trade show in Las Vegas, and the Consumer Brands Executive Summit in Colorado Springs.

We also discuss the latest news (and controversies) around Facebook and TikTok pulling back from some social commerce initiatives (and pressing forward with others).

We cover the Prime Early Access sale and its potential impact on the overall holiday season.

Episode 297 of the Jason & Scot show was recorded on Tuesday October 4, 2022.

http://jasonandscot.com

View Details

EP296 - Guardian Baseball Co-Founder Matt Kubancik

Episode 296 is an interview with Matt Kubancik (@mattkubancik), CEO and Co-Founder of Guardian Baseball. Matt is a serial e-commerce entrepreneur who was the founder of Street Moda, Co-Founder of SKU Vault, and most recently Co-Founder and CEO of Guardian Baseball.

Mark is an experienced Marketplace seller, and his current business Guardian Baseball is a hybrid seller selling both wholesale and owned brands direct to consumer from a Shopify site, and via multiple marketplaces including Amazon.

Guardian Baseball is an early adaptor of Buy with Prime, and shares in the interview, that they would migrate off Shopify if necessarily to keep using Buy with Prime. He also discusses a number of the current limitations with the Buy With Prime offering.

Episode 296 of the Jason & Scot show was recorded on Friday September 23, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 296 being recorded on Friday August 23rd 2022 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason Scott showed listeners today we have a fun interview this is kind of a both a TBT a throwback for me and then also modern discussion around by with Prime
but to set it up we are very excited to welcome mat kubancik to the show welcome mat.

Matt:
[1:00] Thanks Scott and Jason have my own.

Scot:
[1:02] Matt what's your what's your current title you have you have 50 things you're always doing so I never know what to say other than.

Matt:
[1:08] Always doing but Maine.

Scot:
[1:10] Entrepreneur genius.

Matt:
[1:11] Yeah sometimes sometimes a genius sometimes but that's the life of an entrepreneur I co-founder and CEO of Guardian baseball.com or multi-channel hybrid direct to consumer
and brand partner of you know some of the biggest.
Brand names and Sporting Goods retailer so predominantly in the baseball and softball market and we're on Amazon Walmart eBay and on our Shopify site.
And we were named the fastest growing e-commerce retailer by ink magazine in the Inc 5000 and number 180 overall this year.

Jason:
[1:48] Amazing that congratulations
I definitely want to jump into it but before we do you know our listeners always like to get a little bit of a gist of our guests background and so I'm imagining you you went to college and got a degree in baseball e-commerce is that how you started.

Matt:
[2:05] No not at all actually spent six months in in college dropped out was one of the original I started selling on eBay 1999.
Um during think my first year of high school sold baseball cards ironically and then.
Started selling fashion and store stock Closeouts Retail Arbitrage early days of eBay and then when I was 18 years old.
I met an executive that was retired from the Footwear industry and him and I started a company called Street motor together,
and we were a early on 2000s multi-channel retailer and I met Scott through signing Channel advisor when I was 19 years old I remember signing my contract,
verbally over the phone like a grain to the contract and then I went into school and said hey I'm going to withdraw after six months of Indiana University so.
Dropped out and did 100 million over,
10 11 years mainly thanks to the a lot of connections Channel advisor helped me create you know Market places like Amazon eBay buy.com back in the day,
a lot of the shopping channels like Shopzilla and sites like that and we exited that business in 2017.
And been involved in e-commerce and various other companies and degrees.

Jason:
[3:30] That's an amazing story for a couple of reasons first of all I love everybody that that helps helps
fun they're beginning through Retail Arbitrage have you seen the latest version of we Retail Arbitrage kind of making the rounds right now.

Matt:
[3:46] What is the what is the latest version of I probably have but I'm wondering what it would lose.

Jason:
[3:50] It's dudes buying Walmart frozen pizza and then selling it as a ghost Kitchen on doordash.

Matt:
[3:56] I love it yes I actually posted that somebody needs to hire that guy with the tick tock video yeah.

Jason:
[4:01] Yeah that that was amazing and then one thing that's that I found peculiar about your background is most people tell me they even back then Scott was too fancy to actually talk to customer so it's kind of impressive that you were able to meet Scott in person back then.

Matt:
[4:16] Yeah the I would think I was like 18 and I was a channel advisor conference and I had a beer in my hand and he walked up to me and I remember he was like are you are you 21 I was like I don't think so.

Jason:
[4:26] So it was mostly a liability concerns.

Scot:
[4:30] Yeah yeah Matt Matt's a brilliant marketer and he would bring these t-shirts to the shows he did he did Wingo as my homeboy and then was a twingo made Millions so those are some of the best best marketing gimmicks,
and I will show up at the show and I was wearing this this t-shirt with a picture of Miss really weird.

Jason:
[4:49] I feel like it's even it's gotten increasingly true and more much more true in the last month that you could sell more of those t-shirts the Wingo made me Millions.

Matt:
[4:59] Yeah it was a it was a lot of fun so.

Scot:
[5:04] And then so then that was your primary thing so then you did you guys realize that you needed to build you look at all the software for shipping and inventory management and build your own and then you,
tell the story of that.

Matt:
[5:19] Oh yeah so it was like 2012 or 2011 and kind of the only inventory platform out there other than like something on the level like sap Oracle custom build for like larger retailers or Manhattan,
a red Prairie was what was it called Scott like Stone Edge or something what was it was on Old access bit database yeah and I remember,
they actually got bought out by a former competitor of Channel advisor so and there were so many Channel advisor clients on there so we tried to launch that in our warehouse and my childhood friend
and he says who got an engineering degree and eventually became the CEO of skew vault,
tried to implement that and then him and a programmer who was programming a bunch of stuff Slava who's the co-founder skew vault
try to implement that system and it just didn't work properly for us so they came back to me a few months later and they were like hey we're just going to build it and I was kind of like okay if you guys can really do that
and you know it worked we built a skew Vault version 1 out of Street Motors warehouse and then eventually I help those guys kind of get the business off the ground.

[6:25] Was original co-founder Andy just exited the business lat ironically a week before Channel advisor so,
to a company out of the UK and you know still work with Andy on a daily basis and good friends so really proud of those guys and yeah it was it was a great thing we did up having,
thousands of customers and help them with their fulfillment needs and help a lot of the big direct to Consumer and Shabba fine Amazon retailers on a SAS,
like platform manage their inventory and cycle counts and you know all that kind of stuff.

Jason:
[7:00] And so was q v predominantly like a order management system or I guess I always thought of it as kind of like a almost like a dim and a CMS and a way am I thinking of it wrong.

Matt:
[7:12] Predominately a warehouse management system you know we never we had a really good partnership with people like Channel advisor and,
and other channel listing tools so Andy was always very adamant on not disrupting those Partnerships I think you saw a lot of,
a lot of our competition would eventually move into the channel management and then disrupt those Partnerships so we always relied on and Scott was a huge part of that,
and driving force and then Channel advisor folks were always a huge you know big partner of skew vaulting especially in the early days of really driving that home so we never really got into the listing.
Pain management we really tried to rely on our.
Excellent capability of functioning in the warehouse so providing quality control integrating with the shipping carriers like ship work shipstation.
Companies like that and and then integrating with the channel Partners like a channel buzzer.
And providing all the quality control Pick Pack you know scan in audits inventory sinking buffers all that type of normal WMS type of functions.

Scot:
[8:17] Cool so you you were a e-commerce entrepreneur so you've done that then you did software-as-a-service so you get the check that off the box and then I saw on LinkedIn you've also been working with a turbo host so that's actually getting into my world of cars now
tell me tell me how you got into that one.

Matt:
[8:34] I just really like nice cars and you know I started renting them on Taro and I was down in Florida which is like a second home for me and I had one of my best friends move down there and from Louisville,
and we just started buying cars it started with one so I didn't have to like rent Ontario anymore and then you know the turo market got really flooded so what I started to concentrate on was more mid-tier Exotics,
so we bought cars like Porsches and Ferraris and then Terro raised there,
they used to have a lower like coverage they would do like 150,000 and it was something that I was used to you know Scott on very well versed in the marketplaces I think if somebody looks at my.
You know in between companies I've always consulted and I've always been brought in by big Brands to be on marketplaces Amazon eBay and how to really run and function those within a larger organization,
so I really adapted well to the turo marketplace because I felt it was much like an eBay or an Amazon type of,
mentality where they provide the customers you provide the inventory and then provide the service,
and then you don't have to worry about all the legal jargon and a lot of the compliance and you know worrying about marketing spend,
and Roi so you know we had three or four cars and and still working with my partner on that.

Scot:
[9:57] Cool it's a as I got into this Mobility space myself I was poking around it's like otter oh and then I saw the CEOs name is Andre Haddad and he's actually an eBay guy and it rang a bell and I had met him a couple times in eBay meetings so it's funny you've already kind of made that correlation there's a lot of,
e-commerce people in the mobility world that I run across
and then so my big question is if a Ferrari is a mid exotic for you what what's up there about already like Bugattis here like.

Matt:
[10:29] Like it in your old Ferrari California so it's something like a hundred and thirty thousand dollars and then we drop you know 20,000 into it to fix it up and it's running.
You know we run it at like 750 to 1,000 a day where I would consider a more like.
If you look at a competition like in Miami or Vegas they're generally running in the you know the Uris has or the Bugattis of the world so that would I would consider kind of the luxury like Newark here.

Scot:
[10:57] Got it where's and Lambo is kind of in the middle.

Matt:
[11:00] I would say Leo Lambo Huracan would be kind of be in the middle mid-tier luxury.

Scot:
[11:05] What's your daily driver their ass.

Matt:
[11:07] I have five kids now so it's a Ford Expedition in Louisville Kentucky but I have to I have two choices in Suburban or yeah there's no.

Scot:
[11:15] Low exotic low exotic yeah a lot of gold fish floating around in the car there I'm a that's our bread and butter here at spiffy is the five kids think you guys are Jim.
Give them and give them lots of food to throw around back there.

Matt:
[11:33] Applesauce back and everything yeah I'm the Costco dead.

Jason:
[11:37] Spiffy spiffy charges extra for apple sauce stains just so you know.
Side note I just got back from Vegas from grocery shop a grocery e-commerce show in the big news in Vegas is they just announced that formula one is coming to Las Vegas.

Scot:
[11:54] Yeah yeah that's gonna be awesome.

Jason:
[11:56] They're doing a track that's going to be on the Strip their clothes in the strip for a week it's going to that could be pretty cool.

Matt:
[12:03] Who's at that shop talk conference that they're involved in.

Jason:
[12:06] It's put on by the same people that started shop talk yes but it's more focused specifically on the like Grocery and Food Industries.
So you've got all this Marketplace experience you got your fashion experience through shoot Street Mota.
How'd you get there.

Matt:
[12:39] So I started the business with a friend of mine he owns the largest travel baseball organization in the state of Kentucky it's called The Wolves baseball organization he's around my age,
Jewish kid from l.a. got recruited to play baseball in Kentucky so moved here were both only children both the same age both outside of Kentucky so we got along real well,
he started training my kids he's really good with people really good people skills,
really good with developing children and just teamwork and a lot of stuff and so we just started Guardian as a as honestly.
It was supposed to be a lifestyle based business he was paying full retail from a local sporting goods store,
for all his equipment and uniforms and I was this is when I was Consulting for the company that had bought Street mode and I was like hey,
you know why don't we just go direct to the brands will sell some stuff on Amazon you know we'll have a little half a million dollar business.

[13:35] And so we started working with like the wrongs and the Wilsons of the world and the Maru cheese and when I got into this business you know coming from the fashion business and when I consulted I consulted a lot of direct-to-consumer apparel Brands and launching them on.
Amazon and helping with them their Logistics and health and beauty and those are very.
Competitive Industries in the direct-to-consumer world right and they're very Advanced and a lot of their metrics and there's just heavy competition and there's a new direct-to-consumer player subscription boxes which is very competitive market and there's always something new.
But in the Sporting Goods industry and you know Jason if you play baseball growing up is the same Brands like the same Louisville Sluggers Easton's.
Of the world and you are having some direct-to-consumer.
Brands that are kind of infiltrating the baseball and softball world but it's very much like an accessories like they might be a Brandon sunglasses or a bad brain and batting gloves but there's not really a big brand kind of doing it all,
and there's almost no direct-to-consumer penetration so it's something that.

[14:34] As we started evolving the business we started by buying just equipment then we would go to the brands and we started making our own equipment with them so we go to them and say hey.

[14:44] You guys do black pink bags for girls that's really cool but like a lot of the girls are sick of black pink so we're going to make black Tiffany we're going to make black rose gold.
How about we do these like new colorways kind of relating into the fashion business so you know I was still active in fashion and Consulting for and working with a lot of Brands like Puma,
Steve Madden and Brands like that so I know kind of the colorways that are clicking and women's heels or Footwear and sneakers so I would and apparel and I would kind of put those over,
and say okay maybe baseball and softball is a year or two behind so we kind of started doing that and that worked really well.
And then we started producing our own cleats which are an Amazon bestseller so we're you know we out sell some of the biggest brands on the market came from Footwear so we started making kids cleats,
our Guardian one of our Guardian kids please says over 6 700 reviews on Amazon it's one of the top sellers,
we had inventory we have more inventory coming in so we just started started with cleats and then we started making sliding Nets bat bags.
Um and then we released a baseball bat with a huge kind of direct-to-consumer startup brand that's taking over a lot of the market in the BB core which is high school and college is called stinger,
bad company and we did a collab with them and it was called The Guardian bat by stainer and standards whole thing is basically the traditional direct to consumer.

[16:07] Where they're you know the normal high school and college bats are costing three to five hundred dollars and they come in around 250 price point,
260 price point it's the same quality most of their sales are direct they do have a few retailers,
and we came in and did a brand collaboration and we we had over 120,000 views 130,000 reviews on bat Bros which is the independent bat testing and they rated as a top five bat,
and then when it came out for three or four months it was a top five bad on Amazon in terms of sales so.
You know that's kind of what we're doing now and kind of evolving the business into more of a direct-to-consumer and making our own equipment and then working on with brand collaborations like a supreme would in the fashion business where,
putting a guardian and going to a traditional brand and saying hey instead of just doing black and navy and red catching equipment let's do a kid's shark-tooth let's do a camouflage but like blue and green camo or something so we're kind of making it fun.
And it's been good you know it's been a fun ride we're growing rapidly we,
closing investment with Matt Joyce this year he came on as an owner so my business partners Evan I own the business along with a 14-year major Leaguer who just retired,
and he was kind of a good Target for us we didn't want somebody that was just just going to sign a check like a really really big guy that was a Hall of Famer something and wasn't want to be active we wanted somebody that.

[17:36] Was very entrepreneurial and Matt owns a line of gyms and Florida he does a bunch of real estate Investments and he's had kind of a blue-collar dad you know family raised him type of hard-working mentality and we wanted somebody like that.
So he came on this year and we're really glad to have him and he's kind of helped line out a hole.
Roster of athletes with us so we're very early on in The Cutting Edge of Ni El marketing and yeah so we're just kind of a cutting-edge retailer.

Jason:
[18:06] Interesting so a couple of quick questions jump to mind when you first got in the the baseball business,
I would call that the sporting goods in general and I'm kind of assuming you'll correct me if I'm wrong baseball in particular is a little bit of a digital lagger right so,
like you don't think of like Rowling and Wilson as kind of digital first companies.

Matt:
[18:31] No I would say the industry overall is is very traditional and they don't like a lot of
change in the industry I think that's the baseball and softball equipment baseball in all I mean you see baseballs really losing out to Big sports like football and basketball and they're trying to figure out how do we become more engaged with the fan so I don't just think it's.
Just necessary the equipment Brands I think it's overall as a sport but we definitely do see that in the baseball and softball equipment you know I think they don't really.
They get they hand me these 500-page catalogs and there's 498 pages that are literally dedicated to male athlete ages 14 and above.
And what they really forget and they do make equipment for him but it's not a focal point of their business and that's what Guardian kind of focuses on,
is the softball Market is very underserved and then the youth market and if you think about the under 8 years old that's the most kids Everybody Plays little league right ever played buddy place,
t-ball and coach pitch and then as you kind of Rise through the ranks then maybe you get more involved in swimming or maybe you get more involved in Lacrosse and that's your sport,
or basketball or football and then you stop playing baseball so we are our cleats actually really Market to a 12 and under,
and that's where really really kind of honing in the market and then the softball markets been huge you know two of our biggest influencers are Bella Dayton and Jasmine Perez chica they play for Arizona and Texas.

[19:56] Their videos on Tik-Tok and Instagram we've done on marketing as and IL marketing have.
Gotten hundreds of thousands of views and actually get more views than Major Leaguers we work with,
and softball NCAA softball I think it was last 2021 surpassed college or viewership,
for college men's baseball in the world series for the first time ever so college softball and softball in general is a very underserved Market by these Brands and it's something that,
we're working with them on to develop more items and we're also working on ourselves of really kind of dressing that market and putting women at the Forefront.

Jason:
[20:33] Yeah that's super interesting I want to come back to the influencers but I'm just trying to make sure I understand so you started Guardian.
In a lot of categories like a bunch of the aspirational Legacy Brands it's really hard to get a license to sell them right so you know.
You do you want to start new footwear company you're not getting a Nike license you know it's really hard to get get a wholesale agreement with Oakley folks like that was it easy to get like Wilson in drawing to sell to you.

Matt:
[21:02] Yes it because of my business partners.
The 14 travel teams he has the largest so those companies were already knocking down the door to be his uniform.
Facility and and that sort of thing and at that time we started the business 45 years ago and like you said they're kind of behind the times of e-commerce so they hadn't started to clean up the marketplaces like a lot of the fashion brands or Electronics Brands had,
on the Amazon and eBay world yet now they're starting to make a lot of those and they've kind of grandfathers as they in and putting those in those contracts.
Where we've been able to do some special stuff like a lot of Brands we have you know brand registry with are able to come and do viral videos on the Amazon Marketplace and do a lot of things like that.

Jason:
[21:43] Yeah well you you anticipated my next question which is like
it's often for those Brands controversial if they want to be on marketplaces and particularly on Amazon so with
do I was that part of the discussion where they already on Amazon was it a foregone conclusion that they were okay with their products being a marketplaces or is that something you had to kind of evolve into.

Matt:
[22:03] Some of the brands are receptive to it you know I think there's three buckets there's you know brands that are like hey you can sew on your own.com but you can't sell in marketplaces then we've had brands that are like,
hey you can be an authorized retailer but you have to kind of like follow these guidelines and fall in line you can't change product items we're not going to make smu's for us,
and then we have a third brand the third option where a lot of and these are I would say these are more of your up-and-coming Brands and more of your brands that are,
maybe number two that are really trying to take the market share of number one,
you know like what's the car rental company that always said we're number two were working going to work harder so those type of brands are the brands that we really have the best relationships with like a stainer that's,
kind of said hey go ahead and take not only can you be on Amazon but we're going to give you the keys to the kingdom here's brand registry go run with it,
and you know do video ads do all type of editorial marketing handle all that for you so we're kind of acting like an agency in that type of a relationship,
more were handling that and following all their guidelines working when it with ownership working with the executives,
and then carrying their core merchandise and also making exclusive merchandise for the Amazon Walmart type of marketplaces.

Jason:
[23:16] Gotcha so not only are you doing it but you're helping them get better at it and is that controversial at all like are you potentially enabling them to go direct and not need you as much.

Matt:
[23:27] I think yeah I think we you know that is controversial right I think you know I spent.
Six figures on an event in Florida last year hosting all the top equipment Brands and was very adamant on here's our vision you know I think we're going to be like a Target or a Costco where.
This industry is a little unique because you're always going to have.
The traditional brands on the Major League field and in the college's so this is not a.
An industry where people are just going to say okay now I'm going to wear all birds instead of Cole Haans right where so there's always going to be elements of the industry like people are always going to want to use a Rawlings glove or you know a little Slugger bat right.
Or a Marucci bat so.
Working with those vendors and carrying that type of merchandise that the people demand kind of creates the ability for us to make our.
Merchandise that we make.
You know advertised more and have more effect in the market because we're carrying both so and we kind of have always said that that we're going to be like a Costco or a Target and carry our own private label but we always want the Best Brands and the best equipment in there.

Jason:
[24:38] Yeah so then that brings me back to the influencers because in my mind the world is slightly changed a little bit like hey.
But influencers have become a much more effective comment marketing tactic in almost every category but but in Sporting Goods particularly like,
Sporting Goods that have a significant College element like baseball historically the influencer wasn't the player it was the University because the players
we're not allowed to be in for answers but the the team's I'll sign contract so you so if you were super rich you could go buy a bunch of colleges
they are would use your gear and then you were the de facto market leader but you know for the last couple years it's been legal for those individual players,
to be their own brand and in some sports a lot of those players had then.
Opted out of using the team sanctioned equipment is like and I was curious is that happening in baseball at all and is that going to open the door for more brands or have they figured out how to keep it locked down pretty well.

Matt:
[25:41] Yeah so not so much on the latter part of the equipment I'll kind of get into that in a minute but the obviously we were very.
Early on as soon as that IL law came out we were one of the first,
people to start signing College athletes and we've kind of been at the Forefront as a retailer and especially even outpacing a lot of Brands a lot of brands are asking actually asking us for advice and how we run the program so we have it,
about 15 College athletes now between baseball and softball signed to our roster and we utilize them and.
Not so much in a sales standpoint you're seeing a lot of traditional retailers out there big box stores are signing these college athletes and they're having them like take a picture in a shopping cart,
like in their store and it just looks very like hey use my code at the checkout for 10% off.
And what we really try to do if you check out our Instagram or Tik-Tok as we do a little a lot of viral like videos of Just interviewing them,
we fly them in or will fly out and do a lot of photo shoots with the video team and will do videos of them using different equipment Guardian Brandon also non Guardian Brandon some of our brand partners,
which they're really appreciative of and will leverage that content not only on social media but on our website email marketing but also on the marketplaces,
and it's you know,
I think the new wave of Amazon you've had this wave of Scott seen the different cycles of e-commerce retailers out there and I think direct to Consumer brands are really going hard.

[27:06] Are really coming hard on the Amazon Marketplace so I think really the private label companies you know that are strictly just trying to create a commodity product on Amazon,
are really going to be forced out by brands that are really bringing really good content and really good marketing on the Amazon platform much like the direct to Consumer brands of the last five years did on social media.

Scot:
[27:28] Got it so one way of reframing Guardian is you know there's some percentage of your stuff that you sell that the bread and butter its existing Brands but then you're also inside of their building a DTC brand to fill in the holes that by selling other people's stuff you realize hey maybe there needs to be a bat that's kind of like
you know it's BBCOR this and we'll all that jazz but it needs to be at a lower price point is that a is that a fair.

Matt:
[27:51] That's exactly that's a yeah.

Scot:
[27:54] Cool so you're like a delicious d2c doughnut or a yeah with a with a good feeling so,
so one of the reasons I wanted to get you on the podcast is you've been out there pretty vocal talking about by with prime so maybe
explain for listeners who don't know what that is what it is from your perspective and then then how you guys got looped in on that.

Matt:
[28:18] Yeah so by with prime is a new offering from Amazon and it integrates into.
Platforms like Shopify and Bigcommerce.
And it allows a e-commerce retailer to pool their FBA inventory if they're on Amazon or they can send in inventory into Amazon.
And there's a button on the Shopify site or the Bigcommerce site that bypasses the normal checkout process and it's just a one click buy now with Prime and then that item is fulfilled by Amazon,
and that can choose and what type of box or whatever and you can actually deliver it in very competitive pricing compared to UPS FedEx you know a lot of the mail consolidators in one to two business days.

Scot:
[29:06] Got it and then if I.

Matt:
[29:08] It's a lot like it's a dressed-up it's like a gastropub version of their original like multi what was it called mer multi-channel fulfillment service.

Scot:
[29:17] Yeah yeah but with a consumer front end to it.

Matt:
[29:20] Yes with the consumer and actually some of the people in that department are like.
Hey we had this originally for like five or ten years but they just dress it up and gave it a good logo so and some more front-end technology but you know it's a very compelling offer.

Scot:
[29:35] Yeah so the user consumer is I go to your website and I see I'm in the checkout process and it says hey
you're a prime user you can just you've already got your payment and everything with Amazon and you know you're familiar with the prime promise which is the fast free shipping and then I just
essentially press a button in her my Amazon credentials and I'm good to go is that.

Matt:
[29:56] Yeah and it's actually before the checkout process so if you it actually supports variation so,
if you were selling red dresses and you had extra small and small and FBA but you were sold out and medium and you I'd meet him in your Warehouse then,
it would actually if you chose the extra small or small would populate that button on the checkout before you click or on the item page before you added it to check out.

Scot:
[30:17] So you need you need to make it an inventory aware that it's in a FB a kind of thing okay interesting yeah alright but then the you know so,
so this has been another reason this was topical is
you know if we kind of rewind I like five years I think there's been this kind of started this got on my radar well first of all shopify's Mantra is arming the rebels right and
so that folks being a Star Wars fan that invokes a Star Wars kind of thing and then you're kind of like well who's the Death Star and it turns out Amazon's the Death Star and their arm the rebels so then they've been poking Amazon.

Jason:
[30:52] Oddly Kylie Jenner is Luke Skywalker in that metaphor but yeah.

Scot:
[30:56] Sure yeah and and then
and then the Shopify social media started to really poke around Amazon it made fun of Jeff Bezos was in some tabloids for some pictures that surfaced and they were making fun of that and then
his divorce and all that and then I was sitting there watching that you and I have seen other companies kind of poke the Amazon Baron it hasn't gone
very well for him sitting there watching as like this is not gonna go well for these guys and then sure enough you know flash word to hear Shopify has hit some issues with growth rates they over-invested in the post covid world
and then famously Toby the CEO was talking about he got asked on a conference call a Wall Street conference call what he thought about
by with Prime and he's like oh we love Innovation and we would we would love to adopt it well then they had to backtrack that so are you guys caught up in that like are you know because they basically are now telling Merchants that if you use it,
it's pretty hard language they're saying you're probably going to be open to fraud and we can't protect you and so they're definitely heading down this path I think of,
trying to make it very hard for you to use this feature.

Matt:
[32:13] In terms of like are you asking what would I do as a business or in terms of where do you think the industry will kind of go.

Scot:
[32:19] We'll have has you know I'm assuming you're tracking this pretty closely because you're all you always are yeah.

Jason:
[32:25] Did you get the threatening letter from from Shopify.

Matt:
[32:27] Yeah it's we didn't get a threatening letter but we've seen all the pop-up of the terms of service and are account that popped up.

Scot:
[32:33] Yeah yeah it reminds me of the early days of eBay where they were like there's this thing PayPal we think it's very suspicious and we're not really sure you should use you should use our crappy payment thing that takes 50 clicks and rarely works but it's so super secure,
yes so that that's interesting do you where do you think that you know as a merchant,
you are on this platform and you want the flexibility to do everything how does it make you feel as from a business perspective to.

Matt:
[33:00] From a business for so personal and then where the industry is heading I mean where the industry is heading I think you have to look.
Amazon is going to rule the world of logistics you know you've seen FedEx come out with the reports where they've had one of their biggest messes ever and I think.
You're seeing Amazon trunks more and more and it's the more reliable you know delivery than a lot of the common carrier so.
And I've seen you know Scott we've seen what GSI and eBay and Walmart I mean Rockies Han launched of a competitor try to take out FBI I mean these are huge companies that really tried to take on Amazon and Logistics front.
And I can tell you I've used what is now I guess Shopify Logistics or whatever they're going to rename it but deliver and,
it it did not really work for our business you know I can't speak for other people but it had a lot of bugs in the integration it's there's a lot of flaws with the delivery process and I don't know if that was the best egg acquisition for deliver and I don't know if it'll really work out.
For a merchants and so I think there's a lot of there's a lot of progress that Amazon has made to really out do a lot of everyone in the logistics world.

[34:14] And I just don't know if other people are going to be able to keep up and I think Innovation is always going to you know fee if Amazon is able to deliver things in one to two days for a Shopify,
at prices than most Shopify Merchants can negotiate directly with UPS or FedEx or USPS for standard shipping then you know.

[34:35] I understand what's good for Shopify and they want him to go through the checkout but what's good for their merchants on their platform than somebody might actually start to.
Take that business platform because I know as as a business owner and as a CEO I would I would make the Assumption if Shopify came in and said that.
And we saw by with prime become successful as we've seen in some initial few weeks of launching it,
then we would probably consider re-platforming maybe to a Bigcommerce or maybe somebody that Amazon had a really good relationship with.
And maybe that's not you know the smartest move at this point but in the future when you know we can deliver Goods because part of our selling feature to people to outdo the box stores,
is not you know because people can go to a dicks or Academy,
and they can have the much better selection they VIP programs and everything so something we instituted on Guardian baseball.com is when I set out to start the business is I wanted to offer a free 6-month extended warranty,
on all bats and equipment.

[35:35] Because the Brand's only offer a year so we're a year and a half and I said if we compete with these brands in a world of price monitoring and price mapping and the price is the same everywhere
if we're going to have a pair of cleats listed on Amazon and F ba and then we're selling them with standard shipping on our website then the only thing we really have to do is play with price and discounting,
and enduring a world of price parity that's impossible so for a d2c Merchants that plays on the Amazon space you have to able to offer that same offering,
of that one to two day shipping like Amazon does on your own D2 seeing if you.

[36:06] Then you can't really expand in the Amazon because you're just going to cannibalize your own sales on on your own d2c site so I think you have to offer it both so I think Innovation will always continue to succeed,
in the market and I think Brands will start to partner with people that are going to partner with Amazon.

Scot:
[36:23] Yeah often kind of war game did this Jason I'm pretty sure we've said this on the podcast a couple times if I was personally Amazon and I got the job of disrupting Shopify,
you know what I would do is I would leverage FBA and I would go and I get as many Shopify people using FBA and then then that would give me the hook to then say well let's say they came out with a competing platform or or they just.
They wanted you to go to a,
friendly third party platform like let's say it's Bigcommerce or something then then you just kind of proved to me that that is enough hook for the merchants to to make a front-end switch because that that,
that fast relatively inexpensive shipping is so important to most companies and because customers expect.

Matt:
[37:09] And I think Amazon has the war chest to say if Java does come out with that I mean.
And I go to the by with prom team and say hey look I have to lever I have to change the Bigcommerce it's going to cost me X you know if you want me to continue using by with prime what can you guys do for me I mean you know.

Scot:
[37:26] Yeah so you hinted that it's going really well are there any stats you can share with us so like I guess there's one thing would be
you know you can only show it so many times because there's going to only be a surface area of inventory that's an FBA but then when it's shown is that got higher conversion than other things anything you can share there would be interesting.

Matt:
[37:46] So it does have some cons there's a lot of things that are on the road map with by with prime but I mean the obvious obviously the successes are,
we're seeing a slight Improvement do the familiar with the prime badge and also the estimated shipping dates the Fulfillment costs are generally 25 to 30 percent less than we can currently negotiate and I'm with a lot of mail consolidators,
you know resellers a post office obviously you know I've been in this world so I know that different ways to negotiate with FedEx ups and a lot of the mail consolidators.
In the quicker delivery times are generally seen 24 to 48 hours max we're seeing is 72 hours and the a big con of that as you can keep the customer data unlike regular FBA sales.
Um and they're also offering you know obviously I was doubted accelerate I spoke at by with Braun conference prior to accelerated Amazon HQ,
last week and it accelerate they announced that they're you know offering a bunch of different initiatives that are kind of new for Amazon where they're offering.
Brands are participating by with prime the ability to actually mark it on the Amazon platform but back to their d2c site.

[38:53] So there's a lot of compelling offers out there that they're kind of opening up the amazon Universe to which is kind of unique and I was actually surprised about.
But one of the big issues that they're working on is the conversion tracking so our marketing pixels don't record purchases made from the by with prime button which is something that they're working on.
And the akan that they're working on other are releasing this is you can purchase you can only purchase one bearing at a time so it's not like a checkout experience,
where you can group a bunch of different items you actually have to like physically buy one item go back to the site so we have a lot of multicart,
on our website unlike Amazon which is a lot of single item you pts and
so we're seeing you know on a lot of those bulk they're still going to do the traditional checkout process because I don't think it's like it's hard to really explain that to the customer we're like hey if you want to buy the single item go with by with Prime.
So we're seeing at limited success with a lot of 10 items.

[39:53] If we don't currently with the current integration with Shopify it doesn't have the inventory transparency so we have to double up with an mcf integration.
So it's something.
You know it's kind of a unique situation with our business model because we have a separate FB a skew so there's some you know quarks in there,
and there's some different things that they're really kind of coming out so with but it's I call them cons but it's really things that are calling the roadmap and right as they kind of said at the conference to me and a large group of you know.
Agencies and sellers is we wanted to get it out there in the marketplace and I said that's smart and then we want to work on these as opposed to having a perfect program and releasing it a year later.

Jason:
[40:38] Yeah so I actually just realized we didn't.
We didn't articulate a couple things for visitors to just make sure everybody is tracking Guardian baseball is running on Shopify.
And you are an early adopter by with prime so and you even you promoted on the homepage right so you've got like very distinctive branding by with prime which is Amazon's program that you know if you're already a Prime member gives you that,
that Prime service level of fulfillment and the prime wallet even when you buy it on Guardian baseball so.
A couple of things kind of jump out at me there.
You hit one that is a big problem for me is the multi skew problem but I think of the by with prime checkout flow is being very similar to the traditional shot PayPal flow.
In that the checkout button shows up on as a separate button on the pdps but PayPal also let you.
Like use PayPal as the payment method in the cart for the multi skew purchase so you Amazon doesn't have a solution for that today but you could imagine that they would enable by with prime both on the product level and at the cart levels.

Matt:
[41:54] Yes and that's what they're working towards.

Jason:
[41:56] Yeah so so that's always one big problem because you know side note most e-commerce sites are not very profitable if the if the,
if the average items per order is 1 so so we definitely we need to sell more stuff in most cases
to make this profitable the threatening letter I would add to is not Shopify saying hey you're not allowed to accept by with,
it's simply them saying in our opinion their security flaws in,
doing this kind of thing and we might not be able to indemnify you if there's a fraud problem as a result of that right like that's that's the kind of passive-aggressive,
approach shopify's taken to date on it and it is funny to me because all of those same security holes would also be true of PayPal by the way and Shopify has never really complained about PayPal before.
Um so that gets me to the other big problem I see for both Prime and I'm curious if I'm wrong or if you're seeing it
by with prime only works for existing Prime members there's no onboarding experience so if I'm not a Prime member and I go to Guardian baseball.com I see this huge
well go on the homes thing that says by with prime which I don't have Prime and then when I'm looking at an individual skew I want to buy there's a by with prime checkout button,
and I could click that button but I won't be allowed to check out because I don't I don't have Prime and so if the only.

Scot:
[43:21] Who doesn't have Prime.

Matt:
[43:23] I'm glad it's got Evans.

Jason:
[43:27] Nobody listening to this podcast but there's 100 million Prime members in the world so even if we assume,
70 million of them are in North America 80 million if you want to be really aggressive are in North America there's 240 million households in North America so two-thirds of the households in the United States of America
would be the answer like can't click that button right
and so I guess I went like you've got this fragmented inventory you have some of your inventory you can you can fulfill through the the Shopify check out some you can only fulfill through by with prime but then
like you have no way to give the non-prime members access to that is that a am I making up a problem and that hasn't been a problem for you or do you think you have,
have non-prime members that are kind of in the whole right now on that.

Matt:
[44:16] I think that's something to Amazon can better communicate we are obviously limited to what they can do on the side but a normal customer can still do the normal checkout process of adding the cart.
But I think yeah that's obviously something Amazon can do and then also doesn't support discounts which is a big not only the conversion tracking but discount so obviously a lot of direct to Consumer sites.
Like us are offering discounts or first-time customers or email you know pay 25% off with this code or Black Friday Cyber Monday so the currently does not support so it's very limited,
but we really feel it's kind of right now in its use and this is going to change in the next three to six months but right now it's kind of like a fast lane,
you know where you're paying like at Disney World for the fast ticket or whatever the top-of-the-line and we really feel that hey you can go through your normal checkout process.
But we also have this ability we're going to a fast pass you know if you want it now you don't want to Discount you know you want it quicker and you want that problem delivery.

Jason:
[45:13] Yeah so it's weird like here's how I like I totally agree with how you're thinking about by with prime you also take shop pay on the site
and I would argue
there's a different set of pros and cons to shop pay for different customers in different circumstances it seems like the solution to all these that none of these companies are willing to do is you ought to be able to just expose the by with prime button to known Prime members and you ought to be able to just expose the shop pay
check out to known shop pay holders.

Matt:
[45:46] I love that idea.

Jason:
[45:47] Yeah trust me when you suggested to Amazon they're not going to like you because they,
because they want that logo everywhere but yeah so that that seems like the,
the state of by with prime right now it's super interesting and it's super interesting you're saying like man if Shopify ever said we it's a it's a hard know then that would make you reconsider the platform like that you know
like that speaks volumes that's interesting.

Matt:
[46:14] I think you know I think Amazon's coming out with this program in there.

[46:19] I think everyone say okay is is a lot of these direct-to-consumer Shopify Brands going to adapt Amazon FBA and I think a number of them are but I think what also this is going to help.
A lot of Amazon Brands a lot of Amazon DTC brands that are really executing well like a guardian on marketing,
on creating good content in there not just these Dropship Private Label Amazon sellers,
that are out there and you know let's go Source one or two products on Alibaba and sell them under some name and compete with the Chinese but really people that are building a brand you know the brands that are getting acquired by the aggregators and those type of brands.
And those brands that may be.
Our and expanded into Walmart expanded into other categories but are scared to kind of make that big investment into a Shopify site and hire the marketing team and really become like a full-fledged direct-to-consumer I think.
What Amazon's doing on the marketing front.
And the Fulfillment front is going to help these Amazon d2c Brands and I think what's going to happen is going to create a rise of the next wave of d2c or the next kind of.
Trendy type of companies that come out there so you've seen obviously a lot of trends like 2010's as flash sales and then you saw direct to Consumer Brands and subscription boxes,
and the direct to Consumer Brands predominantly grew on social media Instagram Facebook when the iOS changes you know weren't adapted and traffic was still cheap so.

[47:44] I think you're going to see a lot of these the next wave of cool direct to Consumer Brands will come from Amazon and they will adapt on the data see sites with the help of Amazon.

Scot:
[47:54] Prick.

Matt:
[47:55] And I don't think you're going to see as much D to see big brands that are adapting the Amazon by with Prime at least initially and I think eventually that you'll see a lot more adoption once a lot of these quirks are worked out.

Scot:
[48:09] Yeah a lot of d2c Brands got born off Facebook but apple and the atti DFA of kind of crushed that so now Amazon used is kind of the way to go so I think what you're saying right.

Matt:
[48:20] Yeah I think so and I think that's going to create a next wave of either the brands are going to adapt from a t2c over to Amazon or you're going to see these kind of
Amazon native people that have kind of running this world like I have for the last two decades that really know how to master the marketplace know how to assemble the teams of marketing customer service and everything and use the right technology stocks,
for those businesses and really adopt and really grow really Innovative brands.

Scot:
[48:47] I know you need to go and like four minutes so we could wrap it a fire this.

Matt:
[48:50] You're good you can tell Ron few months if you.

Scot:
[48:52] About dying dying to know what do you think about all the FBA Roll-Ups they were all quite the fashion and now they seem to be hitting some hard times did you ever buy into that trend.

Matt:
[49:03] I think anyone in this market I mean you look at a lot of our outspoken people on social media of those,
you know it's tough to acquire that many Brands and I think there are some people that are successful with it that are more going in The Tortoise and the Hare that you know we all I'm hearing some successful people where there's let you know.
By maybe they own 15 brands or they own 10 brands but obviously the big big aggregators that everyone talks about are obviously struggling you're seeing layoffs so.
I wasn't really you know how to directly opinion on it I thought it was there's no way they could acquire that many Brands and with it with the market model of not keeping the entrepreneurial on because I think there's always an art form to e-commerce you can have all the analytics you want you can have all the data scientists and,
and all the formula but you know when you hire College grads and to run these businesses that don't have experience you it's always a touch and feel there's always 20-30 percent art right,
that somebody needs to know and the older I get I realize that I have that on the marketplace of how to really build the brands and how to adapt Brands to that,
and that's why I've been successful and I'm realizing that's my strength so I think some of those aggregators really didn't have that kind of DNA of the entrepreneur and keep that intact and that might have been a downfall of some of those.

Jason:
[50:21] Yeah it's it is interesting
I can certainly see companies kind of being born direct-to-consumer on Amazon having their first customers come from Amazon and then outgrow Amazon over time where you want your own URLs or move to other things which like I mean I think,
anchor is kind of the Prototype.

Matt:
[50:42] That yeah that was that's a really good.

Jason:
[50:45] But I do think I think it's really risky whether you're a rollup or an individual brand or whatever it's really risky to think I'm Amazon is always going to be my exclusive,
acquisition Channel because the problem is Amazon Super efficient at getting the maximum,
fee for each customer you acquire and so yeah you can buy some of those you know customers at first to get started but you're always going to be
paying the highest price and you know the big news that came out this month is I forget what their new name was but Pharma packs which has been a top five,
seller on Amazon for like 10 years,
and exclusively sell through Amazon they just they declared bankruptcy and they're like one of the biggest most successful Amazon sellers of all time and to me that's a cautionary tale for,
like at some point you need to diversify your customer acquisition you can't solely rely on Amazon as that is that source for you.

Matt:
[51:42] I think yes I think it's a part of a Playbook and you have to adhere to other channels and grow in other channels but you know obviously.
Amazon's one of the biggest places to acquire customers one of the most successful so I think it's always going to be in a portfolio but it needs to be part of a whole portfolio.

Jason:
[51:58] Hundred percent that's why they robbed the money from the banks right because that's what,
that's where the money is but man I think that's going to be a good place to wrap it because we have used up our lot of time as per usual if you got value out of this episode we sure would appreciate that five star review on iTunes.

Scot:
[52:16] Matt we really appreciate taking time to tell your arterial story and share with us your thoughts about both Prime if lister's want to look you up online other than going in and buying some stuff that Guardian baseball what should they do.

Matt:
[52:29] I'm on LinkedIn Instagram and it's (2) Matt Kubancik 🚀⚾️ | LinkedIn

Scot:
[52:34] All right we will put links to that in the show notes and we appreciate your time.

Matt:
[52:38] Thanks for having me guys I appreciate it.

Jason:
[52:41] It was entirely our pleasure and until next time happy Commercing.

View Details

Episode 295 is a breakdown of Walmart and Target Q2 earnings, as well as the US Department of Commerce retail sales data for July.

Episode 295 of the Jason & Scot show was recorded on Thursday August 18, 2022.

Transcript Jason:
[0:23] Welcome to the Jason and Scot show,
this is episode 295 being recorded on Thursday August 18th 2022 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason Scott showed listeners Jason how you doing how you been traveling a lot lately.

Jason:
[0:46] I have I have it's been interesting to spend so much time at the airport's they've been quite busy lately.

Scot:
[0:54] Yeah yep the there's cancellations it's total chaos at airports so hopefully now that we're in back-to-school season that'll slow down a little bit.

Jason:
[1:03] Knock on Woods October is a busy Commerce trade show month so I'll be on the road almost of October hopefully visiting some listeners but hopefully yeah travels a little smoother hopefully I can get some better seats on the airplane I'm a little bitter at the.

Scot:
[1:19] Yeah you have like 20 million miles and they're putting your life back in steerage.

Jason:
[1:24] That's a slightly milder version of that is true.

Scot:
[1:29] Cool and then I guess the big question is we've got two new series kicking off are you going to do Game of Thrones or Lord of the Rings or both.

Jason:
[1:39] I'm super excited about both I'm actually some people know I had knee surgery earlier in the year I'm actually contemplating getting the surgery on my other knee so I have an excuse just stay at home for a while a month and watch them both.

Scot:
[1:55] Yeah and then let's see the well ready to jump into some news.

Jason:
[2:02] I'm super excited to.

Scot:
[2:03] Cool well it wouldn't be a Jason Scott show without.

Jason:
[2:08] Amazon news new your margin is there opportunity.

Scot:
[2:21] Yes there is some Amazon news I wanted to just chat about with youth the 16th of August Amazon surprised both
Wall Street and a bit and third-party sellers a lot with their first-ever peak season surge pricing for fulfillment by Amazon are commonly known as FBA
so the way this is going to work is they've put out the dates October 15th through January 14th of 23
third-party sellers that you use fbar going to have a new fee and I hope you're sitting down it is 35 cents per item.

[2:57] Now you may be saying to yourself Scott that's pretty small is that going to really move the needle and one of our friends of the show Colin Sebastian he actually did the math on this.
So it turns out that last holiday if you look at the third party sell units sold during that period you had two point seven two two point eight billion you have a midpoint of 2.75 billion.
He took that approximated in 34 so that went through yeah if ba you multiply that out and you get about 700 million dollars just drops right out of that 35 cents.
So that is the power of an Amazon scale is a seemingly tiny little.
Surcharge can be a big number so it's going to be interesting and you know that will be pure profit because the Amazon is not doing anything differently really.
And then in the press release they basically said our expenses are reaching New Heights and it's making it harder for the company to absorb cost and they have to pass some of those on.
But we still love our third-party sellers did you would you think about this video.

Jason:
[4:01] Yeah well I'm guessing third-party Sellers and investors didn't react exactly the same to that news.

Scot:
[4:07] Yes investors were happy third-party sellers it's kind of one of those things it's kind of tricky because you can't complain too much because it feels like 35 cents but you know if you're a seller selling couple of thousand items a day through F be a it's going to be material and I think,
at the end of the day all this gets passed on to the consumers and that causes inflation which we're going to talk about a good bit on Today Show.

Jason:
[4:30] Yeah it's a,
it's interesting it's kind of a mixed bag because well I feel like it is true that Amazon hasn't charged a true surge charge before the
you know they change their terms and conditions all the time and that you know they'll like they'll narrow the window under which you can keep stuff in,
in the warehouse before you start getting extra fees they'll make you take more stuff back they'll take less stuff and those all kind of.
Have the effect of making F be a more expensive for some sellers.
Well the 35 cents probably isn't a deal-breaker it is a good reminder to all these third-party sellers that your your kind of a digital sharecropper in the Amazon Echo System and what
you know the two things that I think are most interesting are this kicks in in October,
strong rumors that Amazon's going to try a second prime day in October so this could be insult to injury.
They could be asking third-party sellers to like,
load up the inventory and get ready for a second prime day and be charging them more so this actually could end up being even a little bigger than,
was forecasted than Colin forecasted have.

[5:44] Prime day ends up being a meaningful thing and then if you also remember earlier in the year Amazon launched check out with prime which was kind of a.
First move to making fulfillment by Amazon available to non Amazon sellers or at least sellers off of the Amazon platform and so it's kind of interesting.
You know shortly after they they're trying to make F be a more available there they're making it more expensive.

Scot:
[6:14] Yeah yeah the they've struggled with that because every time they've opened it up to people not selling on Amazon they have a surge of some kind and they have to kind of like pair that program back it's happened like four or five times it's crazy.

Jason:
[6:28] And the flip side is of course the other carriers you'd be shipping through the other common carriers the holiday search these are quite common so this is not not going to feel like a typical or out of line when you compare it to UPS or FedEx.

Scot:
[6:43] Yin haven't most of them put on a fuel surcharge already like an even though fuel is going down there.

Jason:
[6:47] There are there are surcharges on top of surcharges and you know some people feel like they haven't turned off the surge charges for two years.

Scot:
[6:55] Yeah yeah so it's hard out there in e-commerce land from a cost perspective that's for sure was there any Amazon news you found interesting.

Jason:
[7:03] Yeah yeah I would actually bundle two pieces of news and column two sides of the coin,
the interesting Amazon test was revealed this company that monitors the Amazon App found a new feature,
it appears like it's only been deployed to Amazon employees at this point,
but it's basically a picture and video stream in the app so this is like the way that this is described as sort of like a tick tock like feature.
Inside of the Amazon app which is interesting.
Obviously in China a lot of people shop in the Chinese version of Tik-Tok which is called do Hyun.
A lot of people get interested in buying products through tick-tocking us they haven't necessarily like.
Checked out on Tick Tock in huge quantities yet but it's super interesting the Amazons kind of approach to social commerce,
is get content creators and influencers and sellers.
To create social content on Amazon's platform so I'm twitch on Amazon live and now this new Tick-Tock feature it's like Amazon's not partnering with Tick-Tock Amazon's trying to be tick-tock.

[8:20] And I said two sides of the same coin because I mentioned in earlier tests Amazon did was Amazon live where they tried to take really popular,
content creators that are calmer sea and entice them to create content on the Amazon platform and they're they're paying anywhere from like two to nine thousand dollars a month plus the.
The affiliate commissions to get people to produce content on Amazon live and it didn't seem like content creators were super happy with those results,
they weren't making a lot of money they were there was a lot of churn and now a bunch of this content creators that have moved off the platform are now organizing a boycott of Amazon,
because they feel like Amazon's not treating their employees the way they would like so it just
reminds everyone that like man there's this really interesting opportunity and you know side of the business around social commerce and kind of you know letting influencers and content creators
into your Echo System but then the flip side is they don't always behave in the ways you you like and even more so when they're they're not on the payroll.

Scot:
[9:30] Yeah yeah the influencers live by the influencer die by the influencer The Tick-Tock things interesting I don't know,
I think it is reading a lot into it to call it Tick Tock but you know they're definitely trying to figure out live streaming
one thing we haven't talked about on the show in my world of Collectibles this Marketplace is really splashed onto the scene called whatnot and it's a whole live stream for Collectibles and you know the
I think they've raised money around a three to four billion dollar valuation which would imply there gmv is pretty substantial I haven't seen any reports
but it's pretty pretty interesting it's kind of an entertainment livestream like we see out of China but applied to Collectibles and I feel like that's a pretty good category for for this format because you can do these
Pack openings and all these kinds of things and I've experimented with it and it's pretty neat you can,
the streamers that can run auctions right in there and they can have kind of a three formats going at once they can kind of have a claim show
an auction and then like a little e-commerce slider store over on the side it's a pretty interesting platform that if you're interested in Collectibles go check it out
get started with collectible toys like these little Funko pops and then it's moved into it's got a vibrant
sports card non-sports card and then and I've seen a lot of activity around the comics category so that's kind of an interesting new approach ahead and seen out there.

Jason:
[10:59] Yeah you know the whole live streaming thing is super interesting and complicated the quick Reader's Digest version.
In China live streaming is super popular and it was born on the e-commerce platform so taobao live which is like kind of the equivalent of Amazon or Ebay.

[11:18] Like launched a livestream video platform and they built a huge Commerce business and these influencers,
the Alibaba paid like we're starting to sell like huge quantities there's this dude Austin Lee who sells lipstick Who Sold over a billion dollars in a single day,
and over time in China the live streaming has moved off of the Retailer's platforms onto the social media platforms like Dao Yuan and WeChat,
and so you look at China and you go oh my God live streams huge it's the future it's how all this stuff is getting sold I want to say it's like 15 or 16 percent of all e-commerce sales in China,
but then here in the US has been a mixed bag there's a bunch of use cases like you just described where it works really well there's a bunch of Ed C lies streamers there's a bunch of like small retail boutiques that live stream during the pandemic to great effect.
They're doing really well you know Tick-Tock which is the same companies do you know.
Announced that they were delaying their live streaming feature in the US so they.
You know it's not they're not rushing it to Market Instagram had a live streaming Commerce feature which they just retired last week.
We've seen Walmart do some experiments in live-streaming we've seen Nordstrom do some experiments in live streaming it's not clear.
The.

[12:39] There's a a mass-market huge opportunity for live streaming that the Amazon live streaming Pilots haven't worked very well and so they're both like there's a bunch of niches and use cases where consumers really like it and you could see it working.
But it doesn't seem like a slam dunk for any of the really big Commerce players that they just need to turn on this feature in the customers will come running so the.
Lot of debate amongst my clients at the moment you know is China just ahead of the US and does everybody have to get ready for live streaming or is the u.s. going to evolve differently than China as it often does.

Scot:
[13:16] Yeah or like is it going to be one of those things where like we call talked about chat Commerce forever and it never really jumped jumped over you know it even though Facebook tried really hard to put Commerce and messenger and they hired the PayPal dude it just never really
really translated to the US who next.

Jason:
[13:34] I know exactly so I yeah I'm not convinced the main way us consumers are shopping is ever likely to be live streaming but I do think it is.
An important solution to particular Discovery problems in the US so I think it's part of the mix but I don't think it's that like,
magic Panacea that's going to replace traditional e-commerce for example.

Scot:
[13:55] Yeah well I know you are tingly all over and super excited because the US Department of Commerce data came out and you have done your number crunching and I know I'm eager to hear what you learned.

Jason:
[14:08] Oh my God this week is like my leap year because you know US Department of Commerce data comes out every month so we always get excited about that but every three months,
the e-commerce data comes out so yesterday the the retail data came out and tomorrow the e-commerce data came out and you were like a should we wait till tomorrow and do one show and I might know there's too much goodness here we need to shows one,
to talk about the retail data today and then we'll do another one to talk about the e-commerce data after after that comes out.

Scot:
[14:38] Yeah on Wall Street I think they have a double and a triple jinx this is kind of a triple witching I don't know why they call it with you.

Jason:
[14:45] I do yeah so July retail sales were up 8.2% versus 2021.
So that's very healthy robust growth.
We've been talking about such big growth and with all these anomalies going on that like we've gone kind of used to it but just a reminder normal retail growth year over year,
for the last 30 years the median growth is 4.5% so 8.2% is almost twice as good as you'd.
And even more to the point year-to-date growth so January through June growth retail is up 8.9% so wit early twice what you would normally expect.
So that is super exciting the.
Wrinkle here is our friend inflation like every time I talk about this huge growth.
A bunch of people chime in and go yeah but it's all inflation and for the last two years that we've had this enormous growth because of the pandemic and changes in purchase patterns all the economic stimulus all that stuff.
I keep looking at inflation and inflation is a small part of the growth but not a meaningful part and so I have to keep telling people
yeah information is in there but it's not a huge deal well that changes this year,
so I mentioned year-to-date growth for this year's 8.9% if you adjust for inflation your today growth is 0.5%.

[16:13] So that basically means all the growth we're getting in 2022 so far is directly a result of inflation and that's super interesting because,
20:21 was like the biggest year of retail growth in my lifetime and I jokingly told a lot of my friends and clients you know they should think about retiring because comping against that.
20:21 is gonna suck and then so far this year we've been comping quite well but it turns out the reason we're comping well is not because,
consumer spending is like super robust and continuing but rather inflation has kind of filled in where that,
that consumer momentum is starting to wane so that is a big story that we need to watch for the rest of the year.
Again the actual.

[17:04] Hyper actor e-commerce.
Broad version of e-commerce called non store sales so for July they were up 18 percent versus last year.
The year-to-date there up about 12%,
I'll be really interested to see what the quarterly number is tomorrow you know in kind of Q4 of last year there was all this exuberant some for spending in retail stores and e-commerce continued to grow,
but it's rate of growth slowed down a lot so for one of the you know only times in my lifetime.
Brick-and-mortar retail grew faster than e-commerce and I have a feeling that we're going to see Q2 of next year that's Q 2 of this year tomorrow that that's not going to be the case that we're gonna returning to the normal trend of e-commerce growing.
Meaningfully faster than brick and mortar.

Scot:
[18:01] We're not going to no till tomorrow I can't wait all-nighter.

Jason:
[18:05] I will give you one other thing to tease based on the q1 data which came out three months ago we've seen that q1 data show up in a bunch of earnings calls and the most famous one is Shopify right so Shopify,
right before their earnings call they laid off like 10% of their Workforce and they said like.
Man you know there was all this e-commerce growth during the pandemic we hired all these people we got ready for all this stuff and then the e-commerce growth regressed to the mean.
Which toy surprised us we thought it would be more persistent and so we've got to lay off a bunch of people and cut a bunch of cops and they show this,
this famous graph of the quarterly e-commerce data showing this big spike the last couple months and it kind of Dipping back down to the trendline.
And I see that graph everywhere and the one thing I like to remind people about is regressing to the mean doesn't mean e-commerce.
Didn't grow it meant e-commerce grew as fast as it used to be growing which is quite fast so,
well Shopify weight off 10% of their people like I was screaming in the background e-commerce has grown 61% from 2022 2022 and it added four hundred and twelve billion dollars a year in space
it's not like it's not like there's not a ton of growth there it's just the growth that we're used to seeing.
So it'll be interesting to see what tomorrow brings.

Scot:
[19:33] Yeah seems like a lot of the the inflation is really starting to Ripple through at this point and we've seen that show up at some retailers but it's interesting to see it can work into the day-to-day with your.

Jason:
[19:45] I know that that brings up a good point like we have several omni-channel retailers that reported earnings this this week and it's a really mixed bag about.
The the.
Inflation indicators in their earnings calls and you know probably the biggest one is Walmart reported earnings two days ago and people
economists watch Walmart's earnings reports really closely in a challenging economic time because.
They're kind of the Bellwether for the American Consumer right like that they have the biggest chunk of consumer spending and they kind of as Walmart goes like the American economy goes so.
The as a reminder about a week before their earnings they low they significantly lowered their their earnings guidance for the rest of the year,
they said that they expect that that they expected their profitability to be considerably lower than they had previously.

[20:40] Giving guidance there earlier guidance was like zero to one percent growth.
And they reduced it to they think earnings are going to be 11 to 13 percent lower this year than they were last year.
Um so fast forward a week,
to their earnings and everyone was kind of braced for it being kind of a brutal quarter and it was a beat beat reiterate like,
they beat their earnings Target they beat the revenue Target and they stuck with their guidance that earnings are going to be a lot lower the second half of the year but.
Investors actually took that as good news they actually expected that that Walmart might have a miss and so the fact that.
Q2 sales and Q2 earnings were reasonably robust at Walmart was kind of positive news and to kind of put that in perspective.
U.s. comp retail sales for Walmart last quarter grew 6.5 percent so again normal retail growth is 4.5% so 6.5 is good e-commerce grew 12% and you can compare that with,
Amazon e-commerce grew seven percent the same quarter so obviously Walmart's a lot smaller than Amazon but they're the second largest e-commerce site,
in the US and they're they're drilling meaningfully faster than Amazon which is impressive they did.
You know we made a big deal about Amazon is breaking out their ad sales.

[22:04] Walmart didn't quite go that far they said that their ad sales which is called Walmart connect grew 30% which is.

[22:12] I'm not faster rate of growth and Amazon's ad sales are growing Amazon's growing about 18% Walmart is growing at 30 but they didn't tell us what the base was and and you know it's certainly a way smaller base than Amazon so I'm not sure.
That growth on the much smaller base is huge news but it was interesting to see them talking about it Doug mcmillon and the CFO both John rainy both made.
You know a big deal about Walmart connecting being a big part the CFO joked about not being used to businesses with this kind of crazy margins before and.
Doug actually talked a lot about how Walmart connect is gaining huge traction internationally so they're they're able to sell the ads in in India and China and some of the other other markets that they plan.

Scot:
[23:00] They were getting a lot of like why surface it now I don't understand the so Amazon started revealing it because they've had to like the SEC said this has become a material part of your business you have to unpack it a bit but this seems like they,
decided to do any Mini.

Jason:
[23:17] Yeah I think just because it's a good number 30 percent growth sounds like a good number.
And it's a yeah when when most of your news is about your earnings really being challenged talking about a super high margin part of your business.
Growing really fast I feel like just reflects well right like I'm not I'm not confident we're going to see them report that number every quarter by the way.
Yeah so we'll have to see how that goes but like to kind of,
summarize why they're saying profits are likely to be much lower for the full 2022 essentially what Walmart is saying is they are seeing consumers change Behavior because of the recession,
and one of the big ways is they're seeing consumers still spend a lot with Walmart but they're shifting from.

[24:06] Wants to needs so they're buying a lot less clothes and consumer electronics and a lot more food,
and the food in the essentials that Walmart sells are much lower margin,
then the home and apparel categories that they're selling less of so the mix it Walmart is changing.
Um which is hurting their profitability but not necessarily their income,
and in fact they called out 11 funny anomaly of the income is in this High inflationary time,
a lot more High income consumer start shopping at Walmart so people that make over a hundred thousand dollars a year spend more at Walmart in a tough economy than they do in a,
really bullish economy and so they feel like they captured extra customers because of that that would have shop somewhere else but they're buying this alone margin stuff,
and John rainy the CFO he specifically talked about how they're seeing consumers make different purchase decisions that there.

[25:12] He called it a pronounced customer shift that people are trading down and he gave the specific example that we're selling a lot less deli meats were selling a lot less beef and instead we're selling a lot more hot dogs chicken and tuna,
and that you know even vegetable based proteins like beans are starting to sell a lot better in those are all signs of,
you know distress consumer that's trying to make their food budget go further every week.

[25:39] So I would call that a mixed bag I feel like investors were thrilled that their earnings call wasn't worse but you know.
I don't I don't feel like people saw Walmart's earnings and said oh my gosh we're out of the woods on the economy and things are going to be great for the second half of the year.

Scot:
[25:57] Yeah.

Jason:
[25:58] So then we move to Target and and Target was kind of a Miss meat,
maintain right they miss their earnings pretty meaningfully so they the guy their expectation when 72 cents a share they came in at 39 cents a share so that's a big,
drop it's actually 90% less profit than they made this quarter last year,
so a huge drop in profitability they exactly hit the revenue Target which was 26 billion and their guidance kind of stayed the same that they're expecting to grow.
Kind of in there two to four percent,
um growth rate which would be a typical year and they're expecting six percent margins which would be significantly up from the 1.2 percent margins they got this quarter.

[26:50] Digital for them was up nine percent which is a lot slower growth rate than than Walmart and slower even than Amazon even though targets a lot smaller than then Amazon.
But what is interesting is.
Target basically talked about not seeing any inflationary changes to consumer spending they did not talk about their mixed changing dramatically they did not talk about like seeing their customer change a lot,
what they talked about is.
They had too much of the wrong inventory because of the supply chain disruptions last year and then being forced to deeply discount a lot of product and they took like a 1.5 billion dollar haircut on their inventory.
Um which they had warned us they were going to do but so what they're saying is man we're just having to sell a lot of this stuff cheaper and that's it's not necessarily because of inflation but more because.
We have the wrong stuff.

Scot:
[27:51] That yeah got you think they had this supply chain problem and ended up with the stuff they ordered a year ago gosh when I open this door is.

Jason:
[28:00] That for sure is true like they all ordered like Walmart you know said similar things that Walmart's I think said if we had a magic wand we would make 1.5 billion dollars worth of our inventory just disappear.
Um and you know they all like.
Beefed up their orders around holiday and they you know they all went to these extraordinary expenses to get inventory they got inventory much more via much more expensive means you know from more expensive suppliers with more expensive Freight.
Um a lot of those costs are coming down right now freight costs are coming down shipping costs are coming down,
but you know a lot of that inventory rolled in and it you know it was the clothes they hope to sell for Christmas that you know is less appealing now.
I would argue people are also just buying less clothes right now like and I do think that's partly because of the economy and inflation.
You know Target saying it's not Walmart saying it is it's possible they're both right it's you know Walmart has a lower income customer than Target and so it is possible that the.
The typical Walmart customers more affected by inflation and their behavior is changing more dramatically in the more affluent customer that shops at Target and Amazon,
um that their behavior is changing less as a result of inflation so I you know it's not outside the realm of possibility that they're both they're both right from their.

Scot:
[29:26] Nursing did in their warnings they both talked about apparel any more color on that.

Jason:
[29:33] I mean again the the they're seeing home slow down a lot which is interesting because you know people were overspending on home when they couldn't travel you you've seen this in your business but like.
A lot of people are back to travel there's a lot of Revenge travel people are also restaurants are having a moment restaurants are crushing grocery stores at the moment,
as you know everybody I'm not sure covid zup officially over but like everybody's mentally of it over covid rushing back to restaurants and fun fact.
Inflation for restaurant food is much lower than inflation for grocery store food so it's actually a better deal right.
So the food thing is weird the apparel thing is weird consumer electronics are really soft sales right now and they're they're actually.
They have this weird counter effect like that's the one category that's having deflation TVs or less expensive this year than they were last year.
And yet sales are still really soft I think Best Buy reports earnings tomorrow so that'll probably be a challenge for them.
In the discretionary spending categories the one category that everyone has called out as an out performer is beauty.
And I think that's this thing that we call affordable luxury that like you know when you're not feeling great about your finances but you want to treat yourself like what you do is you buy the premium whip.
Instead of an expensive outfit or something like.

Scot:
[30:57] Nursing yeah kind of a can still feel good about yourself but you spent a lot less than a whole new.

Jason:
[31:03] Exactly I would argue that a better affordable luxuries to have someone do an amazing job detailing your car but that's just me.

Scot:
[31:09] Or a iced vanilla latte at Starbucks or 10.

Jason:
[31:15] Yeah yeah absolutely that's not that's not an affordable luxury Scott that's a necessity.

Scot:
[31:22] Were there any other omni-channel you want to cover because I had a.

Jason:
[31:26] Yeah yeah I think we probably spend enough time the Home Improvement guys did report it was kind of a in between Home Depot is decent their up
5.4% in their their comp sales which is kind of in between what we saw at Target and Walmart they talked about seeing their consumer business has slowed down and seeing their Pro businesses which is the contractors pick up
so I do think consumer spending on their homes is slowing down I don't know where that pro-business is coming from at first glance so we'll have to dive into that deeper but the housing market is all
topsy-turvy right now.

Scot:
[32:04] Yes I think that this kind of ties into the,
bifurcation of the convenience already consumer in the more affluent and then the value of learning consumer that the pros being busy it was more Renovations are still going on at larger homes.

Jason:
[32:21] Yep that makes sense.

Scot:
[32:22] You know that that weird that like segment and maybe what's happening is you maybe you've outgrown your house you thought you get a new one interest rates went up are like well if I put that money into a expansion or something,
you know that this may be a better use of proceeds than putting it towards paying the bank larger percentage I think that's probably what's going on there.

Jason:
[32:44] No that makes total sense I'll buy that yeah so then what's the last tranche of earnings we want to talk about Scott.

Scot:
[32:52] This was interesting because I was reading a couple articles and I saw you know Casper has a new CEO and and he came in and was basically saying,
hey it's time to start stop losing money we need to be a profitable company,
so then I started wondering you know he had that cluster of sa cluster in a positive way we had a grouping of companies go public that we talk a lot about that we're kind of in this,
some of them were not 100% digitally native vertical Brands but in this kind of cohort over the last 18 months of IPOs,
not 18 months calendar but with IPO windows open we had if you remember we had wish thread up Casper glossy a all birds.
Warby and purple and a couple others go public.

[33:39] So then I started poking around and it's basically a bloodbath out there for that cohort of companies so you know Casper's not doing very well.
I'm thredup which you would think would do really well in recession because people would look at more Consignment type
type of peril they had to do a pretty big layoff the 15% probably the most hit hard is wished which I've never 100% understood wished but
you know far be it for me too
to figure that out but you would think they would be doing well because they always had this super inexpensive stuff the trade-off was it took a while to get to you but if you needed like a phone little drone or
I think one of their biggest sellers is hair extensions
bridal gowns all kinds of stuff you wouldn't really expect for that value or to Consumer you think during recession that would do really well,
their revenue is down 80 percent year over year so they are just basically coming unglued they did a Rebrand and their new brand is.
Bargains made fund discovery made easy which to be hence that maybe Discovery was a problem and now they're trying to say hey we kind of.

[34:47] You came to us before and you couldn't find what you're looking for but now we fix that kind of has that that kind of vibe to the new branding.
One that's popular with the ladies in my house is glossy a they had to do a 33% layoffs and I can understand this because we went on a New York trip and that's one of the,
places we make a trach tube and the store was closed and this is just like.

[35:10] Four weeks ago so definitely post coded so that wasn't good and I think I know what's going on there,
Albert's didn't 8% layoffs were be they had a weird mixed message they were doing some layoffs and talking about their losses mounting but then they announced their opening 40 stores and that they think it makes economic sense it's kind of like.
Yeah I didn't feel like the best time to be doing that and they didn't really say anything other than we think that this is a good use of capital.
We'll see and then you know so Casper is doing pretty poorly and then purple who's kind of a Casper clone if you will need to actually predate Casper's they wouldn't like that
being called a butt
yet another online mattress company their revenues down over 20% year-over-year I think during covid-19 we got new mattresses and now there's kind of a
like a pull forward for that that that's a huge problem so that whole cohort is not doing well and kind of
indexing much worse than kind of like what you saw in the data I want to ask you what if you think there's do you have a theory of what's going on with those guys.

Jason:
[36:14] I do like I think the whole direct-to-consumer model,
I'm not saying it can't work but it's way more challenging than a lot of people.
Um gave it credit for right like the fundamental problem with the direct-to-consumer model
is customer acquisition right like there's 240 million households in the US and getting them to know about you and be aware of you and want to buy your product is,
really hard right and if you're a direct-to-consumer company with no organic awareness and no reason for people to discover you
the way you get people to find out about you is you buy ads right you buy that awareness and and all these d2c companies were.
Using digital ads you know mainly on Facebook 22 by audiences and so one thing we know is customer acquisition costs have gone up because of,
the Privacy changes in the less the lower efficacy of a lot of those those digital things.

[37:17] You know even on the old pricing every subsequent customer gets more expensive than the last one like the first customers you can buy are the cheapest,
but you know increasingly you have to bid higher and higher for an audience that's slightly a lower propensity to buy your stuff and so as you grow as you scale,
it gets harder and harder to keep growing and so we've seen a ton of these d2c companies.
Grow really fast from zero to something and then hit a plateau and slow way down and we were seeing that before the pandemic we were seeing it during the pandemic,
some of these companies like we're partly aided by the pandemic and so maybe it gave them a little extra Runway some of these companies like.
A way we're probably hurt by the pandemic and had less less Runway but I think what we're seeing is that.
That the pure direct-to-consumer model without some other way of cup of consumers,
cheaply making consumers aware of your products,
is really challenging so you're seeing a bunch of these dtc's open their own stores that's the war be model you're seeing a bunch of these dtc's pivot to wholesale so glossy is moving into Ulta I think it is or it may be Sephora I apologize if I have it wrong,
um but they're a bunch of these guys have moved into wholesale to get awareness.

[38:43] And you know that changes the whole margin structure and does all these things I think there's a Warren Buffett quote,
they're only when the tide goes out can you find out who's not wearing a bathing suit and I feel like that's that's kind of the situation we're in with these D disease is you know once we've come into a,
challenging economic model Market the.
The high cost of customer acquisition and the challenges with continuing the scale are really starting to be a parent for all these data see companies you buy that.

Scot:
[39:15] I do and a lot of them in our you know in our world we think about cackle TV and you kind of get in your head yeah
it's you know I'm growing X percent macaque LTD is three or four and you feel like that's going to stay around forever right and then you hit
recessionary period which apparently this isn't and
hit some headwinds or some chop and suddenly you know that no one's buying that second mattress for that second pair of glasses or
you know whatever it is and then,
you know your whole economic model is built on this ratio of cacti LTD of three and suddenly it's one and a half and if you don't react quickly to that
and if you don't have if all you have is paid mechanisms that are built on that that will ratio then you're in the horns of a dilemma where you're kind of like well I turn that off,
the the acquisition spigot I can't grow Revenue but if I keep it on my my earnings are going to,
go to heck in a hand basket because I'm effectively my cup my kak My overall economic side business have changed very dramatically and there's no way for me to.
To deal with that and because these guys have such a big chunk of their you know their their revenue from Paid media it doesn't they don't have a lot of degrees to Pivot on so another way of saying what you said but I agree is the short route.

Jason:
[40:38] You know you reminded me one funny thing I think one of both of our favorite guests on the show Dan McCarthy.
You know he talks about like every time he gets to look at the finances for one of these d2c companies that they they wildly underestimate their CAC and overestimate their LTV that like
the math is also just flawed that like you know most most of these d2c companies feel like they're going to have like incredible retention and keep the these customers re spending every year for a long time that their data doesn't necessarily support so they
they overestimate their ltvs because
they don't account for enough turn and then you know they all just treat their ad costs as their total kak and you know it's customer acquisition cost it's all the costs
to find that customer and get them to buy them and onboard it so all the customer service costs all the onboarding cost there's a lot of extra
cost that should be in that cack number that a lot of first-time d2c CFOs don't don't tend to put in there so.
I thought that was a funny observation as well.

Scot:
[41:44] Yeah and then a lot of times you know you'll be like
let's say 20 million and you're just driving the business itself Google and you're like well this is amazing and but then Google Google searches are a pretty finite
resource and at some point you kind of can get them all right so there's only so many people that are typing in mattress everything and then then you're like okay well I'll do you know
I'll do Facebook I'll do this I'll do what not and then as you do you Whittle away Google is always one of the most effective advertising venues because the consumers given you their intent so they're at the bottom of the funnel,
so then as you walk up the top of the funnel your cat goes way up and then you can have infinite spin there at the top of the funnel but.
It doesn't really change the metrics Downstream so then
that's that scaling problem so all these guys get to 100 million and then and it really Falls over because because they can't really get that incremental next dollar and if they do they're kak LTV ratio goes way up because they're spending so much more on,
paid media LTD is stable so yeah it's a tough slog so I think reading between the lines when
when were be says we want to open up stores that I think they're trying to
you know cough ironically go from a pure online to being in foot traffic and getting people there which is you know what they're basically saying I think is that that may be cheaper than that next in Criminal
online add-on.

Jason:
[43:11] 100% I wonder I when we're all retired and we look back on this market like I do think there's going to be a lot more d2c activity than we have today but I actually think most of it is going to look
more like Nike it's going to look more like someone that was born as a wholesaler that created huge awareness affinity and love and eventually hit escape velocity where they didn't need
that that wholesale model anymore and they were able to then go direct to Consumer and have a low customer acquisition cost and kind of growth hack
and I'll bet you a lot more of the d2c brands that are dominant you know sort of 10 to 15 years down the road got there by
starting wholesale and transitioning to d2c rather than being born D to C which is just I think a tough value.
Scot that's a lot for one show and you know we've already teased people about a subsequent show on e-commerce so I feel like we should try to wrap up is there anything else we didn't cover that you were excited to talk about.

Scot:
[44:19] Not just want to give you good luck tomorrow I hope all your data flows or columns line up your Tableau is humming and I look forward to hearing your analysis on what comes out of the day tomorrow.

Jason:
[44:33] Awesome well my in-laws are visiting and they're commuting home tomorrow so they promised they're going to listen to Tonight Show in the car so I just want to give a shout-out sit to and Papa.
Um
and with that it's happen again we've used up our allotted time as always if this show for you some value if you're going to be a little smarter around the virtual water cooler tomorrow,
the way you can repay us for this free show is you can jump on iTunes and leave us that five-star review that we so warmly deserve.

[45:08] Happy commercing!

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EP294 - Amazon Q2 Earnings

Episode 294 is a breakdown of Amazon’s Q2 2022 earnings.

Episode 294 of the Jason & Scot show was recorded on Sunday July 31, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 294 being recorded on Sunday July 31st 2022 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason and Scott strip show listeners well we have had a
plethora of vacations Jason did a business trip he’s going to report on over it in our F and then I had a little covid situation so it’s been The Universe has been trying to keep us from podcast so it’s great to be back in the saddle tonight Jason.

Jason:
[0:59] I am thrilled to be chatting with you on a rare Sunday night this is unusual for us.

Scot:
[1:04] It is it is usually we watch our Disney movies have a little popcorn in called an evening but tonight we’re going to throw down a podcast.

Jason:
[1:11] We I feel like we need to get ahead a little bit because you know there’s a new Game of Thrones series coming soon.

Scot:
[1:16] I know and Lord of the Rings we got a lot a lot of geekdom kind of happening all at once here.

Jason:
[1:23] Exciting stuff and even more exciting than all of that Scott I’m super grateful that you’re feeling well and recovered
but mental picture for our listeners I have a mild version of what Jason considers a tan for the show which is super rare.

Scot:
[1:40] Wow and that is because you went to a that summer in RF show that’s out in a ranch somewhere tell us about that.

Jason:
[1:48] Yeah I doubled down so I had a week of vacation in Upper Lake Michigan and then I went straight from there as one does when you work hard to a quote-unquote work trip
which is in Ranchos Palos Verdes at The Tiara new resort on the beach in southern California.

Scot:
[2:07] Cool and then so I’ve been turning our F of n this time of year that was called the merchandise or the merch conference is that what you want to.

Jason:
[2:16] You are old school so originally when shoppbs.org and NRF were two separate entities shoppbs.org had a,
fall summer event at this Resort that was exclusively focused on like digital merchandising and you’re exactly right it was a great event called the merch Summit.
And so this is kind of the spiritual successor to that than in a ref also had a event at the same time of year that was called the CIO Summit where all the cios got together and so they’ve kind of mashed those two events together change them a little bit
try to make it even more inclusive and they now call it an RF Nexus and so it’s focused on,
really forward-looking Trends and technologies that are relevant to
e-commerce professionals to digital leaders to cios and to see a Moe’s so there was a you know kind of like senior execs across it marketing and.
Digital all in attendance.

Scot:
[3:17] Nice nicer than what was the was there a topic to the event or what.

Jason:
[3:24] So there are a range of forward-looking topics.
Like probably the trend that topic that got brought up most were various aspects of the metaverse and some of those conversations came very close to getting me kicked out of the.

Scot:
[3:43] Because you are.

Jason:
[3:45] Because I’ve become.

Scot:
[3:46] VR headsets.

Jason:
[3:47] I become a huge cremation.
I know that’s shocking to listeners who find me like wildly optimistic but you know we had a lot of outside speakers talking about the metaverse and.
Spoiler alert I think the metaverse is super interesting it absolutely could be an important part of the future and when people say metaverse they’re mostly talking about three things that don’t necessarily go together but can which is.
In ftes and blockchain stuff they’re talking about the actual metaverse which is kind of like you know virtual reality and they’re also talking about web 3.0.

[4:24] And so they brought in a bunch of authors and subject matter experts,
that are super bullish and are like it’s a foregone conclusion that the future is with three and everyone’s going to abandon web 2 and if you haven’t already gone your,
wheezes and secured your property in the metaverse then you’re stupid and you’re going to lose huge sums of money.
And I disagree with most of that like I feel like it’s.
Wildly more up in the air than that and like at the moment first-movers that have tried to do Commerce things in the meadow verse have made more mistakes than not and so I spent a fair amount of time.
Like debunking some of those claims and highlighting some of the catastrophic mistakes that people have been making when they when they try to make a splash in the metaverse Without Really knowing what they’re doing and,
I choose to believe that the attendees appreciated that counter perspective but I don’t think some of the speakers appreciated being challenged.

Scot:
[5:20] What to do a deep dive where you essentially just dumped on the metaverse Jason dumps on the metaverse.

Jason:
[5:27] Well or.

Scot:
[5:28] Be part of our curmudgeon series.

Jason:
[5:29] Yeah a dose of reality about them again it could be a big thing I’m not saying it’s not I’m just saying it’s not a guaranteed big.
And then a close cousin of that that I spoke was,
the future of artificial intelligence for Commerce and I’m kind of and we’ve talked about this before but I’m kind of a curmudgeon on that as well only because.
I think focusing on artificial intelligence is kind of silly like to me artificial intelligence is a tactic not an outcome and there are a bunch of super exciting outcomes that are,
made much better by using artificial intelligence and so I talked about some use cases that I’m super excited about.
But but I you know caveat that with they’re not super exciting just because of the math that causes them to be artificial intelligence their super exciting because
they help people find more stuff to buy and have more successful shopping trips.

Scot:
[6:26] Cool well that’s that’s definitely out there and we have history on the show of given our listeners more of the hot truth of what’s going on right now so it was a it was a really interesting second quarter reporting period so we wanted to spend the bulk of our time today
reporting on that
I want you to lay the scene for us mr. US Department of Commerce what what’s what are the things feeling like there and then you know I think we’re all pretty red in on the macro that consumer confidence is like
what
10 20 year lows inflation’s at 40 year highs we had two quarters of negative growth that used to be called recession but no longer is called a recession.
So yeah so.
So that’s kind of the macro backdrop and then then I saw you had done your normal really great analysis of the US Department of Commerce what’s that looking like.

Jason:
[7:18] Yeah and there’s not a lot like super game-changing in the in the monthly data from the US Department of Commerce I like is you just kind of called out I feel like we’ve just made this transition from.
Overheated economy due to stimulus and extra covid demand and certainly a greater level of uncertainty and fluctuation but like in general,
really robust retail sales to now we’re having really robust retail sales because of inflation and so you know,
looking at the numbers they’re pretty consistent with the last couple months of numbers we’ve seen and so in general like July retail sales were up 8.3% from July of last year,
and year-to-date all retail sales from from January through July of this year are up 8.8%,
from July of last year so ordinarily we would expect retail to be up.

[8:11] I’ll call it you know three to four and a half points so being up 8.8 is a.
Significantly higher growth obviously a chunk of that growth is.
Fairly attributed to inflation and people having to spend more.
But you know inflation is kind of I feel like is misunderstood and people talk about about it being one number consumers spend a bunch of money on a big basket of goods and the amount of inflation on each item in that basket of goods.
Varies wildly right so the amount of inflation we’re seeing in gasoline.
And certain food items is really high consumer electronics are actually deflating it’s a you’ll get a cheaper TV this year than you did last year right so.
So you know if you break down in a segments.
Segments that have high inflation and you know we’re negatively affected by the pandemic the last couple of years are killing it right now so it’s a great time to own a gas station like that.
Gas stations are up 50% year-over-year.

Scot:
[9:10] Yes cool and then it’s too early to get the online number from the US Department of Commerce right that that’s got it.

Jason:
[9:17] Yeah we don’t have the quarterly number but the proxy that we do get is this like non-store sales and that’s a nine point six percent from last year so we’re
where the brick-and-mortar number is up more than you would usually expect the.
The non-star sales are e-commerce is up even higher but,
probably a little lower than you would ordinarily expect we’re kind of used to that kind of twelve to fifteen percent growth in the so you know 10% growth is a is a little bit lower.

Scot:
[9:50] That’s because we’re that they’ve got a comp problem because last year was such a surgery or with covid.

Jason:
[9:54] Exactly exactly.

Scot:
[9:56] Okay so that’s one set up and then the other one was for some reason we’ve entered this interesting period where Snapchat is one of the first companies to report and.

Jason:
[10:06] They need to change that by the way.

Scot:
[10:07] Yeah I don’t think that’s her they like it.
Because in our Recaps they’ve been kind of the first one to take it on the nose and it wasn’t any different this quarter so July 21st they came out.
And it was just a total mess and lower and a poop show because last quarter they basically said we got a handle on this we know what’s going on with ID fa.
You know I’m going to another Victory lap on this because I feel like you and I were like super early on I DFA and it’s really coming home to roost and interesting ways and Snapchat continues to be a,
non beneficiary of those changes but then addition to that,
you’re more in that business that I am but I’ve got to imagine that when you see recessionary head winds and and everyone’s tucking in their expenses one of the first things that you look at is your ad spend right and you know maybe
it’s not a great place to be if you’re Snapchat basically saying hey
you know we’re not really good anymore and measuring what’s going on with your ads because it feels like I guess people would cut that they’ve also become you know one of the smaller platforms so I imagined.
They’re probably out on experimental ring of AD spend and maybe they get cut from that too so they had a double whammy of both kind of micro meaning I DFA and then macro softness so that was just a total total nightmare
quarter for them.

Jason:
[11:33] No do it wasn’t pretty 100% agree like I do think we call the that I DFA was going to be pretty substantial to some of these businesses but I do think.
Some of there’s like there they were mostly trying to blame it all on IDF a and I do think there’s some softness in.
Digital marketing spend right now right I guess you go into recession it’s not the right thing to do but you know a lot of people that are nervous about their economic future are you know slow down their marketing spend right and it’s kind of like
when when you start to Skid on the ice.
You know it’s not very smart to hit the brakes but it’s human nature to hit the brakes and and you know some people people are doing that right now and I think some of their their softness and then you know some of the softness in the other AD platforms we’re going to talk about,
is is related to that recessionary fear and the ongoing impact of the various privacy initiatives.

Scot:
[12:30] Yes so then we were all like okay that’s that’s Snapchat maybe it’s isolated and then we had five days till Google was going to announce,
or / alphabet there called a whole I will always call them Google and then there was a surprise announcement on July 24th Walmart basically came out and said hey we need to update our guidance that they had already lowered,
for the quarter and they basically said sales are decent but profits are going to be way below kind of what we were talking about and they specifically called out some inventory problems so the CEO
they now have everyone has a there’s like 16 CEOs at Walmart or something but the CEO of us said,
there’s probably 20 percent of inventory if you could just wish it away and make it disappear you would,
and then around that same time Target also came out and I think there’s was even more severe,
and then Walmart called out apparel as a problem area where basically I guess when you look at kind of your your wallet where you’re spending money there’s always,
can’t live without groceries but you can live without like that 10th pair of socks or,
or a new outfit or something like that so it seems like consumers are definitely slowing down dramatically on the apparel side did you parse anything else out of the Walmart announced.

Jason:
[13:51] Yeah I mean I feel like those are the main two takeaways I Walmart in particular
like they’re got they reduce their guidance from like eleven percent profit 21 percent profit right so pretty meaningful and essentially what they said is a we’re starting to see significant changes in consumer Behavior as a result of the recession and or as a result of the inflation I should say
and the the specific behavior we’re seeing is people are spending more on Essentials and less on
non-essentials and the non-essentials are more profitable for us so our mix is getting less profitable which is why we’re adjusting our guidance and it also means
that we have too much of these non essentials we were already you know heavy on them because we over ordered,
during all the supply chain crisis and now we’re having trouble moving them so Walmart didn’t say this but a lot of other pundits have said this like you can
expect to see all these Goods at Walmart and Target start to really get discounted and in one weird way,
that’s potentially good news for the economy because that that could actually help counter some of the inflation that everyone’s talking about.

Scot:
[14:56] Yeah yeah 10% profit change at Walmart’s like a 40 billion dollar number.

Jason:
[15:02] Yeah I will say and you you’re the stock market guy I’m not right so not shocking
you come out and you revise your guidance in significantly down like that and not tracking your stock takes a pretty big haircut right so everyone wrote articles talking about the dipping the stock I happen to pick the stock right before we went on the show and its back it’s completely rebuilt.

Scot:
[15:23] Yeah it’s always better to take your medicine and then if you’re going to do it kitchen sink it and throw in some stuff because it’s an expectation machine not necessarily an absolute.
Machine
okay so then everyone was like well that’s not good but maybe it’s isolated to stores let’s see what Shopify does well then well then Google came out and Google was mixed probably less bad than people thought so their Core Business which is people going to google.com and typing in stuff it exceeded expectations
but their ad business and then their YouTube business were under pressure and they basically kind of counteract that each other where they did talk about
you’re more macro head runs around the ad world and that advertisers were pulling back so they kind of,
added on to that Snapchat message of some softness with ad spend.

Jason:
[16:11] Yeah and just for Google followers I would
add you know they’re interested in comments Commerce particularly interesting just remember like the president of Google Commerce recently left,
Bill ready to go to Pinterest right so they haven’t announced a new head yet like I’m expecting them to call me any day
so we’ll see where that goes but previously one of the things they’d really been leaning into was YouTube for Commerce and they’ve added a ton of Commerce capability to YouTube and it
it varies it doesn’t seem like that paying off quite yet in the Google world.

Scot:
[16:47] Yeah and then everyone’s like well let’s see what Shopify does in so let’s see after market close 26 was Google and then everyone was expecting Shopify to do something the next morning well then that evening Toby put out a Blog
post saying hey we’re laying off 10% of folks and then I was like oh boy that’s not good the quarter must be really really bad.
And it was really interesting to his credit I think Toby did a really good job in his blog post it’s never easy to do these types of layoffs and I thought he did an exceptional job of laying out,
why and essentially taking the blame for it basically saying he made a bet that this would be a pull forward it was you know.

[17:32] And then when you’re in the thick of it you do that was our logical,
thing to think could happen and instead now we’re reverting to the mean and they’ve gotten way out of their skis what did you think about and then the next morning because he had taken their medicine,
it wasn’t quite as bad and then Wall Street actually likes it when Shopify gets rid of expenses because they’ve added there,
that’s like a thousand people to them that they laid off our 10% so they’ve grown their head count up to this kind of astronomical 10,000 folks and then they,
is one of those little quizzical because then they said you know it’s not going to change our ability to innovate or do anything basically so then you’re kind of like wow I wonder wonder
hey how’s it feel to be one of those thousand people here in that part of the message and then be you know what did they do that you didn’t really need them and they were in the sales they have all these content management people so kind of not developers not product and so part of their message was they were going to double triple down on on
product development and adding features.

Jason:
[18:33] Yeah I’ll be interested to see how it plays out I got a ton of pings after that announcement because everybody did a Victory lap on my corpse right like everybody’s calling and going ha ha mr. e-commerce guy
e-commerce was an anomaly like it was it was big during the the pandemic but but now it’s all gone see even Toby
like over-invested in e-commerce and then he had to come out and say that he Comer sucks now.
And so a I got a bunch of those kind of troll tweets that I had to respond to.
And you know I have my own kind of issues / concerns with Shopify so a I would say.
That shopify’s actually been slower than I would like to see in product development leading up to this and in particular they have a product that’s aimed at more Enterprises and less.
Tiny businesses that’s called the Shopify plus and most of the folks I talked to that have.
Invest in Shopify plus I’ve been pretty disappointed with the rate of innovation and product development on that platform and a bunch of the people that got laid off.

[19:38] Where the teams associated with Shopify plus so that seems.
Interesting to me and I will tell you that like in Toby’s announcement he published this this US Department of Commerce Economic Development.
Which of course you and I are super familiar with and we talked about all the time but eat accurately represented it right like that there’s,
e-commerce has been at the certain rate and during the you know from 2022 2022 we had this crazy Spike and you know if you look at where it is now and you draw a dotted line to the growth you would have expected before the the pandemic like the.
The line is barely above where you would have expected so they called that regressing to the mean and you know gosh we exuberantly over-invested in now that it’s come back to the mean we have to right-size.
And so the only thing that’s wrong with that graph is it’s kind of a it visually doesn’t represent,
the huge amount of growth that’s in the mean like the mean is very high so,
from 2022 2022 we added four hundred and twelve billion dollars a year of e-commerce sales so e-commerce in United States of America Grew 61% From 2022 2022,
so when when Shopify another say oh man we covid dim boost e-commerce as much as we thought we only grew 61 percent over the last two years.

[21:06] Um like how many people did you hire right like you did you you didn’t add 61 percent to their their staff commensurate with that growth.
So yeah I just I take exception with people that think.
That this data in some way shows some some significant softness and the other thing I would say is all of these graphs that these people are talking about they all like to show the percentage of e-commerce to Total retail and.
It’s easy to overlook and forget the fact that the denominator in that that ratio has been fluctuating wildly because of covid-19.

Scot:
[21:42] Yeah yeah and then you know the other thing that mrs. is the it’s like almost like a pie chart where you don’t see the absolute dollars so so percentages are a tricky thing it’s gonna be a better way to visualize it.
One scary thing is maybe we don’t revert to the mean like a week the you know the lines we haven’t had enough time to know until that start sticking up you know we won’t know if we’re back on the mean or not who knows.
Google.

Jason:
[22:11] I know for sure but I get you know like I will do it maybe a Shopify deep dive at some point but like to me Shopify does is.
Great product for small businesses it caters to this long tail in my biggest gripe with Shopify as an investor is always that they never tell you what they’re stainless or sales are like they never tell you how well
last year’s customers did this year they just tell you the gmv of all the customers they currently have and so as far as We Know,
more than 50% of their customers go out of business every year and then you know 50% of new mom and pop start a smart start a business and sign up with Shopify so
the unlike a lot of other retail platforms that report their their data and when they grow we can kind of assume e-commerce grew shopify’s growth can be 100% attributed to turn we just don’t know.

Scot:
[23:00] Yeah
so then it was Thursday morning the 27th and meta formerly known as Facebook announced and that was a poop show so they had a myths of top and bottom and their second quarter of declining growth they threw the kitchen sink in there IDF a they’re seeing macro issues
Sheryl Sandberg is leaving and this has been announced for a while and then all the Talking Heads were like oh my God you know she
when out of the top this is kind of the end of Facebook so that was that was pretty
pretty negative sentiment there and then that brings us to the main topic we want to talk about which is after hours on Thursday Amazon announced.

Jason:
[23:41] And Scott one thing before you jump in the Amazon like you forgot the most important thing about meta.

Scot:
[23:46] What.

Jason:
[23:48] The Kardashians are mad at them.

Scot:
[23:50] Oh yes they changed Instagram in Kim’s I don’t I haven’t tracked this you know it better than I do.

Jason:
[23:56] Yeah I’m just well it is an interesting thing will do another show about this at some point but like Instagram is has probably been the crown jewel of men of for a while and you know
Instagram is getting a lot of competition from Tick Tock that the news feed and Tick-Tock is a lot more our rhythmic so the content you see
is less related to who you particularly follow and more what the robots think they want to show you and the you know can monetize
and so Facebook to try to follow suit is changing Instagram to be more algorithmic and less
based on your followers and so if you’re a mega influencer with 30 million followers
you don’t like that right like if you’re Kim Kardashian you want everyone to see all of your content because they followed you you don’t want them to see some unknown person that did something viral.
And so the change that Instagram made is to be more like Tick-Tock and you know some of these big
big influencers that benefited from the old model understandably don’t like it in are criticizing it.

Scot:
[25:01] Got it yeah we should definitely do a Kardashian deep dive how fun will that be.

Jason:
[25:06] Yeah yeah finally be able to let Kylie on the show and so she’ll stop bugging us.

Scot:
[25:12] Good.
Okay so if you’ve been listening this recap there’s two words I haven’t said and those are beat and raised so then Thursday night Amazon came out and everyone was like oh boy this is gonna be bad
and there was a CNBC person who actually like a lot of names Josh and.
He was basically he they do this little lunch time.
They have this investment committee they call it and he’s had a short on Amazon because he kept thinking they were going to miss Q2 he basically said look with Walmart and Target basically reporting the way they have.
To think Amazon would do differently means they have some totally different customer base I just don’t think that’s the case so Amazon surprised everyone with a beat and raised quarter.
So how did they do that with all this you know we’ve got Walmart Surprise Miss Shopify surprise Miss Google.
Less worse meta terrible Snapchat total disaster in an Amazon just kind of came out and surprised everyone.

[26:16] So so one way to think about Amazon is this very unique business and there’s not a lot of.
That you know another company like this that they have this portfolio of businesses they have built and they’re all intertwined but.
They have I imagine they have this is my mental model is they have dials where they can turn up and down this portfolio of businesses because they’re all intertwined and that’s one of the benefits of keeping this stuff together like when PayPal and eBay were together
there are some operational Dynamics there that you could use to you know if you hit a certain speed bump or something you could navigate that better,
so Amazon has these things so they’ve got the core retail business which is lower margin it’s a retail business still profitable on its own but.

[27:02] Not a great business but a good business and but like a massive scale you know hundreds you know what three hundred million dollars plus annualized then you’ve got a third party Marketplace business that we talk a lot about.
Very profitable,
doing really well you’ve got a smaller ad business super profitable doing really well growing rapidly AWS the cloud component now merchant services which is essentially the monetization of the,
Center asset you had to build for the first piece.
And my mental model is what they basically said was well we’re heading into this period where we’ve got all these recessionary things consumers Under Pressure let’s dial back on first party and dial-up third party.
And that really won the day so so what they did is the third party as a percent they don’t really give us.
The gmv of each of these things that the total sales in each bucket they give you a unit mix so the unit mix was at an all-time high I need a fact check on this I’m 99% sure this is right.
Five 57% third party versus first party the highest previous that was last quarter at 55%.
They may say let’s 2% how could that really make that big a difference well.

[28:18] That’s actually big because when a hundred dollars moves from the first party bucket and you and I have talked about this a million times but just to recap for listeners in the first party bucket the accounting is a dollar is a dollar of Revenue.
The third party Amazon doesn’t get to recognize the hundred dollar widget that sold they only get to recognize their commission or take rate which is about 10%.
So they lose 90 dollars if a doubt if a widget moves between those things and Revenue.
But that ten dollars that’s left is pure profit it’s almost like 99% profit so so if you really want to you know juice profits you move things from the 1p bucket the 3p buck.
So and then also tell us about Prime.

Jason:
[29:06] Yeah so Prime is a little confusing this year because it was in July and historically that’s
when Prime day has always been except this weird covid era that we’ve had so you know if you if you go back to 2020 they canceled Prime day in July and instead had it in October and then the following year in 2021 they went back to Summer but instead of having it in July I like they always have they had it earlier in June which is a big deal because it’s a quarter earlier it’s Q2 instead of Q3 so
we’re looking at Q2 this year we’re competing against a cue to that had prime day in it and this year Prime day is in Q3 so this year
Brenda is back to Mid July which July 12th and 13th so
a lot of extra work and verbal gymnastics for the poor cf0 on the earnings calls.

Scot:
[30:03] Yes there was no benefit from Prime in the quarter so that didn’t really it neither hurt or helped.
So even though third-party carried the day and I kind of theoretically so let’s say.
Yeah let’s say you’re running one of these really large retail businesses and you’re either a store based or a e-commerce base
I feel like Amazon because they have their products in a central location
they can be much more dynamic because you know think of the store networks that Target and Walmart have almost like an edge Network.

[30:37] And that product gets pushed out to the edge and then if you need to Pivot for some reason well you’ve got a tough decision you can
you can pull the product back it’s not really desistance not really designed for that it’s mostly returns comes back not like let me yank all the sweatshirts out of a you know store number 292 or something.
Or you have to liquidate them and then you end up with this problem that you call so if your Edge is full of stuff that’s not really moving right now,
you can’t really.
Change that rapidly you know you’ve got like a 60 90 day cycle to flush that out clear room for the stuff that’s going to work so I think that even even though they did turn up these higher-margin pieces to win the day
I think being an e-commerce oriented retailer gives them a lot more flexibility in a world where inventory and consumer behaviors are changing rapidly
do you agree or disagree with that.

Jason:
[31:34] Yeah no I I mean I feel like they’re their breath of offerings and monetization make them much safer than most other retailers they have more levers to pull in more knobs to dial.

Scot:
[31:49] And then the other thing and you know here one of the reasons I started spiffy is because we had talked so much on this show about the bifurcation where K seal Obama has come on and.
Talked about the value and the consumer and the convenience or any consumer and a lot of that data came from 08-09 the quote-unquote Great Recession
and you know what we learned during that recession is there is a consumer that is largely immune from recessionary and in that point time we didn’t have inflation but I think I think that’s kind of the same.
Same kind of Stew if you will of macroeconomic stuff that the consumer has to face whereas the value are going to Consumer was really impacted by it.
So I will also another argument I have is that that guy Josh on CNBC was wrong there is a separate customer now surely there’s overlap and what not.
But Amazon has captured all if not you know.
98% of that convenience or any consumer and you know that is a great place to be when you have a lot of these recessionary wins because they’re not as impacted as the value or any consumer.

Jason:
[32:57] Yeah no I do I think you’re 100% right like this gets complicated because these are such large numbers but the way I think of it there’s 240 million households in the United States of America there is more than 100 million.
Prime households right so the you know a significant chunk of America shop Amazon and have Prime,
190 million households shop Walmart so basically all you know the vast majority of America except for rich people in New York and California shop Walmart so you can’t talk about oh,
there’s a Walmart customer and there’s an Amazon Customer because the vast majority of customers go to both places but.

[33:38] There’s a core customer that spends most of their money at these two places that is likely very different right so there’s these these higher net worth individuals that spend the bulk of their discretionary money Amazon
that are way more insulated from inflation than the average Walmart consumer that spends the bulk of their money there and then.
A big difference in this inflationary period is if you’re a cord customer that shops at Walmart or Target.
You have more economic instability so you’re spending more of your dollars on Essentials versus nice to haves right and guess where you get your Essentials Walmart and Target like that’s still where you get your food.
And so at Walmart the mix shifts right instead of buying a cool outfit you’re buying more proteins for your family.
But that that Amazon customer is both more affluent and therefore less impacted by by inflation and they probably don’t get their protein from Amazon.
Right so like we Amazon doesn’t see their quote-unquote essential spending they only see their discretionary spending so they don’t have the same.
Dynamics like causing their mix to shift to less profitable mixes in a recession so I do think in that way.
The economic headwinds facing Walmart and Target are very different than the ones facing Amazon.

Scot:
[35:05] You know if you are getting your protein from Amazon it’s probably at a Whole Foods where I have a feeling that consumers pretty resilient based on.

Jason:
[35:13] Yeah which and again people do but like a see a statistically insignificant period of like whole food is less than 4% of the grocery market so yeah.

Scot:
[35:23] Well our are like Kroger and those folks feeling I don’t track them as.

Jason:
[35:27] Yeah
the so again they have less discretionary right so yeah they’re they’re doing pretty well like they’re benefiting like a lot of the items in Kroger are impacted by inflation so there’s their sales are up
um the you know.
They’re like the discretionary retailers are losing more dollars to the grocer so it’s I’m not saying that that the grocer particularly love the current circumstances they’re in but but they are like if you navigate them right there economically favorable.

Scot:
[36:03] But then because it’s not Walmart where interest or you’re making the toys there’s there’s a loser somewhere and it’s pie like a Macy’s and JC Penney you’re probably going to get hammered I would imagine because there’s you know if Walmarts telling us people aren’t buying much apparel than this kind of start Rippling through
all these other places.

Jason:
[36:18] Yeah or I’ll give you an even more painful example Bed Bath & Beyond.

Scot:
[36:22] Yeah yes Father they’re not doing well.
Okay let’s peel the onion on this a little bit so Revenue grew 7.2 percent year-over-year to 120 1.2 billion and that exceeded the expectations of 119 billion by about 2 billion.
So not a huge huge beat but again it was such a bad setup that that it seemed like.
You know what a miracle in somewhere North America this is really interesting when you kind of look inside of Revenue North America came in at 74 billion and then expectation was sixty seven billion so that was a really that was almost like a 10% Len.
But then International was a miss it was 27 verses 32 billion.
Everything I forgot to say that the top and everything we do is outside of the impact of financial currency moves so it’s called X FX and Wall Street parlance which which is important because the,
currency moves are gyrating around like crazy right now so you swirl that together and that’s where you get your North America was up seven,
International is all five so that’s how you get your two billion dollar win but it’s really interesting because if you look at Amazon’s North America they were up 14 percent year-over-year which Compares very favorably to your US Department of Commerce data.

Jason:
[37:44] Yeah yeah no that’s a and again like,
I look at this all in Aggregate and say this is a solid quarter in a challenging climate for Amazon and yeah they have performed the the industry average despite
being one of the largest players.

Scot:
[38:04] Yeah and then you know a mere like less than a week after Walmart said they were going from kind of ten percent to one percent profit margin Amazon’s gross margins improved 45 percent year over year versus the consensus 43 percent so that,
that was the one that really yeah I think people are like well if they make revenues surely they’re going to go out and readjust their profits and it’s going to be really hard so
they came in with an operating income of 3.3 billion and this was in our Sunday called out an incremental for billion of increased cost but that was offset from improved fulfillment center Ops
so I think what’s going on is they built out the Fulfillment center capacity so crazily and they’ll since the pandemic they were basically just standing them up and just you know
getting stuff out as quickly as possible.

[38:51] And then this quarter they kind of came back and where they use this phraseology invest in Harvest so they go in these different modes so they’re able to come out of invest mode and look around and say well.
You know in 2020 we sure we’re setting up fulfillment centers kind of crazily lets you know we need to tweak,
this this and this and then I want to have billion dollars of operational efficiency came out of that they called out some areas that are increasing and expense are.
Ews expenses so those sit there and use a lot of electricity which a lot of electricity is off fossil fuels and then I think I think computers are getting more expensive I guess that must be a chip related thing you said Electronics but that’s
probably like big screen TVs anyway.
Then obviously they called out fuel as an area and then they have a particularly large amount of money going into digital.
With the funding with digital content with the funding of The Lord of the Rings series coming out and then they also bought Thursday Night Football so they called those out is as expense items.
And as I mentioned at the top third-party one today.
And then looking inside of there we talked about that seller Services grew nine point one percent year over year to twenty seven point four billion and I think whenever any of these things,
grow faster than the Baseline of 7% and they’re higher-margin they’re going to drop that much more dollars to the bottom line.

[40:20] So there was that and then I don’t know anything about ads so I’ll kick that one over to you.

Jason:
[40:27] Yeah speaking of things that drop Towers to the bottom line so that the ad units is a reminder is a.
This business Amazon has had for a while but only broke out as a separate segment recently and so now it’s fun to see it every quarter so it Q2 of 2022 was up 21% versus,
the second quarter last year,
um if you add up the last four quarters of Ed Revenue its thirty four billion dollars in ads than Amazon selling and Amazon doesn’t tell us the profitability of these individual segments but most people estimate that like.

[41:06] Worst the advertising business is probably a 75% gross margin business so,
75% gross margins on thirty four billion dollars makes the ad business more profitable than AWS for Amazon so,
um Healthy Growth again you think about all the other people selling ads Google Facebook snap,
um you know really struggling but Amazon you know continues to grow and they’re already the third largest advertising Network in the US so,
that’s pretty impressive,
side note you know every other retailer in the world is trying to replicate this this new ad business than Amazon has invented and they’re all doing it you know with great success at a much smaller scale.
Um so that you know the ad dollars are shifting from these,
kind of top of funnel content providers to these bottom of the funnel retail networks that have first-party data and don’t have all these idea of a.
Problems that the others are facing so that’s.

[42:10] The ad business you know separately Amazon Amazon has this subscription business which is mostly Prime but a few other things mixed in there and,
you would expect that to be slowing down because they’ve you know hit they’ve saturated they probably have half of us households have Prime accounts but that’s still growing at 14% which again.

[42:31] Is pretty impressive and I think that’s a picking up the rate of growth from last quarter so it’s super interesting impressive to me that these,
these plati sticky Echo systems are particularly strong and Amazon and then of course everyone always talks about AWS,
you know I get and we’ll talk about this later but we get all these annoying tweets that like oh the only profitable part of Amazon is a WS and it’s great it is great right and revenue there was almost 20 billion dollars in nineteen point seven billion,
which is well ahead of the confessed consensus estimates it’s a decent margin business so I think there is a lot of hardware and electronic electricity,
behind that business but it’s still pretty high margins and you know a lot of the world hasn’t moved to the crowd yet so it WS has a lot of,
Headroom in its Tam
but a lot of folks were worried that in these economic uncertainty times that I see shops would be slowing down their migration in the cloud and therefore AWS would,
would take a hit and I want to say Microsoft announced a slower rate of growth before Amazon so there was an expectation there that might not be an awesome number and and again it was pretty solid
solid beat for for AWS.

Scot:
[43:52] Yeah so that’s kind of the different operating units and then,
you know again wall Street’s kind of a what have you done for me lately so then everyone’s like well this is an anomaly surely surely you’re not going to be able to repeat this
and everyone said number one stop calling me Shirley and then number two Amazon put out Q3 guidance and basically both the revenue of that guidance and the prophet were well ahead of what Wall Street had been thinking.
The the revenue guidance was 125 to 130 billion which at the midpoint is 15 percent growth so are one was was quite
pleased by that it basically made it feel like they were feeling very strong because remember
this is all 727 so Amazon’s got 27 date they got about a third of the quarter already in the books and it basically was a signal Amazon saying yeah we feel pretty good about the quarter right now
and Amazon had prime day in the books as well so that was good and then.

[44:54] Do anything Wall Street loves more than a beat and then raised so the beat is current quarter and then the Rays was the going forward quarter
is Abby trays in a buyback so then they also said oh and by the way we bought 3.3 billion dollars worth of stock in the quarter because we felt like
the price the stock was was kind of left so so that was all very very well received and and really made Amazon stand out from from
me up substantially from the other both retailers and add companies that had previously reported.

Jason:
[45:27] Yeah so.

Scot:
[45:28] And then you got Mean Tweets go.

Jason:
[45:30] Yeah so here’s what’s annoying so I would say that that’s a terrific quarter for Amazon given the economic climate and you know frankly exceeded my expectations and in a number of areas.
But you do know there’s room for lots of different interpretation and a bunch of folks on Twitter like zoomed in on the profitability of the US retail sector was down and you know they jump on this whole like
see this is what we’ve always been saying retails unprofitable it’s a loss leader for Amazon,
you know really Amazon is just about a WS and this like you know Silly retail thing is just a sideshow and there’s no way to make money on it.
How do they get away with a lot sweeter thing Jason don’t I have that right like I got a bunch of tweets like that and I didn’t respond because.
I’m not articulate enough to answer in a short tweet so hopefully it will make everyone listen to this this whole podcast,
but I would say you guys are all wow like it was a terrific quarter for Amazon retail like and there’s two things you’re missing Gap profit is not the same thing as how many dollars flow to your bank account right like,
um you know how much money Amazon decides to invest in new warehouses that are going to pay off in the future dramatically affects their.

[46:51] And so it’s almost silly to look at Gap profit to say whether Amazon retailers a good business or not but more importantly.
Um all these profitable businesses that everyone’s talking about exist only because of retail right so that ad business I just talked about.

[47:10] People aren’t coming to Amazon to consume ads they’re coming to Amazon to buy stuff in the ad show up right,
um and the other business that’s impossible for Amazon to lose money on that’s growing wildly is merchant services that you hit on,
um the merchant services are because Merchants want to sell stuff on Amazon on the retail platform and so it’s a little when people are talking about oh gosh the retail business and Amazon’s a loser but the ad business is profitable,
that’s a little bit like saying.
The content creation business in b.c. is a total loser but the ad business at MBC is a winner right like know that they’re only able to sell ads because they create that content and in the same way.
Amazon is only able to make money on Merchant Services and ads and to some extent on subscriptions because of this,
vibrant strong retail business
um that you know has more favorable characteristics than a lot of other big retailers in this current inflationary potentially recessionary environment so I’m sorry guys I just I think
you’re wrong and wildly oversimplifying Amazon’s business model and economic circumstances.

Scot:
[48:22] Yet another framing that’s kind of fun is after retails been around for what like I guess even longer but I get
I was here Sears like 150 years or something.
And you have all that history and it took Jeff Bezos to figure out hey you can actually glom on these really profitable high margin businesses and make the whole thing better
and there’s a synergy synergy inside of there that enables you to like they did this quarter where they can dial things up and down don’t you think Walmart had more of that right now or Target or you know
Macy’s or any of these other retailers so so in a way I think they’re missing the point there to just pick out this one piece that can’t be
unintegrated and say that it’s doing bad because you have to take the whole enchilada because they designed you know retail 2.0,
by mixing all these things together in a unique way no one figured out till they did.

Jason:
[49:21] Yeah no hundred percent so so Props to Amazon and keep on keeping on.
I did want to I think we’re over on time but I just wanted to just like briefly hit on a couple non earnings related topics just to wet people’s whistle so.
Hey we talked about prime day there’s a pretty significant week that there’s going to be a second prime Day this year so a lot so a number of journalists have seen internal documents.
That talked about a thing called Prime Early Access sale which is scheduled to happen this fall.
And so most of us interpret that as likely going to be October which again is when they accidentally had Prime in 2020 because of covid-19.
So look for more there but like potentially Amazon will have a second prime day to me that’s really interesting because.
I feel like the first Prime day at this point is mostly about comps and people turn to match last year’s Prime day and it’s I’m not sure it’s necessarily totally additive but adding a new sail if it.

[50:26] Works and capture sales in October that could be interesting so.
I found that super interesting Amazon launched a new product that maybe is only cool to me but it’s called retail store analytics and this is they’re taking all the data from all the cameras and all the just walk out stores and they’re selling it back to the brands.
So you know just like a you know a cpg can go to Amazon and find out how many glances they got on their their product detail page and how many add to carts they got,
they can now find out in a Whole Foods how many people looked at their package on the Shelf versus how many people bought it so there,
they’re monetizing all the customer insights they’re getting from these brick-and-mortar stores using all those cameras which I thought was pretty cool.
And then the last thing I’ll leave people with is there were some significant articles talking about internal week memos about Amazon trimming its private label and its private label largely being.
Unsuccessful and Amazon potentially moving away from private label and.
Like I don’t think those articles are wrong but I would just throw 11 piece of caution when you interpret those articles.

[51:35] I’ve seen no evidence that Amazon’s moving away from any of its successful private-label initiatives,
so so what’s happening Amazon has a huge amount of private labels they have a ton of Brands they invented a bunch of them never got traction never caught on never had significant sales and I do think they’re doing a rationalization of all of those,
but there still are Amazon private label brands,
they’re doing quite well and it appears the Amazon is doubling down on those so I guess what I would say is that they’re really focused on the head tail private labeled it’s doing well in there,
they’re kind of rationalizing the long tail that was not doing well so that is all of the Amazon news,
and it’s a good thing because we’ve blown through our lot of time once again as always if you found this episode valuable we sure would appreciate that five star review on iTunes.

Scot:
[52:33] Thanks everyone and until next time.

Jason:
[52:37] Happy commercing!

View Details

EP293 - E-commerce leadership changes and news

Episode 293 previews Amazon no good, dirty, rotten, Q2. Including why Amazon's much hailed SCOT software may have led them astray (not a surprise given the name). We also discuss the recent leadership changes at Amazon, Google, Pinterest, and Bed Bath & Beyond.

Episode 293 of the Jason & Scot show was recorded on Thursday June 30, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 293 being recorded on Thursday June 30th 2022 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

Scot:
[0:38] Hey Jason and welcome back Jason Scott show listeners Jason this is a start-up land it's like a triple witching we have the end of the month
the end of the quarter and the end of the first half so too it's a big day to be
making sure you're hitting your opening so that's what I've been doing today how is your summer been.

Jason:
[0:59] Less XLE than yours it sounds like.

Scot:
[1:02] Oh I've seen you in that department of Commerce data comes out so.

Jason:
[1:13] I don't know maybe I feel like we should move it to like python or are something more more hip for the geeky kids.
But I am I'm having a great summer there's been plenty of New Avengers and Star Wars content on in it's fun to see some people in person there have been a few more in person events,
I'm a little stressed tonight though there's a big day for listeners is being recorded on on June 30th,
and Twitter is sun setting my Twitter clients that I use numerous times a day tonight so it's,
it's possible that a lot of people that are used to getting spammed all day by me on Twitter are going to go into withdrawal tomorrow.

Scot:
[1:56] No you're gonna have to use the app like the rest of us mere citizens.

Jason:
[2:01] Yeah yeah the neophytes I have to jump in with the unwashed masses and the vanilla Twitter client or some other third-party client if any listeners have a personal favorite I'm open to suggestions.

Scot:
[2:15] Yeah they're not a lot of good ones whatever you do don't sign up for that paid service because it just makes your tweets take 10 times longer to go out it's like the opposite of a feature.

Jason:
[2:25] Yeah doesn't sound that appealing.

Scot:
[2:27] It's supposed to keep you from drunk Tweeting or something but then like you just kind of forget that they're all cued up out there waiting.

Jason:
[2:34] My best Tweets are the advised ones.

Scot:
[2:37] Yeah yeah your best ones are grumpy grumpy old Jason once where you're like all right digital on the get the most interaction.
Cool well we wouldn't be a Jason and Scot show without some Amazon news.

Jason:
[3:00] News new your margin is there opportunity.

Scot:
[3:07] Yeah there's a lot going on at Amazon one of the.
If you kind of remember back in our queue to 2022 recap from their earnings they talked a lot about how they had over built their capacity for warehouses so that's the first time they've done that since,
oh I don't know 1995 and
that was just like a line in an earnings call well now we're starting to see that they're closing warehouses there's been reports of them closing between five and ten warehouses I've heard they're closing delivery stations and figuring all that out
one of the funny topics is a lot of folks started contacting me and realize said things like hey did you know your mention and this Amazon article is like what,
what turns out they have this technology they've developed called the supply chain optimization Technologies,
abbreviated sco T which happens to be my name.

Jason:
[4:04] And for newest nur's that's actually the correct way to spell Scott is it not.

Scot:
[4:08] It is yeah it was the 60s and my dad thought it would be fun to have a unique name and it's he was right it's made me infinitely google-able so I have a lot of very easy to find on the Google.
I'm very envious of my friend Michael Jones who is impossible to find on Google so so no anonymity for me,
but anyway you know what's interesting is and I want to read this little excerpt from a Wall Street Journal article a thousand or something,
you and I both know at Amazon because they have this engineering culture they try to take people out of most decision-making
process sometimes they call it hands off the wheel so they have all these AI like one time we had a guest on that told us how you know frequently a vendor will be negotiating with an Amazon buyer through a chat and it's a bot on the other side of the the chat not a human.
So they have this technology called Scott and what it does is it makes three different projections for basically the orders for looking out into the future it does a high medium and low and during the pandemic.

[5:12] The high wasn't high enough so they were kind of taking the high and adding some percentage to it
and building out the Fulfillment infrastructure and everything based on what this a I did
well because the a I had never seen a pandemic and it obviously it couldn't keep up with the upside of the pandemics demand curve it didn't see the downside of the demand curve coming either,
and then I think the humans you know when you when you have your,
pilot like six to eight quarters into adding 10% to what this thing does and nailing it.
You know they also didn't anticipate this in the bottom fell out and that's one of the reasons why you know they just kind of too,
kept taking the Scott forecast adding 10 to 20% and then suddenly they found themselves kind of with their skis out over a cliff.
This is really interesting that kind of in a way that the an AI gone wrong kind of caused some of the problems here so I thought that was kind of funny.

Jason:
[6:09] Yeah I mean like the synopsis here is that Scott is the biggest money sink in Amazon.

Scot:
[6:18] It's true yep I like to think because they listened to the podcast they named it in honor of me and somewhere in there is a robot named Jason I'm sure.

Jason:
[6:26] Because you are their Nemesis yeah.

Scot:
[6:28] Yeah retailgeek it's hard to do an acronym for retailgeek but I'm sure someone there is is working on.
Also you know as listeners know there's a new CEO and the jassy and there have been a lot of high-profile departures and it's not clear if he's cleaning house or.
Um you know these these issues stocks down a lot of the compensation that Amazon is from stock-based compensation and then,
you know someone has to be accountable for these problems so they had there was kind of this domino effect so there was right one Jesse took over there was two other people that were are parents Bell and Wilkie and they left,
and then just recently this year a 23 year old veteran Named Dave Clark left and he ran the whole consumer business.
Interestingly he went to a company that's been in the news a lot called Flex Port their CEO has been on CNBC and the all in podcast talking about how to fix the supply chain problems.
So that's that's interesting that he was able to see your Flex Port was able to lure away a 23 year old Amazon bet.
So there was some Sour Apples on the way out Dave Clark told someone that Jesse's just a,
terrible micromanager and yeah he'd been there 23 years and shouldn't have to be micromanage and that kind of thing.

[7:51] And then they announced that this the guy that ran North America consumer who previously had reported to Dave Clark his name is Doug Harrington he was moving up into that role,
what caused a further chain reaction for those people that didn't get the Dave Clark opening one of those was Alicia bowler Davis she was SVP of global consumer,
and she went to this online pharmacy called Alto Pharmacy and then Dave Bozeman he went to he was the VP of Amazon transportation services kind of the middle mile so she was if I understand she was Last Mile and he was middle mile,
so they both left so that's interesting that the Fulfillment center they've been building out and to the key Executives for the last five years or so left those not clear if
that was because of this build out and someone had to be accountable or if they got picked away or what's going on there,
so a lot of changes in Amazon at the upper echelons and yeah some chaos here as they re adjust for the new post covid normal.

Jason:
[8:54] Yeah and I mean almost feels like there's a little bit of a perfect storm of reasons for that senior leadership to start to turn right which historically they have had very little turn by the way right through most of their history
but you know the the founder departs as you point out there's a ton of the overwhelming majority of compensation is,
stock equity and is that becomes less valuable like those jobs are.
Are less sticky you know and there's just the rates of growth at Amazon are are naturally slowing down and it's,
you know for a lot of people that you know are used to being the Rockstar that's you know constantly doubling your business and growing really fast it's not as much fun to.
To manage their downturns and you know at best slower rates of growth.

Scot:
[9:45] Yeah and then you notice some changes coming in the grocery side.

Jason:
[9:50] Yeah so grocery ends up being kind of a really interesting part of this whole Amazon churn so the first thing to know is the new head of consumer that did win Doug Harrington,
had previously started Amazon Fresh at Amazon so so,
he is a grocery guy and his pre Amazon experience is with webvan which is sort of the original digital grocer.
So he is a pure digital grocery guy obviously he's had brought more recently he's had broader roles it.
It Amazon.
Then then just grocery but you know one would assume that Amazon Fresh is near and dear to his heart that's the only brick-and-mortar concept that still.
Sort of in play and growing at an Amazon so that's kind of interesting and historically there's been kind of a tension between Amazon Fresh which is.
The grocery business Amazon built organically and Whole Foods,
the grocery business that Amazon bought right and there have been times when they seemed like they were smashing them together and then there are times when they're pulling them apart and at the moment they're opening a chain of Amazon Fresh doors that compete with Whole Food.

[11:02] You would assume Whole Foods is kind of upmarket expensive grocery and Amazon Fresh is meant to be well Market but like when it washed Amazon Fresh was a little more mid-priced,
then we expected and Whole Foods is kind of moving down price a little bit more than you might expect so it's all,
it's all been interesting they fight a lot over over Revenue recognition for online grocery orders and it's I would argue it's a confusing customer experience right now because you can order a.
Assortment of items with different prices and different service levels from Amazon Fresh and from Whole Foods.
So it'll be interesting does Amazon fresh wind because that's Doug Harrington's baby or you know does he at least.

[11:44] Put more more stock in solving that problem you know I would argue digital grocery is the biggest white space in the kind of digital retail thing and so it.
It's not bad for Amazon that they have a senior leader that understands that space so it's that's going to be interesting,
and then on the whole food side the you know the founder of Whole Foods has remained in places the CEO which is kind of surprising given that when was the acquisition 2017.

[12:12] Five years ago so five years sounds like a suspicious number for an urn out but.
The you know he stuck he was the founder he stuck with a company for a long time like culturally he's,
kind of different than Amazonian so when one might not have expected him to last that long but now there's a new CEO which is a long time Lieutenant of his Jason Bushnell boo shell rather and,
whether this is the first initiative from Jason or it's a coincidence like Whole Foods has kind of announced that they are pivoting their pricing strategy in really focusing on,
improving their value prop and reducing their prices and obviously there's a lot of Economic headwinds and there's kind of a.
You know a big big segment of consumers that are concerned about the economy so superficial you go oh yeah it's obvious.
That Whole Foods would want to get cheaper but I would actually argue.
That we've really seen and shout-out to our friend Steven Dennis we've really seen like this very overt bifurcation of the consumer and there's a bunch of consumers that like do not appear to be changing their shopping Behavior based on inflation and,
economic concerns and then there's a bunch of value-oriented consumers that are very overtly changing their shopping behaviors and you would.

[13:33] You know a lot of luxury brands are actually raising their prices right now and doing quite well and so you'd almost expect to see Whole Foods lean into that affluent consumer,
and Amazon Fresh you know try to try to Target that that value went into consumer but it appears they both have decided to go after value.

Scot:
[13:51] Yeah it's super confusing as a consumer to figure out and sometimes what I want I want for things and it'll split the cart between the Whole Foods in the prime and like then then it's a hot mess at that point.

Jason:
[14:04] Yeah I can't get my weekly shop from either one like I like some of the items and my weekly shop are not available from Whole Foods and some are not available from Amazon Fresh it's annoying.

Scot:
[14:14] Yeah.

Jason:
[14:14] To add further customer confusion so Amazon Fresh is Amazon's grocery store concept what you might have thought that there'd be a bunch of benefits to being a Prime member and shopping in Amazon Fresh.
But you'd be wrong until recently like there were no special Prime benefits for Amazon Fresh Shoppers and so they just launched last week a new program which is kind of a.
It's I would almost call it like a traditional retail grocery Affinity program you basically get 20% off on a lot of.
On an undisclosed random list of thousands of items where they call everyday essentials if you're a Prime member shopping at Amazon Fresh So this is you know I mentioned that Amazon Fresh didn't come out.
Quite as good a value as I was expecting well this is the big move to maybe make them you know compete more directly with with Aldi and.

Scot:
[15:08] Caught another thing I wanted to pick your brain on is a couple folks have tagged us on social media because they have seen the prime pay badging and new payment mechanism out in the wild have you had a chance to play with that.

Jason:
[15:22] I have and I confess I'm I'm a little more perplexed than I was when it first launched so maybe like the 30-second recap,
um you know Amazon announced this new beta pilot called Prime pay and it's essentially letting third-party sellers that are not selling on Amazon.

[15:46] Accept Amazon pay and.
Offer Prime benefits and have your orders fulfilled from fulfillment by Amazon.

[15:59] Like if their Prime members right so if your Shopify Merchant in you're selling cat litter,
you know you can have a bad you know and someone's a Prime member and they're on your Shopify site you can say hey check out with your Amazon pay and and you know get your goods in one day or even same day,
if our cat litter is in the Amazon Fulfillment Network and that's that was when they announced this beta and they didn't provide a lot of the details.
You know my first reaction was that's a shot directly across the bow of Shopify.
Who had been making a lot of traction with shop pay and was making a lot of noise if not traction with their fulfillment systems and now you know Amazon swooped in and said hey don't screw around with these,
you know barely scaled fulfillment things just put all your goods in the Amazon's fulfillment and when you sell it from Shopify will ship the order or when you sell it on Amazon will ship the order,
and will give you access to the.
The biggest bet best digital wallet in the US market which is Amazon pay right and I thought that was super interesting and I was frankly really curious.
If Shopify was even going to allow its Merchants to use it which.
It would have been way off brand for Shopify to not allow that but you have to imagine they didn't want to vote.

Scot:
[17:18] Yeah.

Jason:
[17:20] And so now fast forward a few months and we've seen the first betas in the live in in,
live in the world and they are all Shopify Merchants so first question answered at least for now Shopify is allowing its merchants,
to use prime pay but there's a huge Nuance in Prime pay that I kind of missed when the beta was first announced but now it's glaring at me,
um Prime pay will only fulfill your goods if you're already a Prime member.
So when they first saw this I thought oh my gosh they just captured the whole 3pl market and no other 3pl is going to have any room because you're not going to be able to compete with the service level of Amazon and the convenience of the aggregated inventory and then the bonus of.
Of the Amazon digital wallet on top of all that that it was just going to be too compelling a value prop and so everybody every small seller in the world is just going to rely on Amazon for all those Services game over.
But.
There's about 100 million Prime members and there's about 240 million households in the US so there's still an awful lot of households that do not have Prime.
And if you're a Shopify Merchant and you want to sell something to any of those households that don't have Prime.
You can offer Prime pay for the Prime members but you have to have an alternative 3pl to fulfill for the non Prime members.
So they really haven't put any of the other 3pls out of business at all they've just stolen some of their volume.

Scot:
[18:49] Yeah yeah Anderson more more complexity.

Jason:
[18:53] Yeah yeah so it's going to be interesting to see how it all plays out,
but it yeah shout out to our friend Joe a Marketplace poles they always have great content and,
he was the first one in the made me aware of some of these betas in the wild and he found the cat lady's.com and I'm not going to ask how he he.

Scot:
[19:14] Put me there.

Jason:
[19:17] But Joe I'm a fan and props to you.

Scot:
[19:21] Your fan of Joe or the cat ladies are both.

Jason:
[19:23] Now both originally Joe but now I my my love has expanded to the cat ladies.

Scot:
[19:29] Do they really sell kitty litter.

Jason:
[19:31] I believe they do or at least like artificial grass.

Scot:
[19:35] Yeah that's definitely in the crap category hey hey I'll be here all night,
another thing that Amazon announced that I know you're excited for because you're actually moving so this is a great time to buy some cabling and some new mesh network key things they announced Prime Day this year it's going to be July 12th and 13th
and then they promptly have started pushing the deals out like right now like just today and yesterday I've been getting flooded with emails that say,
they have a new brand for it and they call it early Amazon Prime Day deal exclusives so it feels feels a little desperate to be honest with you that you know they set up this big shopping holiday and now they're kind of,
pushing the deals out with a before then I don't know if they're trying to juice Q2 or if there.
One school of thought is if we're going into this recessionary period the more dollars you can grab out of that shrinking wallet due to inflation as well,
get them sooner versus later so maybe they had set this up before
things the macro deteriorated now they're kind of like wow I wish we could set this earlier let's go ahead and get some deals out I may be reading too much into that but I don't ever remember them kind of they've always had you know.
Black Black Friday and January or early October kind of things holiday deals in early but I've never seen them,
push Prime day as hard and early as they are now.

Jason:
[21:00] Yeah I mean they always have had some pre-primed a deals like it's not completely unheard of but I agree with you the volume seem significantly higher
and it's funny that we still call it Prime day right because for a long time is over it went from like Prime day to Prime 18 hours to Prime two days and now it's starting to feel like Prime month.
Um which is interesting I don't know this comes into play,
there are some consumer surveys out there that show less interest in Prime day than years past right and you're comping against a tough Prime day
in a very different economic environment
and so like it's possible that there's some concern like Amazon's rate of growth has slowed and everything else it's possible possible that there's some concern,
that.
That you know Prime day won't have the it's for sure going to have a spike but that it won't have the same spike it has in years past,
um and you know so they're they're trying to you know find ways to Goose it more I you know.
I don't know I do think one of the interesting Dynamics there's kind of like two opposite forces that happen on Prime day like secretly.
The stuff that sells best on Prime day are Amazon.

[22:20] But the penetration on those Amazon products you know continues to be higher so that that like.
The what the law of large numbers just means like.
You know not you can't sell a smart speaker to as many people as you used to be able to do because everyone has a heck of a lot of smart speakers right and they're they're frankly getting so cheap that it's not as big a win when they do sell one.
And so then the other half is this long tail in there like one of the problems there so many sellers on Amazon there so many Lightning Deals that like the signal-to-noise ratio in the,
the awareness of some particular good deal and the scarcity of a deal like all of those things that you would normally do that a normal you know brick and mortar retailer with you know constrain inventory,
would do for a sale like they just don't work as well.
For this Marketplace model and so I do think it's tricky to keep the hype and you know we've seen you know
Prime day was modeled after singles day we've definitely seen singles day lose some momentum still a big deal but rate of growth slowing significantly and reasonably that will see that at Prime Day to all that being said
the way to think about prime day is it's it's two days of sales in one day which is kind of a big deal.

Scot:
[23:38] Yeah
and then I thought this was interesting that Amazon announced that they're going to use some of that data that we've been collecting in their stores that don't have a check out the just walk out technology and they're going to be selling some of that data to Brands so they can basically say to our brand
hey 800 consumers walked by your product three picked it up and put it back on the shelf and you know
of those three they read the ingredients and then they put it back on the shelf and and then presumably there are some action ability to that data what what do you think about that.

Jason:
[24:16] Yeah so I think it's really interesting you know way before there was just walk out technology like we were starting to get some
some very early technology to give us some insight about how consumers behaved in stores right so you were starting to get some like,
smarter people measuring things that could do heat mapping and and you know we were getting these I could GI tracking technologies that we'd put on on a small subset of customers to kind of understand how they browse through a store,
because you know frankly for the last 100 years of Shopper marketing we mostly have been based on these like urban legends about how Shopper shop,
and not having a lot of data and then e-commerce comes along and suddenly you've got super granular data about how people pick products and what they glanced at and didn't buy and what they added to their card and then check out and
what they you know added to their card and then took out of their car like all of this pre buying behavior that we get in e-commerce,
we've never really had in the store and you know the Technologies and the methodologies these match Panel test all these different studies we used to do we're really sort of Kluge,
and so a lot of us have said hey one of the secret benefits of just walk out technology is that by accident,
it collects all of this really valuable consumer data about how people behave,
before they get to the cash register or before they consummate their purchase since they're I guess there is no cash.

[25:41] Um and you know we've talked about that being a useful Advantage for Amazon and that they're probably using it too,
um sort of inform how they design these new store Concepts,
and so now like so many other things than Amazon does they take this this.

[25:59] Like you know competitive advantage that they have and they turned it into a product and sell it to other people so now they're selling those.
Those Shopper insights to cpgs and you know you're a cpg trying to figure out how people decide to pick your cat litter versus someone else's cat litter on the cat litter shelf in a retail store.
Um

[26:21] Kroger won't tell you a lot about how they make that decision because Kroger doesn't know but now you can get real data from Amazon about how they make that decision and Amazon and you can probably assume that there's a similar path to purchase at Kroger so,
suddenly like Amazon becomes the market research firm for all of the Shopper marketing so I do think that's super interesting,
um they're not alone Walmart actually has a store that's heavily instrumented like this that they watch first that's called them,
the intelligent retail lab store that you know it's kind of a it doesn't have just walk out technology but it has thousands of cameras and sensors and they sell data from that store through their data licensing arm which is called illuminate if I'm remembering right.
And then you know Amazon launched a new product.

[27:09] Nine days ago on the 21st that I'm really excited about this called Amazon marketing stream and Amazon marketing stream is,
a much higher volume more granular api-based,
access to all of the marketplace shopping data so that's you know data on traditional Amazon shopping that like,
previously was locked up or you could only get for your own brand or you could you know you can only get in Amazon premium services.
Now it gets plugged into pack view in all of these of these digital media tools you get all this real-time visibility to have people are making purchase decisions and then at the same time.
They're rolling out this that same kind of data for how people are making purchase decisions in a brick-and-mortar store,
super long answer but I think this is kind of a big deal and I do think this is the future is kind of replacing,
like urban legends and opinions about how consumers behave with actual data about how they really are.

Scot:
[28:11] You do you think this stuff is kind of stand-alone or they're going to build this is going to be kind of feeding into this ad Network because they seem to be really putting a lot of effort into Excel.

Jason:
[28:20] Yeah I do so I think there's only so much so many brands that are so I'll tell you who's not in a position to buy that data is all the digital native startups that then cut a deal to get you know distribution through.
Right against the big cpg brands that can afford like have budgets to buy that data and then you know they have so much like institutional.
Impediments that then you know they all talk about how much wonder they are with that data but it's really hard for them to act on that data and do anything different than they historically have.
And so I think the best way to make that data actionable is you know to filter that data into.
New audiences and new ad formats for retail media networks right so like I think there's a natural.
Fit between those.
Those two products so I'm sure we'll see more Integrations in that but I do think for really smart marketers and in particular the folks that are involved in customer experience design,
the the raw data is is super useful and and you know gives gives Brands a competitive advantage that are able to get it and take action on.

Scot:
[29:30] Cool did you so that's where we are on Amazon any non Amazon news.

Jason:
[29:39] Yeah just a couple of things to keep our show in its it's tidy timebox format we talked a lot about executive changes so in my mind there are two other huge executive changes,
in our industry this week.
There's a guy that we've talked about on the show several times Bill ready who's the in X PayPal guy in X PayPal mafia guy.
That red Commerce for the last couple of years at Google and he just announced that he's leaving Google to become the new CEO at Pinterest so the,
the founder is stepping out of the CEO role at Pinterest and they're bringing over Bill ready,
and to be honest that has the pundants whipped up into a lather because everyone's like oh man Bill ready is a Commerce guy he was PayPal he was head of Commerce a Google Now the fact that the Pinterest is bringing a you know a dedicated Commerce guy in the lead the company,
it's the most overt sign yet that you know Pinterest thinks it's future is Commerce.

Scot:
[30:39] Yeah which I think it's driven by the IDF a stuff don't you.

Jason:
[30:44] Yeah yeah again harder to make a living on ads when you can't show the efficacy of the ads quite as well and you can't Target the ads quite as well and so it becomes much more appealing to say,
you know let's monetize our Audience by selling stuff to our audience directly and also that you know gives you that first party data that then you know keeps you,
well immersed in the in the advertising business so I think for any of these.
Free hydrographic social media sites it's a,
it's a perfectly reasonable hypothesis to explore to say hey we got to figure out how to play really well at Commerce and make Commerce part of our core offering and certainly you know Pinterest is doing that they've talk forever about how,
how much higher buying intent that their users have then other other social networks Tick-Tock is leaning heavily into it snap is leaning heavily into it it's a perfectly reasonable hypothesis,
the one unfortunate truth is nobody's been particularly successful at it yet and.
Have they not been successful because they just haven't gotten the execution right or is it because the consumer doesn't really want that like I honestly think that's an open question I don't think it's a foregone conclusion that Commerce can save all these social media networks I mean it's worth trying,
but I think the jury's going to be out and I will say the.

[32:10] The sort of part of this the bill ready transition that's not talked about that I'm frankly more interested in is to me one of the companies that.
His best position to win a Commerce and is underperforming at Commerce the most is the company Bill ready as weaving its Google and you know,
bluntly like I don't think Google has made a ton of Commerce progress over the over the last two years that bill ready has been there it's going to be interesting like will Google replace him will they replace him with a,
Google Insider will they replace them with another Commerce person will that person have
some new ideas like you know will they be able to find a way to kind of Marshall some of the inherent assets Google has
and be better at Commerce oh my God I'd love to see Google lean into
in-store Commerce more and help solve search and you know all of these retail media Network opportunities for brick-and-mortar retailers like I feel like there's a lot of untapped.
Opportunity there that I've been surprised to see Google not succeed at and so it'll be like is this a new chance for Google to start anew.

Scot:
[33:20] Yeah and then you know it's also interesting so if your Pinterest board and you're like we need an e-commerce Guru the PayPal Mafia thing is good but that was quite a while ago and Google hasn't.
Done a ton so I would be hiring somebody to Amazon expects you know it'll be interesting to see what if.
Because there's so many floating around what if some of them one of them ended up at Google that would be dug be kind of really interesting to see if Amazon has own Minion.

Jason:
[33:49] Especially when yeah if Flex Port can get a super senior SS team member.

Scot:
[33:53] Yeah why can't Google yeah it's kind of weird right,
yeah and then you know to watch someone that maybe had a chip on their shoulder that said hey I didn't get a promotion I'm gonna
I'm going to you know use all these assets that Google has and bring them to bear I think the reason why is when these people interview at these bigger companies be at a meta a Google or whatnot.
You know there's not a board sea level and board level focus on it you know 21 if you're a Google.
The sacred cow is the add thing and if you
if you say something like you know what I want to divert 20% of traffic to this new thing then you know if you're not going to do that so so startups from probably more attractive because they have more flexibility and they're not stuck kind of in that innovators dilemma like some of the other
systems are.

Jason:
[34:50] Yeah think about that that'll be my deep thought for today yeah so I think that one is super interesting I'm gonna continue to follow that closely one side note like Pinterest has previously hired a bunch of other,
I'll call them like Commerce stars and like one that stands out to me is.
The chief technology officer from Walmart I moved to Pinterest Jeremy King and so I mean there's you know this is not the first.
White indication that Commerce is an important Initiative for Pinterest so we'll we'll see how Bill does there I hope he does well so one other transition that I'm getting a lot of calls about these last couple days,
is Bed Bath & Beyond just had their quarterly their Q2 earnings report and it was atrocious,
so their same-store sales were down like 24 or 25 percent their e-commerce was down like 23%,
um and you know folks may remember like a year or two ago they forced out the.

[35:52] One of the founders is CEO and they brought in a turnaround CEO this guy Mark Triton and I talked a lot about Mark Triton he was like very credibly one of the architects of targets exclusive,
brand strategies and so he was,
the chief Merchant that helped launched a bunch of products at Target that were wildly successful and he left Target to become the CEO of this struggling retailer,
Bed Bath & Beyond shortly after they hired Mark Triton they got a new activists board member Ryan Cohen who bought a big chunk of.
Bed Bath & Beyond Ryan was one of the founders of chewy and made a bunch of his money there he was like a principal shareholder and on the board at GameStop during all the,
the craziness with Robin Hood and GameStop and Bone all that stuff and so,
like Ryan kind of inherited Mark as his turnaround CEO and simultaneous with these like very disappointing Q2 earnings,
they announced that Mark would be leaving and they appointed an interim CEO who's a Sugo of who's a,
already a board member at Bed Bath and Beyond and former CEO from like Goff Smith and several other retailers.
So

[37:20] What I have found interesting about all this it's a really difficult situation but Bethenny on Xena in a tough situation.

[37:29] And they certainly aren't performing very well and they have a lot of cooks there at the moment with with conflicting ideas about where to go but I have seen a lot of pundits kind of.
Like dancing on Mark Triton's grave and talking about what a horrible higher this was and how stupid it was for Bed Bath and Beyond Beyond to go after this this.
Exclusive brand strategy that Mark was trying to execute and how like oh obviously this was doomed from the beginning and anyone could have seen this wasn't going to work.
Um and kind of writing him off and personally I feel like that's a little unfair like II.
Mark certainly turned out not to be the right CEO for the circumstances the Bed Bath & Beyond was in but I actually think that that,
you know Bed Bath & Beyond needs to invent a reason for people to go there and spoiler it's not the 20% off coupon anymore,
um it's not the treasure hunt anymore,
like you're not going to win on assortment as a big box like against Amazon right and so one of the smart ways to win against Amazon is to sell stuff that people want that Amazon doesn't have and if you can invent desirable products,
that's a smart strategy and every big retailer in America is trying to execute that strategy and Mark like frankly has been better than most of executing that strategy I think.

[38:52] That strategy kind of sucks when you're hemorrhaging your customer base people don't have a reason to come to your store and then you,
execute the first wave of your private label products and they all get trapped on a boat off the coast of Long Beach and never make it to the store right and so I don't know of in a different era if Mark strategy would have worked.
Ed Bed Bath & Beyond I don't think it was an unsound strategy you know it just right you probably needed a CEO who's a lot more focused on being good at supply chain and cost-cutting and was willing to make some hard decisions about.
Curating the store assortment and stuff like that to kind of cut costs.
Before you got around to launching these products and you know horrific timing that you tried to launch all these products like you do as a.
During a huge supply chain disruption so I don't know what do you think you think it was a doom strategy.

Scot:
[39:47] I don't think the externalities are hard to pick out you know so you go from a supply chain crisis into a inflation.
No stagnation spiral this is like a it's a really rough rough rough hand that he was dealt for sure.

Jason:
[40:04] Yeah yeah so I don't know I do think they're a bunch of other retailers that really aspire to launch more products so I have a feeling that you'll see Mark glance I'm somewhere pretty soon because I think he has a skill set that.
That will be in demand and then it does not appear they're calling Sue an interim CEO I don't think anyone thinks she's the,
the future of Bed Bath & Beyond so I think they're they are out there doing a CEO search it's going to be interesting to see what kind of person,
what you know will step up to that challenge right now.

Scot:
[40:33] While you were talking about it kind of the crazy idea popped in my head you know these these Amazon FBA acquisition vehicles have all seemed to hit the skids pretty hard thrashy oh and what not,
yeah there's a there's a path where maybe they buy one of those if you wanted to like parachute in 500 private label Brands to try and restore that,
that's one acquisition path that you can take to become interesting I don't know if you know if that makes any sense for the categories or whatnot but that would be an interesting,
way to solve that problem with an acquisition.

Jason:
[41:09] Yeah no I do think there's something there and I think just the.
You know I'm not sure you want to hire a traditional product Centric Merchant driven CEO.
You know for a traditional product Centric company you know that's kind of losing its way right like you probably need some complementary skills they add something new to the mix and you're right like there's kind of a big remix going on in the world right now there's a bunch of
digital Talent from you know the Amazons and Google's of the world this spinning off there's a bunch of digital Talent from all these,
kind of startup ecosystems that you know we're we're playing in the Amazon Echo System and now we're less appealing and in the the you don't have to be a roll ups are a perfect example of all those,
you know I think a bunch of those guys you know and and women will probably find,
their next career opportunities taking what they know and taking it to a different kind of business than kind of just recreating what they've been doing.

Scot:
[42:10] Totally agree we will see.

Jason:
[42:12] In e-commerce guy solving Carwash for the world or.

Scot:
[42:15] Crazy crazy talk you do cat litter I'll do car washes.

Jason:
[42:20] That sounds like a great plan and that sounds like a great place to leave it because it's happened again we've used up all our allotted time,
but as I always have
you found the show helpful or it was entertaining to scream at how wrong we were into your podcasting client then you could reward us for that entertainment by jumping on iTunes and leaving us that five star review.

Scot:
[42:44] Thanks everybody and until next time.

Jason:
[42:48] Happy commercing.

View Details

EP292- Quarterly Recap

Sorry for the delay since our last show. We took a beginning of summer hiatus, and Jason upgraded to a new knee!

This episode was recorded in front of a live audience at the NYC Google HQ, for Zenith Basecamp.

Key Topics discussed:

Amazon’s rate of growth declined in Q1, what lies ahead for them.
Impact of App Tracking Transparency (ATT) on advertising platforms
- Shopify vs. Facebook
- Retail Media Networks
Q1 2022 US Department of commerce data and trends
Audience questions (including buy now pay later)

If you’d like to follow along, the audience could see this deck during the discussion:

JAS_ZenithDownload Episode 292 of the Jason & Scot show was recorded on Wednesday June 8, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show I’m Jason retailgeek Goldberg.
This episode is number 292 being recorded on Wednesday June 8,
the beautiful New York City Google headquarters for Zenith base camp and is a special treat we’re recording the show in front of a live audience.

Scot:
[0:45] That was a super important.

Jason:
[0:49] That Applause is super important because I have no credibility with our audience so they wouldn’t believe me if you didn’t applaud thank you very much as I mentioned I’m Jason retailgeek Goldberg as always I’m here with my co-host Scot Wingo.

Scot:
[1:01] Hey Jason and welcome back Jason Scott show listeners.

Jason:
[1:05] I think I’ve met most of you but for those of you who I haven’t mentioned a met yet thrilled to do so today I as was mentioned earlier I’m the chief Commerce strategy officer for publicist your,
almost certainly going to hear from Scott that he thinks might title is super funny and,
I’m a fourth-generation retailer back in the Dark Ages I helped launch e-commerce at some funny retailers like,
Blockbuster and Best Buy and Target and today I get to work across all the Publicis groupe with all the clients that care about Commerce and I’m super interested to know which clients,
don’t care about Commerce at this point and so that’s me but like I said many of you have met.
My annoyingly successful co-host Scott you may not have met so Scott can you tell us a little bit about yourself as they flip the slides.

Scot:
[1:56] Sure and congrats on that a win at Blockbuster on the digital that was that was good you crush that one yeah.

Jason:
[2:03] It’s super fun every presentation ever done a publicist starts with a big Blockbuster logo and a saying like don’t let this happen to you.

Scot:
[2:11] Isn’t there one still open in Alaska if you’re gone to visit them.

Jason:
[2:13] Bend Oregon.

Scot:
[2:14] Okay then yeah I knew you know that have you talked to them about their digital strategy.

Jason:
[2:20] It’s on the to-do list.

Scot:
[2:22] I’m a Serial entrepreneur from the Research Triangle Park area and so I started a company I have an engineering background started a company the developer tools.
And then this thing called the internet came along and I have a lot of weird Hobbies one of my hobbies we’ll talk about a lot of those today is I’m a Star Wars fan so I started I had this I sold my first company,
said this dangerous combination of e-commerce has born and I had a lot of liquidity so I started buying really big Star Wars stuff,
it stays at my office I have an agreement with my wife that it does not come into the house sadly I probably won’t be married if it did so there you go,
so that was there at the early days of e-commerce that company I parlayed into a company called challenge visor so started that in 2001 that’s a B2B soccer as a service platform for selling on marketplaces are there any channel guys are customers in the house
about 3,000 customers and
then so Channel visors biggest partners are eBay and Amazon so I’ve been I’m also he’s retailgeek I’m Amazon geek if we have to Brand ourselves maybe a little bitty big geek so I’m in the marketplace side and that’s how I met Jason we were on a board together at shot dot-org,
remember the first meeting I was there with Jason the CEO of NRF walks in and he’s like does anyone have a question Jason raises his hand and says why do we have the worst website on the internet and I was like.

[3:38] I need to get to know this guy so he called him out on the terribleness of the in R Us website which was kind of fun
and then took Channel advisor public so that was one of my things is an option where I always wanted to do was do an IPO so I got to do that in 2013 that was a lot of fun got to ring the bell I’m a
also a CNBC donkeys got to meet and Jim Cramer my wife calls him the guy that yells every night on TV and makes all the loud noises,
that was fun and then my current startup let’s go to the next slide next two slides yeah it’s called spiffy and next slide.

[4:12] So spiffy was actually good and go through this animation Jason was supposed to take this on and,
so spiffy was actually kind of inspired by the podcast so on our podcast would talk a lot about consumer behavior and for me I’m also an Elon Musk geek
and Elon talks about core principles his core principles are physics he’s always talking about well if you want to send a ship from here to Mars you’re going to have to you can’t use
let’s see welds you have to like mix the atoms together and because of physics we can do
we don’t do that on Jason Scott show we talk about consumer behaviors so we spent a lot of time talking about the bifurcation in the convenience oriented consumer
saw that was swirling around in my head I had my first Uber experience and the this the series of things that lit up for me was alright
services are going to go digital we’ve seen products go digital in the form of e-commerce if you look at GDP consumer services are twice the size of consumer products and then
the then as I looked out there there was a lot of companies in this space but none of them were going after the convenience oriented consumer.

[5:15] Another hobby of I guess it was a shared one is we like to coin phrases,
one of the ones that I coined was Zero friction addiction so when consumers have these low-friction experiences not only are they great.
But they amplify the friction of previously previous experiences you didn’t think we’re friction e Starbucks mobile app for example how many of you use the Starbucks mobile,
once you do that and then like the mobile app systems down it’s like the worst day of your life because you have to wait in line behind three people and you’re like oh my God I’m going to claw my eyes out.
And before the mobile app existed you’re like three people whoaa short line this is going to be a faster bruxism.
So all that was swimming around in my head and I was like I wonder where I could participate in this idea and I was gravitated to car care because I previously invested in a car wash and then I researched and Car Care has a minus 85 net promoter score especially with women,
how many of mean if you don’t have cars in New York but how many of you have had a bad car experience especially.
You’re my people so another thing that fascinates me is the Auto industry is going to go through this digital change that we’ve seen e-commerce go through but it’s also the car is changing so I’ve had a Tesla since 2012 since I’ve been living that kind of vehicle 2.0 lifestyle
so next line
so started spiffy in 2014 and today we’re in 27 locations about a 50 million run rate doubling,
we have 250 Vans across the United States and about 500 technicians so that’s a little bit of background on me.

Jason:
[6:44] That’s amazing Scott and so you know Scott mentioned we started this podcast that the joke is he and I met at a board meeting it shop dot org and he and.
After the meetings we’d go to a bar and we would just talk shop about what was going on in Scotts Valley.
You know we should record this there’s like eight other people that would be interested in this conversation and the joke is that like the next day I showed up with like five thousand dollars worth of audio equipment I think.

Scot:
[7:10] This 90 is forget your mom.

Jason:
[7:12] That’s true yeah.

Scot:
[7:12] 99.9 listeners.

Jason:
[7:13] Including my mom who gives me notes on every show hi Mom.
So so that’s kind of how the show started and you know that one of the topics that’s most frequent in fact we often say it wouldn’t be a Jason and Scot show without talking about Amazon.
And so you know Amazon have their quarterly earnings last month and in the u.s. they’re gmv growth rate they sold 6.7% more stuff than they did in q1 of last.
Um so that is a alarmingly slow rate of growth by traditional Amazon standards and we click to the next slide.
The.
This month you’ve seen all these news articles about Amazon actually having too much warehouse space too much what they call fulfillment center space and how they’re literally trying to sublease space to other people that they may have over-invested,
as e-commerce starts to slow down and if you cook to the this next slide.

[8:15] Actually graft my pandemic Hobbies I learned Tableau by the way if anyone super exciting other people are not a big bread.
I’m a geek what can I say so I graphed e-commerce has growth rate versus Amazon’s growth rate and historically in the u.s. e-commerce has kind of grown about 10% a year before the pandemic Amazon despite being.
35 to 40% of all e-commerce grows quite a bit faster as you can see the gold line above the blue line but when the pandemic.
Um they their paths kind of linked and and you know for these last several months Amazon has grown at about the race.
E-commerce and so there’s a bunch of analysts that are freaking out.
Is the gravy train over the good times done is Amazon selling off and so that’s the first topic we want to talk about is what the heck is going on with Amazon Scott.

Scot:
[9:11] Yeah and it’s been interesting another one of my hobbies is Amazon Fulfillment centers this one’s riveting and
so this started I think it’s like 2005 I was driving to work and I saw some construction and you know you’re later they put a big amazon logo on it that’s like holy cow there’s like a million square foot building,
this is the Raleigh-Durham area so it’s like I wonder how many of these there are so I went on to Amazon’s website and they said something like we have around 10 fulfillment centers nice like that,
that seems low and then what I discovered at that point time was no one was tracking.
From the Wall Street analysts through Amazon fulfillment center roll out so so started working on that and quickly discovered that they had about sixty fulfillment centers
built and they were building like another 16 so I started publishing data on this,
and fun fact they always use airport codes so this was like RDU 3 soyuz rd1 and these numbers and this kind of thing so I get to know about the Amazon fulfillment center really
interesting you know really deeply so I think then one of our most popular popular episodes I think we got till like 12:00 listeners on this one so a 30 percent increase
this was February 18th we did episode 287 which is a deep dive into Amazon’s fulfillment.

[10:19] And to me it’s just endlessly fascinating I haven’t been to a fulfillment center but I have been able to sneak into some of the delivery stations and that’s kind of a fun thing so
what ties into this is what I think happened is Amazon was in front of their capacity needs before the pandemic and then the pandemic flip that upside down
so I think what’s happened is over that time where they’re in line with e-commerce they were just out of capacity they literally couldn’t ship the couldn’t build enough fulfillment centers fast enough and whatnot
so during the pandemic they have built an incredible amount of infrastructure so I’d have some data here
the other thing you need to know is in 2018 another this was probably the most popular one Jason I coined the phrase ship again is even heard this one.
And this is where we.

Jason:
[11:03] We got on like The Today Show.

Scot:
[11:05] Be on the Today Show they’re like what is this ship again and should we be concerned that was us that was us we cause that and we take all the credit,
and what happened is Jason has many of his Tableau slides he had this he has a slide that shows
the FedEx capacity USPS and ups and then Amazon’s growth and you can see that Amazon alone then you layer in e-commerce was going to we would run out of capacity for shipping well Amazon also saw those so in 2018 they started a program called,
the DSP now this is confusing because they have two DS p– programs there’s one in your world of ads I don’t know what that one is,
delivery service professionals is the one I focus on and what Amazon did is he basically took a page out of the FedEx Playbook
and they went and they built a network of 1099 contractors to do last mile deliveries so whenever an Amazon Prime van comes to your house that is an Amazon DSP.

[11:59] They’ve built that entire network since 2018 which is pretty crazy
okay so the problem with that Network though is they started it out of fulfillment centers and very quickly it was obvious the Fulfillment centers were when you have these million square-foot buildings and you’re just putting things through a door or a loading dock
you can’t reload Vans quickly so what they’ve done is they’ve come up with a new format called a delivery station,
this is a smaller about a 200 thousand square foot thing and what it is it’s largely attached to a fulfillment center and it’s pretty wild at eight am the Fulfillment center doors open and these rafts of containers come down and there’s these Vans all lined up,
staged in line,
where they go furthest packages away get loaded in the first Vans and then they’re off and then it’s like a military operation it’s like D-Day it’s like crazy to watch this happen hundreds of employees loading these vans that get deployed through the day.

[12:49] So just to give you some numbers that started at zero and now they have built 487 delivery stations for small products
108 delivery stations for large so they built about 600 delivery stations in the last 3 years
which is pretty crazy that represents so there’s so
nothing Amazon does each delivery station has four or five dsps and they play them off each other so they’re small businesses and then they give them all these scorecards and if you score well you get more routes and trucks so there’s like this gamification,
and I’ve met some of these guys and they’re just like constantly going at each other and and Amazon is very clever because they’re like stuck in this game
gamification they don’t really realize it that Amazon just playing them off each other the thing that fascinates me is they’re all run by this
you know data in the cloud so everyone in this operation there’s no real managers or anything they’re just like all looking at their their their devices and it’s telling them what to do every day that’s kind of as a computer science guy that kind of fascinating
we do have a i overlords that
that just kind of run things so there’s two 2500 dsps and 100,000 Vans and so they’ve invested a ton in that and then that’s just the delivery stations so they’ve also added you know
88 sortable fulfillment centers.

[14:08] Basically they’ve invested so much in infrastructure during the pandemic that I think we’re going to see these numbers they’re they actually have admitted they have too much capacity but I think it’s going to give them the ability to re-accelerate versus e-commerce because they now have the capacity in this new world.

[14:22] It was a long answer to that one but but you know I think what’s key to me is if you buy into this theory that getting product to the consumer fast and efficiently is going to be key,
they’ve gotten the cost to deliver a package and that last mile down to a dollar fifty with this.

[14:37] You know so many of you that are shipping products and you’re looking at FedEx at eight nine ten twelve dollars in different zones that’s kind of the economics they’ve baked into that
now for a long time thought one of the Amazons unusual playbooks is they’ll build something really really crazy expensive and you’re like this is insane and then they’ll open it up which for most people in the old score world you’re like,
that doesn’t make any sense because you used to build these proprietary networks like Walmart’s Data Center and computer infrastructure,
that was proprietary and gave them an edge Amazon’s philosophy is let’s open it up that makes the product better and we get third parties to help pay for the.
So this is obvious now that the AWS and Amazon third-party Network I believe that there will be a day when I could ship I’m enrolling your in Charlotte I’ll be able to ship you a package I’ll just put on my front porch the Amazon DSP will pick it up and I’ll ship you a package for
three bucks right so it’ll be half the cost of FedEx or UPS but don’t make a hundred percent are 50% gross margin on it,
so that’s going to be really interesting and they’ll be able to offer that they are actually
offering a lot of that kind of capability to other Merchants so so that’ll be interesting you’ll have to face this decision of if you’re your Cody or someone like that do you want to switch from FedEx to Amazon shipping your products and so there’s a lot of real interesting things going on in the Amazon World those are some of the big ones.

Jason:
[15:51] Yeah yeah to kind of put that in consumer terms.
Before the pandemic Amazon had invested something like 50 billion dollars in their fulfillment centers and so on.
It wasn’t that long ago I would talk to clients and they’re like hey Jason we’ve got the secret plan to compete with Amazon where we’re gonna buy a warehouse in Kentucky because that can ship to the whole us and we’re going to compete with Amazon and I’m like.
You realize Amazon has 109 million square foot fulfillment centers and 50 billion dollars worth of infrastructure and that was before the pandemic from.
Mid 2018 to today they’ve invested another 50 billion dollars and literally double the size of their capacity so the likelihood of anyone in the u.s. competing with him in terms of.
Capacity is next to know and as Scott mentioned in 2018 we had this bad holiday where we didn’t deliver everything on time Amazon became
you know aware that they weren’t going to grow where they want to grow using third-party parcels and I think there’s this famous quote from Fred Smith it FedEx like.
Amazon’s an amazing company but they’re our partner they’re not a competitor they never understand the competitiveness of the,
the parcel business and back then Amazon delivered eight percent of their own packages that was 2018 today Amazon delivers over 60% of their own packages right and so in a very short period of time.

[17:16] They they’ve created this phenomenal capability so the magic question is is this a blip like,
is the are they going to start growing faster than e-commerce as soon as we get out of all this crazy economic Madness or like is this going to be the new normal for Amazon that they’re you know so big that they can’t grow as fast anymore.

Scot:
[17:35] My prediction is yes they will I think they’ll get the capacity they’ll turn on these other things another area that I think they’ll get into and we’ve covered this on the show is where we call these things like to go Puffs the road you have a fancy name for.

Jason:
[17:47] Instant delivery or ultra-fast delivery.

Scot:
[17:49] Yeah Amazon part of this infrastructure they built out is in that similar vein so some same-day infrastructure where,
you know these delivery stations are getting smaller and smaller and closer and closer to the consumer so that they can do same delivery in fact at the delivery station I was at they do 7 a.m. to 10 a.m. load out and then everyone comes back at to and they do another load out of a smaller portion of vans,
for same-day delivery orders that have come in so so so I think I think what they’re going to do is they’re going to Crank It Up,
Prime will eventually go to same day and then that’s going to create a whole new stimulation of demand and then they will grow faster than e-commerce.

Jason:
[18:24] I feel like that’s another funny one is talk to like there’s a bunch of new startups that are like trying to do e-commerce fulfillment and they’re like we’re going to do two day delivery just as well as Amazon.

Scot:
[18:34] Yeah this is this is a good segue into Shopify so one of the things that there’s defied explanation for me is the rise of Shopify shopify’s a great platform great CEO
but they got this valuation of like 50 times forward earnings forward Revenue which just never made sense to me and then they started poking the bear so they started to give Amazon and Jeff Bezos so hard time like when his pictures
they were like making fun of him and I was like this you and I have seen this.

Jason:
[19:01] They’re arming the rebels.

Scot:
[19:02] We’ve seen this play out we’re like who was it the CEO of Macy’s said Amazon will never get into apparel and if they do it’ll be a bloodbath everyone that makes one of those statements they end up a you know
ruining their career and then be very being very wrong so.

Jason:
[19:17] Terry Lundgren.

Scot:
[19:18] Terry Lundgren yeah thanks he was also in the in that in our f word me the so
so so it’s really interesting is Shopify has been poking at Amazon and then Shopify announced that they were going to.
Arm the rebels with two day shipping and they’re going to build a fulfillment center we’re like.
Okay this doesn’t ever end well then in this then like literally 30 days later they announced and they were going to spend a billion dollars and build a fulfillment center
are two billion which you know Amazon spend 100 billion so that’s kind of a ridiculous
and then they were going to get everywhere two day shipping and Beebe in parallel with prime which doesn’t make any sense then they punted on that and they acquire deliver.
And then at the same time and this is a good segue into our next topic they basically said,
and this goes back to March of this year last year we saw that after Apple’s WWDC that year last year,
they announced IDF a and I-80 T which is next slide.

Jason:
[20:18] Yeah jump to slides actually one more.

Scot:
[20:20] So you and I were like this is going to change everything and destroy all these middle players so so basically you guys probably know what this is I’ll let Jason describe it better these new privacy things basically you get rid of not only third-party cookies for web-based things but if you have an app based
ecosystem you get rid of tracking it all together and we were like freaking out about it no one else was I,
and I felt like Shopify was going to be worse because if you think about Shopify the bulk of their traffic comes from
social then they sit in the middle and then they have the merchant well these things in the middle aren’t going to really exist in a world where you can’t track anything and sure enough this is really caught up not only to them but the social media guys.
So we’re entering this world where Shopify poked the bear Amazon has a bunch of stuff going on that hasn’t even come out to counteract Shopify and when that stuff comes out,
then I’ll know if you’ve seen it but Shopify is down like 98% or something like that because they’ve lost
you lost a lot of credibility with this fulfillment thing and then the overall economic has been a really interesting impact and then I think everyone realizes that they’re really exposed to these IDF a changes.

Jason:
[21:25] Yeah and so I think most people in this room are probably painfully familiar with idea Fay but essentially.
It’s become harder to track a consumer across multiple website so all these advertising platforms that aggregate an audience and send them to third-party content sites used to be able to buy a super-efficient audience on that
third party site and then they used to be able to measure how effective it was when they sent people to that site and what they ultimately bought and so because of the tracking
deficiencies too bad things happen
we can’t buy as good an audience as we used to buy so the by is less efficient so the CPM is higher and we can’t measure how effective it was right and so
there’s a lot of impacts certainly for all of you folks that are involved in advertising there’s there’s a very direct impact on those changes
but the secondary impacts can I talked a lot about is before these changes it felt like Shopify and Facebook for example where cozying up,
like Shopify has a digital wallet called shop pay which is very exciting successful and they actually made it possible to buy items not from Shopify sellers on Facebook.
With Sharpay and you’re like oh man it’s very synergistic Facebook gets the audience and then they send them to Shopify seller to close the deal and it seemed like they had this partnership and we saw IDF a coming and were like oh man this is going to break up
because in the New World.

[22:47] The Facebook’s of the world need to own that conversion they need to own the sale so they can see the conversion data so they can report on the
efficacy they need instead of third party data they need first-party data and so now all these advertising platforms most notably Facebook and Google are
doubling down on becoming Commerce platforms which you’ve talked for a long time about Google is secretly Marketplace.

Scot:
[23:13] Yeah and then I think ultimately Facebook has to buy Shopify or build show,
so that’ll be interesting now the price is down before when it was like 40 times for door like they’ll never do that but I think now but they do seem,
it’s hard to know what’s going to happen to Facebook because they’re so focused on the metaverse that I don’t know if Shopify fits into that somewhere inside of there you know someone watches Revenue versus like Ford things and and if you care about revenue and Facebook you would buy you would buy,
Shopify the other thing that’s really interesting another one of my weird habits is I love to listen to public quarterly calls.
Probably the worst quarterly call I’ve ever heard and I have a lot of empathy for this because I’ve done many of these is this the Snapchat the last the q1 Snapchat call they basically it was like they just rolled in there,
half drunk and had no idea what’s going on in the business and like the analysts are asking them questions like do you think this is the bottom of i d f a and the last quarterly call they had said that was the bottom.
They’re like well you know last time we said it was the bottom we think this is a bottom Jason do you know if it’s a bottom it was just like that kind of a thing so if you’re an investor and you’re sitting there like these guys have no idea how bad this is where the bottom is or how to remediate.
And you know that that leg down I think that really big one there that was right after that quarterly call everyone there while she was like these guys have no clue what’s going on.
So it’s really interesting.

[24:33] Wall Street is very much awake that these changes that apple and then subsequently Google have made and the Android have really just clobbered these ad networks that kind of our sit between AD networks and kind of relying on on third-party data
the converse of that so every time there’s a there’s a zero-sum game here every time there’s a loser there’s a winner the big winner here is retail networks and I heard that we’re going to have
talk about their ad Network I’m the Amazon guy so Amazon’s ad network doesn’t get a lot of play here but just as of last year it was 30 billion dollars in revenue and they’re growing that 25%.
And I know they have a massive amount of investment going on there they have a new marketing Cloud they’re doing a ton of stuff in there because they realize hey
thanks Apple and Google the you have created gold dust out of first-party data guess who has the most first-party data on buyer intent and conversion it’s Amazon.
But then if you’re other retailer be at a Walmart or Target and even smaller retailers are getting into this and kind of more of a,
I called a Battlestar Galactica kind of way but more of like a shared data kind of a way that’s going to be real interesting.

[25:41] You are yeah yeah I think you and I are the only ones to get them the,
so that’s that’s really fascinating to watch this one change in mobile platform just cause these billion-dollar ripples down there and you kind of wonder who it Apple did they think about this where they like,
you know that Mark Zuckerberg he’s too big for his britches let’s let’s clobber him in the rest of these guys but you know they don’t love app Amazon either so they have to be kind of frustrated that it has helped enable one type of competitor but that just clobbered the other ones.

Jason:
[26:12] Yeah it’s I mean it’s super fascinating I.
The retail the emergence of retail media networks I think you know is a direct cause of this essentially that you know you now have all this first-party data it Walmart and Target and to your point like.
Craziest retail media Network to me is Gap in the reason I say that like most retail media Networks
primarily sell ads to endemic Advertiser so you know Cody wants to sell through Sephora so for launches retail media Network they have some leverage to get Cody to invest in,
in add-on Sephora but Gap doesn’t have any endemic advertisers like Gap only sells their own stuff right so they’re now you know trying to go find.
Advertisers that are synergistic with The Gap lifestyle and sell ad so I don’t think that could have ever happened in a world in which you could really cost effectively by that audience from Facebook but today because it’s harder for the Facebook’s of the world I think this is a.
A permanent shift we’re seeing and another reason that it’s really an imperative for Facebook to become a Commerce platform of Their Own.

Scot:
[27:20] Yeah this is probably a good time to pause and see if there’s any questions yeah so Amazon or IDF a any questions on those two topics any other comments how many of you have felt some kind of an impact from the IDF a thing that’s called you to change strategy.
Wow I guess we’re wrong yeah.

Jason:
[27:38] We usually are so there’s that I feel like a lot of the success of the show is Scott and I rarely agree and I feel like people like to hear us debate right and so the last topic we put together is.
Again one that’s probably only near and dear to my heart but the,
US Department of Commerce publish all this data about the health of the US retail right and I’m this dork that like wakes up at 8 a.m. I’m kidding I’m up at 8 a.m. right now I wasn’t supposed to say that out loud,
on the on the day the data is released to like load the stuff into Tableau and so may was a super exciting month because that’s the first time we get the.
Q1 quarterly data for all the retail categories and e-commerce and so I kind of put together a quick.
Quick summary and week I just want to hear if you’re surprised or not so first thing if sorry if you go back just one side for just a sec.
From from January through April in the u.s. we sold 2.2 trillion dollars of stuff that’s almost 10% more stuff than we sold in 2020.

[28:42] 36% more stuff than we sold in 2019 so everybody talks about how hard the last two years have been and how challenging and difficult and that’s all true.
What doesn’t get hit is it’s been the greatest two years in the history of retail like we’ve grown,
way faster than we ever have before and so if you flip to this next slide this is this visualization that’s got an icon of created
this is sales by month so that Gray Line is retail sales in 2019 and then the Gold Line is 20/20 so you can see
oh my gosh we all panicked in April when the pandemic first happened we have this dip but 2020 we actually sold more stuff than we did in 2019 even with the the pandemic.
What we sold changed dramatically we’ll talk about that,
and then we get to 20 21 and look how much higher 2021 was like 20 everyone was like oh my gosh was 2020 a weird year and growth is going to go down and instead,
growth went way up and so at the end of 20 21 I was advising all my peers that worked at clients to retire right because your comps are going to be impossible from,
from 20:21 so that was a great time to go out on top.
And I was really worried that 2022 was going to come in below that and of course we’re talking about all these economic headwinds and things that we may talk about but so far in 2022.

[29:59] Even ahead of 2021 so you hear all this news about how like.
Oh man the rate of growth has slowed we grew so much in 2021 and now we’re only growing a little bit and doom and gloom and all these things.
But when you see this picture you go wait a minute.
With the best year in the history of retail last year and we’re doing even better this year it’s actually quite a Rosy story but if you flip to the next slide of course there are certain categories that did.
Especially well right and so if you are a gas station and you got utterly creamed.
During the pandemic and one was driving anywhere it was easy as to grow fast if you are restaurant that no one went to it was easiest to grow fast apparel that.

Scot:
[30:41] Miscellaneous that’s my favorite yeah I wish I sold more miscellaneous.

Jason:
[30:46] It’s the hardest category to buy.
Um and so you can see there’s categories that kind of outperform the industry average and there’s categories that underperformed the industry average food and beverages grocery right so even though grocery had a really good time in the pandemic it’s actually underperforming,
the overall category because there were some of those other categories that were so much and whenever I talk about this people are like yeah Jason but all the growth you’re talking about isn’t,
consumer changes or more spending its inflation right and so I actually tried this,
experiment of taking the inflation out and I looked at the last three years of growth in 2018 dollars and as you can see,
information used to not matter very much in the data so through 2020 and then we started opening up this Gap where inflation legitimately has an impact on our sales right now
but even if you just look at the Gold Line which is taking all the inflation Outlook.
Um the growth is still very meaningful in phenomenal so it’s a like Well you certainly inflation is part of the reason that we’re seeing a lift in sales it’s a mistake to assume.

[31:51] People are just buying less stuff and they’re just having to pay more for that stuff in that there really isn’t a consumer change
the really is a consumer change here in so we want double click on a couple categories in the first category I grab because it’s super near and dear to Scott’s heart is Automotive right so they sold
half a trillion bucks last year they’re up 50% from the bed you have 20/20 and if you go to the next slide you’ll see the.
You know they’re their shape that obviously the you know the pandemic gave him a temporary dip but again like most categories they we did slightly better in 2020 2021 was a phenomenal year and then it seems like
20:22 is having a little bit of trouble comping against that what’s going on in the apparel or the automotive industry.

Scot:
[32:34] Was a guy that buys like 30 Vans a month you can’t buy vehicles yeah so there are no vehicles out there it’s pretty crazy I had to buy my daughter a vehicle and we had to wait like six months and then had to pay like over sticker.
Against all grains of my being but had to do it yeah the things we do for our kids.

Jason:
[32:52] Combo of like there’s increased demand and there’s these supply-chain constraints and there’s no chips right.

Scot:
[32:58] Yeah yeah so it went from chips now they seem to have the chips but then all the zero covid policy in China is made all the other inputs go to hell in a handbasket so-so
so there was some Supply that got out because they had all these vehicles waiting for chips the chips have gotten there but now they can’t make a lot of the other components of the vehicle as my understanding
and we order we ordered 100 Vans and we got three delivered this year from from new which is just crazy.
The other problem I’m up against his there’s this other company buying a lot of ants called Amazon and they’re buying I’m buying I’m buying what it feels like a lot to us 100 and they’re buying like you know,
twenty thousand so so they seemed to get a higher spot.

Jason:
[33:36] They’re higher in the queue than you yeah so if you take nothing else out of this this segment if you have to sell a car right now do not use Blue Book value your car is way more valuable than Blue Book value.

Scot:
[33:47] And before you sell your car get a new car so it’s kind of like yeah because you may be hoofing it if you don’t you may be getting to know the Uber app really well.

Jason:
[33:55] Yeah and whichever card you get get it clean by get spiffy.
So let’s a lot of people in here in the cpg space so grocery super important this is a category that I follow really closely almost 300 billion in sales in the first quarter and again it’s up its up.
By the way a new coin we turned is your over 32 years ago right like that’s the new the new black in earnings calls is everyone’s talking about their silver says 2019 which was the.
Quote unquote normal year so groceries up twenty Twenty-One percent from from that normally year and we’ve kind of had this 8% growth rate which is better than grocery historically grew if you go the next slide you see our shape again,
grocery is a unique one right like.
Yet average sales in 2019 and then 20:28 was great for grocery right because nobody went to restaurants like so all the calories that used to buy from restaurant you’re buying from grocery so that Gold Line is way up and then,
in 2021 they had trouble comping against it in the first half of the Year where all that growth happen but they still 2021 ended up.

[35:00] About 10% from 20/20 and 2022 is continuing to be up so far,
from from 20 21 and so the way I like to think about this if you jump to the next slide is Sheriff stomach so this gray line is how much.
Calories you buy from grocery stores in the Gold Line is how many calories you buy from restaurants and historically over the last 10 years it’s been almost a 50/50 split so then the pandemic happened and we got seventy percent of our calories from grocery stores
thirty percent of our calories from restaurants and everyone’s like wait how did we get any calories from restaurants they’re all closed doordash,
right it was all off Prem consumption and then we’ve been waiting to see what would happen could grocery permanently hang onto that lead would restaurants come back and you can see over the last year
it kind of close the gap but then look what’s happened these like this year restaurants are way above Grocery and so the magic question here is,
was their pent-up demand and we’re all rushing out to restaurants because we haven’t been there and that’s kind of a,
a one-time Spike and it’s going to normalize back to 50/50 or is the new normal that we’re all so sick of being in the kitchen for the last two years.
That groceries going to have a real decline because if you’re you know a leading Grocer in the US this this is a really scary slide at the moment you have a guess.

Scot:
[36:21] Yeah I’ll throw a Freakonomics curveball in here I think a one input into this is the work from home trend,
so when you’re working from home it’s a lot easier to go to the grocery store prep the veggies between zooms or while you’re on his Zoom or something like that or like chopping below
below the line and just prepare a meal right but when you’re in the office and you work late and now you’re kind of gone back to that office lifestyle then I think that’s going to be a big driver I think.
I think we’re going to go back to working in the office I think when everything’s up into the right you’re like okay everyone can work from home but if things get tougher and we go into recession one of the levers Executives can pull as well we need everyone back in the office so I think we’re going to get back to that,
it won’t be the same so it’s not going to be whatever we were at before it’ll be ten to twenty percent lower but I think that’s going to be the Big Driver of this one is that work from from home Trend and I bet it’s spiking now,
um because of that so I’m seeing and we have data at spiffy for this so one of the things we do at spiffy is we go to office Parks as an amenity if I look at Dallas the Raleigh-Durham area and Atlanta,
we’re almost back to 80 or 90 percent to pre-pandemic levels at office parks.
Now you look at Blue States like California New York Etc you’re like a zero so so ultimately I don’t know if that separation remains or not but ultimately we’re seeing
people get back to the office park at least in this Southeast kind of region which is which is I think that’s going to drive this more than what you show her.

Jason:
[37:47] And so then the the last category we’re going to talk about is obviously most near and dear to our heart is e-commerce.
So
in March we sold almost a hundred billion dollars worth of stuff inside baseball thing this is data from the US Department of Commerce it comes out every every month there’s better data that comes out every quarter this quarter we had a crazy thing happen,
the US Department of Commerce restated the data that they had published in the past and they actually added 100 billion dollars of extra e-commerce sales last year they said we’ve been
Under reporting how big e-commerce was so you may have earlier in the year seen these articles in the Wall Street Journal and elsewhere talking about how the e-commerce craze is over
and retailers caught up and it’s a much more complicated story than that again
e-commerce is up 55% from 20/20 so that’s going to be tough to comp against the if we flip to the next slide.

Scot:
[38:45] Well I disagree with their methodology so we had them on the show and it was.

Jason:
[38:49] US Department of Commerce.

Scot:
[38:50] Here’s the geekish I had to like break-in Jason was like you were just like.

Jason:
[38:53] It would be like if anyone mask was on the show.

Scot:
[38:55] Yes yeah you’re just like slobbering all over yourself it was embarrassing and they God we’re.

Jason:
[38:59] Tending that’s unusual.

Scot:
[39:00] They got were Audio Only and the,
but then as we got into it you know they count like curbside pickup is e-commerce and to me as an e-commerce guy I have to kind of throw the flag on that one because you know going during the pandemic you know,
order online have it shipped to me and now I just go to the Best Buy and set outside they bring it to the store and now I’ve converted that to an e-commerce sale that doesn’t really pencil for me so I think these numbers are overinflated because all the curbside pickup flipped over to e-commerce.

Jason:
[39:29] There’s a common debate and you and I violently disagree on that one.

Scot:
[39:33] Digital influencer blah blah blah.

Jason:
[39:35] Yeah yeah exactly but yeah I mean if you so if you what’s happening is
e-commerce orders are being fulfilled from the store but you think about all these orders at Target that you place online and get delivered to your home from a shipped person or even from a
u.s. post office targets fulfilling 96 percent of all their e-commerce orders from stores so curbside pickup is just another.
E-commerce order that’s fulfilled from a store and so again like to me.

Scot:
[40:03] But I had to get my car ready to go to Best Buy and I kind of blue shirts only difference is the blue shirt walked 50 feet to me versus me walking 50 feet in the store.

Jason:
[40:12] But so yeah we’ll agree to disagree.

Scot:
[40:13] That’s e-commerce more people can disagree.

Jason:
[40:13] Smart people can disagree and us so you see the shape again you know again 2020 accelerated e-commerce 2021 still did better although slower and so far in 2022 we’re doing better again.

Scot:
[40:28] Boy what’s the one that you hate so much what’s the chart you hate the Goldman Sachs one.

Jason:
[40:33] Well yeah I mean there’s a couple different.

Scot:
[40:38] Mackenzie or McKenzie yeah that’s it.

Jason:
[40:40] Yeah so we’ll talk.
Yeah so jump to the next slide so Mackenzie is the early in the pandemic came out with this thing and said hey e-commerce has been perfect permanently accelerated by 10 years.
Which is utterly wrong right like e-commerce.
White kind of went three years ahead and now some categories are still three years ahead like grocery but a lot of categories are much closer
to where we’d forecast which I’ll show you in just one sec before I get to that though I just wanted to kind of show you pre-pandemic
the Gold Line is have as retail grew this The Gray Line is how fast e-commerce grew again Scott and I would disagree about how to count e-commerce but still.

[41:18] Retail tended to grow three to four percent a year a great year would be 5% e-commerce grew ten to fifteen percent a year,
and and in the pandemic obviously e-commerce wildly accelerated and Retail kind of stayed flat people thought it went down but it kind of stayed flat so then we had this thing that’s never happened in my lifetime,
which is in like May of 2021,
because retail had been so soft for so long retail actually grew faster than e-commerce and we’re now having this topsy-turvy thing where the rate of growth for e-commerce and Retail are very similar and so you know I said hey.
Well what would have happened if we didn’t have the pandemic so this next slide is kind of showing the growth rate for e-commerce.
And showing where we would have forecasted e-commerce to go and again in the Wall Street Journal they showed the blue line under the Gold Line.
They have this old US Department of Commerce data and if you go to the next slide I zoom.

Scot:
[42:15] They don’t wake up at 8:00 and put it into the table like it.

Jason:
[42:18] They don’t know Tableau like I know tableau,
and shout out to all my friends at Salesforce for the own table so you can see it’s very noisy right now but it does seem like the pandemic permanently accelerated e-commerce.
You know 122 years of acceleration not,
not ten years and so then I think the very last slide I put together on the shape of e-commerce is in this is a scary one of me I’m curious what you think about this while e-commerce is continuing to grow well.
Is Gary is this is traffic to the top 10 eCommerce sites in the US and this is a different story
the gold on the grey line was before the pandemic the blue,
the Gold Line was after the pandemic but you can see traffic went down in 2021 even though sales went up and traffic is down even further in 2022 and so what this means is fewer.
Are going to e-commerce that the big eCommerce sites less often but they’re buying more stuff when they go so.
This will be our last question is we’re way over time is,
that like an inflation thing is that a change in consumer Behavior what do you have any hypothesis what’s going on here.

Scot:
[43:30] So I think people were pegged at home for a while they bought everything they possibly could and they’ve bought forward so they feel like they got new laptops they’ve got their fancy exercise bikes.
They’ve got all that stuff their peloton’s and now they’re just spin out on stuff and now they’re wanting to do experiences and services so that’s where the dollars are going if you know I think the Gainer of this traffic is probably,
Airline sites hotel sites another we have visibility in this a spiffy because our largest customer set is rental car companies,
we had a record day yesterday so people are traveling like.
Pre-pandemic levels and which is really interesting so the dollars they do want to spend the discretionary dollars are going to experiences and not Services I’d call this a year to go I was a year early,
I’m sadly many of our predictions.

Jason:
[44:16] We have a forecast every year and I get to cream Scott in the for.

Scot:
[44:19] Well I don’t know what.

Jason:
[44:21] History doesn’t show that but you guys don’t know.

Scot:
[44:23] So I think that’s what’s going on so I you know
but I feel like a really really interesting indicator is going to be Amazon Prime day so that’s going to be in July of this year and we call it Prime day but every other retailer is glommed onto it and sees a bump from it so it’s kind of this fabricated holiday not unlike singles day.
That yeah that you know,
that is going to be really interesting data point so that could you know the the bullish cases that’s going to stimulate people to be like oh yeah I do need a couple other you know
cables or a battery or whatever it is so we’ll see that we’ll be a nursing data point that I think will set us up for holiday and we’ll get a pretty good indication of how this is going to go,
will the consumer be like okay I’m all travelled out and I want to buy more things or will they continue down this Services dollars been passed.

Jason:
[45:11] I do think it’s really complicated economy right now part of this is inflation and inflation I think is hitting e-commerce harder than than the sort of CPI numbers because the price of a lot of the goods that tend to sell on e-commerce are tend to be.

Scot:
[45:25] Their supply chain a lot of stuff you just can’t get.

Jason:
[45:27] So there’s there’s constraints but also consumer Behavior has changed their categories that we would never sell on e-commerce before the pandemic that we are now so one of them that we talked about is Automotive
that’s a big ticket item right so you need less visits to sell a big Tesla then you then you did to sell a TV and another one is Grocery and when I say that people are
Jason are you hi Grocery and I am hi I just had my knee replaced and I’m on some Good Meds the I wore it out going on store visits,
the the grocery isn’t that expensive but grocery sales and e-commerce are a week’s worth of groceries it’s 60 to 120 items so that.
It is actually a lot higher per visit so some of these new categories becoming more important combined with inflation combined with the supply chain constraints I think off,
aspire to do that and that’s kind of our,
our last take away because it’s happen again if you go to the next slide we have used way more than our allotted time but there was no one that could put us off the stage and so.
Appreciate it and Scott any closing words.

Scot:
[46:34] Did anyone have any questions.

[46:49] How do you think is going to impact and trends that we’re seeing right now.

Jason:
[46:53] So to repeat the question really quick big Trend in buy now pay later Apple just announced that they were going to have their own flavor buy now pay later built in the Apple pay this week at their event.

Scot:
[47:06] I’ve seen some interesting consumer behavior and I’m a little
little incredulous on it because it’s always sponsored when you dig into it it’s like sponsored by a firm and so but what it what it shows is Millennials and gen Z they don’t like to have as much open credit
they kind of view that negatively and I see this I have kids that are in their 20s and they are freaked out by credit cards but they like to attach that credit to a thing and then pay it off and be done with it,
so I think there’s an argument to be made that there will be a generational the way we interact with credit will change and then people will after certain
over a hundred dollars they’ll interact with it in that way so I think that’s a really fascinating thing and I want to see more data on that before 100% believe it but I was super incredulous that talk to my kids are like yeah that’s how I think I was like well I guess there may be something here.

Jason:
[47:53] Yeah and as usual that’s a really thoughtful and wrong answer.

Scot:
[47:58] For you yes.

Jason:
[48:00] No so it.
Buy now pay later is huge right now it’s the fastest growing form of check out and / Scott’s point I would argue they’ve done an amazing job of branding right like oh it’s credits evil credits bad this is not credit right and I talked to our traditional,
um Financial customers and I talked to a family-run bank that’s a fourth-generation bank and the CEO is like Jason,
my family’s been in the money renting business which I think that’s an awesome way of calling the credit money money renting business for 100 years and that buy now pay later dog doesn’t hunt,
like it’s just a bad version of credit that’s been rebranded and.
At the moment it’s working like it’s more expensive to sell something with with a firm or with a buy now pay later service than it is with a credit card but retailers are all doing it because they’re selling more stuff because of it right so that’s the argument at a firm.
Best Buy you should pay more to use buy now pay later.

Scot:
[48:59] Conversion rates go up.

Jason:
[49:00] Because conversion rates go up.
The scary thing that’s starting to come up is guess what’s happening right now 42% of all those buy now pay later purchases are now in arrears right so so kids haven’t kept up with those purchases it’s a.

Scot:
[49:15] What would a firm would say is that on the front end they can tighten the credit now so yeah that’s what they all say.

Jason:
[49:20] The jury is out and I would say like this Amazon announcement is kind of an interesting nothing Burger because guess how you pay for the the Amazon the Apple buy now pay later service with a credit.
Right so you’re so it it’s kind of like.
If the buy now pay later services are rebranded credit and they kind of hide the fact that as credit that Apple buy now pay later is installment payments on a credit card.
So so the.
Is still out but there is a fear that that this whole bubble of buy now pay later is about to burst and whether it does or not I would say there’s too many of them there’s going to be a,
consolidation retailers are having a lot of pain about.
All the consumer requests they’re getting to support all of them and we call it NASCAR in the checkout when like you have to you know have 57 logos on the checkout for all these different different ways to pay so I think it’s kind of going away.
Any other questions before they kick us off the stage.
Awesome well thank you guys so much and until next time happy Commerceing!

Scot:
[50:20] Thanks everybody.

View Details

Amazon released their Q1 earnings for 2022 on Thursday April 29th. In this episode we do a deep dive into all the details.

Key Topics:

Declining macro economics
First quarter 1P sales were down year-over-year for the first time in two decades, as it had to comp against a very strong Q1 2021 which was elevated by the pandemic.
AWS getting a strong boost from the pandemic.
Ads continue to quietly be a bright spot for Amazon
Andy Jassy's first annual shareholder letter
Amazon's new "Buy With Prime" offering for DTC sites.

Episode 291 of the Jason & Scot show was recorded on Thursday April 29, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show
this is episode 291 being recorded on Thursday April 28 2022 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
it is a Thursday in April late April and that means it's Amazon results so we're going to take everyone through the results that came out today
talk a little macroeconomic and a little bit of ecom's if we have time
Jason I wanted your hot take on Ilan buying Twitter are you freaking out.

Jason:
[1:04] I am not freaking out but I'm having to have a lot more conversations with people about it than I might have expected people are super interested in following it closely.

Scot:
[1:14] Yeah I had.
I think I'm not freaking out but I think one because everyone is freaking out they may be looking over a little prick
little kind of idea I had which is if the logic path goes like this the dad model on Twitter hasn't worked
since they went public that hasn't really grown or do anything the subscription model is tricky and if you do have Elon doing this he obviously understands e-commerce really well with Aziz.
Help create PayPal yeah I think it could be an interesting experiment
to do a hybrid some kind of a subscription type program but also I think if anyone could take a run at actually doing e-commerce right inside of Twitter building on Marketplace of some kind I think that would be interesting to see him take a run at that
now we could have the whole if you don't go to a cocktail party to buy stuff
conversation but I do think there is something there where if you are a influencer and you know obviously Instagram is starting to figure this out all the live streams
I think there's something there that Twitter could monetize so we'll see that's kind of what I'm thinking more versus make you know.
That kind of losing my mind.

Jason:
[2:34] I think if you're a traditional Advertiser that has for what like.
Who benefited from the advertising model like you're concerned because there's potential disruption but I'm with you I think there's the.
The rate of change is likely to increase it Twitter like Twitter had been you know somewhat stagnant for a while so like I'm always excited to see interesting new experiments and trials so
I suspect we'll see some.
Some clever new ideas at least attempted to be implemented in that and you know some of them I'm sure we'll be cool side note and I maybe shouldn't disclose this on the podcast.
I'm a pretty long term user of Twitter I was like in the first million users I'm pretty sure I've never seen an ad on Twitter.

Scot:
[3:18] I see him all the time.

Jason:
[3:19] So what I haven't figured out why it is I don't see them like I have a verified account and I don't know if there's some.
Oily status where like they don't show as many ads but I also primarily use Twitter through apps and it doesn't seem like any of the apps show ads do you use a web browser or do you use like.
Tweetdeck course.

Scot:
[3:44] Phone I use that wealth the apps.

Jason:
[3:48] Use the Twitter app.

Scot:
[3:50] Yeah I use the Twitter app the old apps don't really work anymore because they limited them to like some they're all hobbled at this point.

Jason:
[3:57] So except for tweetdeck which is owned by Twitter it's like an alternative a poem by Twitter that I stole.

Scot:
[4:04] Okay I didn't know that still existed.

Jason:
[4:07] Um yeah so I have like hesitated to Deep dive into why I don't see ads because I'm grateful that I owe but but.

Scot:
[4:16] Show me Aunt as the chief digital ad officer you should be seeing ads though I do think that's pretty important.

Jason:
[4:23] Every time I watch a TV show in my wife fast-forward through all the ads I'm like like I say you realize Those ads paid for this house right and.

Scot:
[4:30] Yeah.

Jason:
[4:32] I'm sorry tell the advertisers listening.

Scot:
[4:35] Well I saw on Twitter that you have been spending some time in the meadow verse what's that all about.

Jason:
[4:40] I have its kind of fun I got invited to a conference that was put on by meta AKA Facebook and
the reason I was interested in it was not necessarily the topic
they were hosting this 800% event in the middle verse so they sent us all their latest headsets which is the.
Used to be called the Oculus quest to now it's called The Medic West too.
But I hadn't really looked at their Hardware since the first generation that you and I bought the Oculus Rift which required a,
pretty beefy computer and a bunch of sensors and cables and I was pleasantly surprised by The onboarding Experience like you just take this thing out of the box doesn't have any cables doesn't require any external sensors.
And it seems like it works way better and easier than the old Hardware so that was kind of fun and it was kind of fun to see,
the early iterations of how.
Facebook in Visions like 200 people having a virtual meeting in a in the metaverse I'm not sure.
It's a super exciting or that the experience has been nailed yet this is like very much a 1.0 kind of thing but it's fun to see you know people inventing new things.

Scot:
[5:57] Cool yeah a lot of those things you just kind of like you fiddle with your avatar for a while then it's you're sitting there watching other people you're like what is going on because their hands are moving all weird as they're like typing or something.

Jason:
[6:09] Yeah they have a very like accurate looking avatars and I'm like that's the last thing I want exactly.

Scot:
[6:15] Yeah I want to be Brad Pitt for crying out loud number one reason to go in the meadow Reese's to look better.

Jason:
[6:21] Indeed indeed well they apparently opted not to do that for this conference.

Scot:
[6:26] Well we we had mentioned doing a web three deep dive and I got a lot of listeners that reach out and said they would really like to see that so we need to put that on our agenda.

[6:42] Yeah yeah yeah you know what I mean Dad request for us to do a podcast.
Your pedantic so you want to kick us off with the little view of what's going on the macro before we jump into some micro.

Jason:
[7:01] Yeah so in general the macroeconomics are kind of a Debbie Downer and you know I am spending an awful lot of time talking with retailers and brands that are kind of planning for.
Wean sort of next 9 months as a result of that but kind of frame this up.
You know the Marquis - macro is inflation which there's a bunch of ways to measure it it's a wildly imperfect thing but the the most popular foot like General inflation number we use,
we're now at 8.5 4% which is a 40-year high so inflation is very high.
Another one we look at is like various credit worthiness and so like mortgage delinquencies is a good proxy for consumer health.
And mortgage delinquencies aren't alarmingly High yet but they're in the last quarter they ticked up.
And so that that is a potential early indicator.
A bigger indicator that we don't like is to see the savings rate Decline and so historically like for the last 10 years I would say.

[8:20] The average savings rate has been about eight percent so consumers save about eight percent of their income,
during the pandemic we had the highest savings rates ever because consumers got really conservative and they were gifted a lot of extra money in terms of economic stimulus so it like briefly pipe.

[8:38] Spiked over 20% but now it's back down below the it's at a 10-year low now so it's at 6.6 percent so that.
It says that all of that inflation has kind of sucked all the savings out of the the US consumer and we're starting to see more defaults,
I don't have data on it but one that I've heard is alarming is we're starting to see a high default rate on all those buy now pay later services that everyone you know has gotten attached to.

[9:07] I've been in the housing market lately and for those that don't know the you know mortgages are starting to to really shoot up so that the.
Traditional 30-year fixed mortgage rate is up at 5.1% now.
It was it that during the pandemic it was down below 3.
And then you know a particularly alarming one is GDP,
which you know we had been kind of growing in that that one to two percent a quarter and you know we just got the the.

[9:45] The Q I want to say I think it's just Q4,
GDP and it was expected to be up 1% and it was actually down 1.4 percent so the economy shrunk witch.
Was alarming and then you roll all that up.
And you and I have talked about this being a little bit of a mixed bag but there's these consumer confidence index has and the one I look at is the University of Michigan survey,
and so they have it kind of indexed against a hundred and so right now the the consumer confidence survey is that a five-year low so it's,
lower right now than at any point during the pandemic and it's it sixty five point seven and so often.
The consumer confidence our roads before the consumers actual Financial Health our roads but spending tends to correlate with consumer confidence more than.
Then actual economic macro so so that's a particularly alarming one to the retailers,
the one thing I would say is bright is as I've talked about before you know in general retailers did really well in the pandemic and and sales,
um we're quite a bit higher over the last two years,
and we haven't really seen them take down there the rate of growth has dramatically slowed so March retail sales versus a year ago was up 5.5 percent.

[11:14] You know that's up forty percent versus two years ago and q1 of this year was up 10.8 percent versus last year
it's up thirty percent versus two years ago so retail sales are still strong what you know some people would rightly point out however is what we what's hard to measure is how much of those.
Of those increases in retail sales and q1 were actually from that inflation right so you know unit sales could have been down significantly because prices were up so much.

Scot:
[11:48] Yeah I just one of our interns handed me a note the GDP is a quarterly so that's the q1 result they do frequently update those kind of after the fact that they get more data and so but I don't
usually it's kind of fractional so I don't think it's going to swing to a positive sadly.

Jason:
[12:07] Yeah so you roll all that up and let me just say like we went into two strong years in January and February a lot of people are planning a lot of aggressive.
Investments and I and it feels to me like people are like really curtailing those investment plans as and are starting to hunker down for for potentially rough economic year,
so we shall see.

Scot:
[12:32] Are so when you're out there talking to clients or few people kind of saying because right now everyone's maybe they already done it maybe they're kind of making their fourth quarter planning decisions right so it's kind of like a very very,
cloudy crystal ball.

Jason:
[12:49] Oh yeah I've I've already like finished a bunch of holiday campaign plans so I've been talking like Christmas toys Non-Stop,
three weeks which is a little weird but yeah and you know they're like they're there is a inflation layer to everybody's holiday plans right now,
you know hopefully we get to use the the optimistic version and not the pessimistic version but everyone's planning for you know potentially going into Q4 in not great shape.

[13:30] Yeah yeah but I mean you're going to tell me not to worry about any of that because Amazon made a bazillion dollars right.

Scot:
[13:36] Well want want also not great news on the Amazon front so that part of the setup here is we are lapping q1 2021 where covid will a huge
Tailwind for for Amazon we were still we weren't shut shut in per se are locked down but there was still you know.
Very little air travel and people weren't out doing stuff and then also last year there was a prime day and q1 so that's not this year so that swings the number some to some degree
and then just a blanket statement whenever Jason I cover these things we always go with the data that excludes the,
any changes from Financial currencies what Wall Street would call X FX so so - is the X any any.

[14:25] Currency kind of changes so that neutralizes the currency stuff which is actually been oscillating quite a lot with the the whole Ukrainian Russian thing
so but we take that out so we try to get kind of a neutral currency view of what's going on
so it was really interesting earnings this year are this quarter because you know we had Netflix coming out and really kind of miss their number and,
you know there's a family of public companies that everyone thought there was a new normal but it was actually this kind of covid-19,
pull forward that is gone away so Zoom Peloton are in that camp and now it's looking like maybe Netflix's there.

[15:11] Yep Shopify shopify's well I think Shopify has a whole nother world of hurt we'll talk about here.
The other the other surprising thing of Netflix is just kind of randomly on the call we tasting the co kind of said oh and we're looking at an ad model and I think I'd like surprise
people inside the company hadn't even been briefed on this so that's good for you so so good news I think maybe an ad models coming to Netflix so more more ads for you to go sell and do your thing.

Jason:
[15:39] Yeah but honestly I think no one heard that because he's right before that he said we're going to stop letting everybody share passwords I think that's.

Scot:
[15:47] Yeah it was like what.
So yeah so you can tell they're they're scrambling to kind of they're opening their minds to things they never thought that they would look at before because the subscription actually had a loss of net subscribers
even when you take out the head turned off Russian subscribers don't even if you take that out it was negative and then Google was really interesting because you and I I think we're actually
pretty clearly some of the first people to talk about how worried we were about the IDF a some people call this a TT I do
I don't like to call that I call it the idea phase so the the blanket term will just use as the the Amazon the Apple privacy changes
and Google's results were interesting because Google has a lot of businesses inside of their Google core is immune from the Apple privacy changes because they are the search partner of Apple.

[16:43] So you just go right in there they have access to all the delicious cookies and all that kind of stuff and then also they you know search is nice because you get this intent in the form of the search term so you don't have to guess what someone's trying to do and use all this
add technology to figure it out that being said the YouTube part of the business we got hammered and
reading through because apples a big partner of theirs but also a competitor
you kind of like you had to parse their language really carefully but it seemed like YouTube was hurt hard enough that it really,
really kind of ended up.

[17:23] Putting pressure on the overall business even though the core search business was was pretty resilient through the changes so that was interesting and then you know what's going to.

[17:34] What's going to make this even worse just broadly is they are
pretty publicly stating they're going to bring a lot of those changes to the Android platform so it was kind of an Apple only platform problem but now Androids going to replicate,
many of those no tracking hiding your email all these kinds of things that.
Our overall good for consumers to some degree maybe they're going a little too far because there is some benefit for having.

[18:02] Good product recommendations in those kinds of things that are I think are going to get hurt from this but yeah so that is all getting worse,
so then Facebook so then I was like oh man
this is gonna be really bad for Facebook but I think what Facebook did is they kind of kitchen sink it last time and they basically said in fourth quarter wow this apple stuffs bad let's just go ahead and if we're gonna rip the Band-Aid let's rip that thing off.
Chest hair in off and they.
They they actually did less worse than everyone expected so that was a relief which is we're kind of in that market and so I think they had predicted that it would be really really terrible and it was only.
Terrible and then apples revenues were up 9 percent which was in this climate is when it's very low for Apple but a wind that brings us to Amazon results,
anything from those who wanted to opponent before we jump into Amazon.

Jason:
[18:59] No just I think the apples Apple earnings were today and I would say they were surprisingly upbeat like both.
Like they talked about the macros but they you know what would what you would expect to be particularly acute concerning apple is supply chain given that a bunch of their factories are walk down and closed in China right now,
and Tim Cook seem like quite optimistic that they had a solid supply chain point and go forward so I hope he's right because I'm gonna want my new iPhone.

Scot:
[19:30] If anyone would have a handle on that I would be Tim Cook so so.

Jason:
[19:34] No I mean I.
He's credible I wasn't saying he was wrong I was just pleasantly surprised to hear I don't hear a lot of people talking about feeling like they have their hands arms around supply chain this year so that was an outlier to me.

Scot:
[19:49] Well they talked about.
He was a year ago diversifying out of China into was it Singapore or Vietnam they may have been Vietnam so I think they've got a couple you know they have Diversified there,
they're manufacturing portfolio across multiple countries so maybe that that's part of the resilience that they're seeing there are maybe they think those cities that are locked down in China will get back to it but by the time they have some new iPhone or some.

Jason:
[20:14] Yeah and I do think they have this privilege status where when their factories get walk down they get watered down with workers and them so there is that.

Scot:
[20:22] So productivity is up yet for going to shelter in place you might as well do it on the assembly line making the Apple phones.
Okay so let's jump into Amazon results and start with Revenue
so the little bit of A Tale of Two Cities here so online product sales when - at minus 1% which obviously isn't good some Wall Street analysts did the math and they pulled out
the comp,
to the Amazon Prime day and I think that made it basically neutral so not up or down but still you know not something you want to see here I guess if GDP is decreasing,
you know zero is the new wind but but not what you expect from Amazon and clearly one of the you know I would I need to go back and look at 08 and 09 it went - in those years.

Jason:
[21:15] I was going to ask did it because I couldn't remember it going -

Scot:
[21:18] It did yeah I have a chart in a presentation and it goes e-commerce went like - 20 and Amazon went negative 5
so it was better than always is tracked considerably better than the e-commerce data but it did go - for a period of quarter or two in 08 and 09 I want to say q 4 of 8 and he wanted nine is my memory but I'll fact.

[21:38] Conversely subscription Services were up 13% and and there is Prime and you know all the things associated with Prime
so that's interesting and then you had some commentary from the call that you heard around that that I'll say it for you unit sales were flat and in the commentary on the call they talked about that being due to inflation so you know they're they're starting to say
hey we're seeing the signs of inflation here and we're fuel is rising and supply chain and they're starting to kind of.
Throw a lot of these things out there that you know I think.
We're doing this the evening of the report so I think wall Street's not going to really like this whole body language coming on Amazon
overall growth when you stroll together all the Amazon business units you get to seven percent growth which is the slowest growth since the recession of 08 09 and if you compare that to Q4
of 21 which it's your of your growth of Q for 20 that was nine point five percent so a pretty material slow down quarter-on-quarter from the growth rates here that we're seeing,
they do split out a couple segments so North America was up.

[22:57] 7.6% all in and then where they felt a lot of pressure was International it was down six percent so it feels like you know.
Internationally known us has is actually kind of in a worse slide from a macroeconomic and we're starting to feel it here as well,
so that was that and then physical retail was up 16% that's an easy cop because you've got people weren't going to stores largely Whole Foods mix that up,
this is good time you and I haven't had a chance to talk about it but they did announce that they're closing a lot of their stores so here we had a was interesting we had just opened a 5-star store,
four star whatever that is and,
and then they closed it like it was literally open for like 45 days I didn't get a chance to go to it and they're closing a lot of those bookstores and whatnot and that's been attributed to the new Co Jassie,
saying hey we're not going to really pursue that strategy anymore.

Jason:
[23:55] Yeah it was a little surprising because that you know there was a decent Fleet of the book stores they closed them all the five-star stores the,
the stores that were saved were the grocery store so obviously Whole Foods but also these Amazon Fresh has they added like six more so they're like 46 now if I'm,
I'm counting right and then they have announced a new fashion store that supposed to open this quarter in Los Angeles,
and as far as I know plans are still,
on to do that but yeah it was surprising that the bookstore here in my neighborhood closed as well.

Scot:
[24:35] Cool and then you were watching The Profit side of Amazon what you see there.

Jason:
[24:40] Yeah well the they you know they talked a lot about all of these macro pressures and you know,
those all having an impact on rising cost so labor costs were up fuel costs were up,
and you know overall supply chain was significantly more expensive they talked about shipping expenses reached 38 percent of revenues and like in comparison that normally is about 32%.
What you know fuel being a big factor and all other shipping costs and so roll all that in and they made three point six billion for the quarter which is like a 3.2 percent margin,
and I think the consensus estimate was.

[25:27] 4.6 so a meaningful Miss on the margins and it's interesting because.
You know normally these - macro things they it's they can have a weird effect because,
when the mat the inflation is high but consumer confidence is okay it actually,
increases demand because you sell the same amount of stuff and you sell it for a higher price,
but once consumer confidence starts dropping people start buying less right so you know Amazon you can see that demand dropping on the top line so that's a concern and then all of their costs go up because of all these macros and so the margins.
Take a bigger hit and so that's a big concern and then in their commentary there was this interesting,
um narrative around Amazon inadvertently ended up with too much capacity so primarily in there there with just X Network so.

[26:28] You know over the last two years they famously have doubled their their warehouse capacity which now I think in total is over 100 billion dollar investment.
And.
They also hired a ton of people during covid they had a lot of people on covid we've said they backfield a lot of positions and then all those people came back and they apparently had too much labor so too many warehouses and too much labor equals,
a hit on margins as well and so a lot of their narrative was around,
they're they're expected focus on improving the efficiency of that supply chain this next quarter which.
Means they have to either get more Goods in their Network and do more stuff and I you know I think we're if we have time we'll talk about some new programs Amazon's rolling out that my do that and it'll be interesting to see if they.
Shrink or at least slow the rate of their labor force growth based on some of these comments as well.

Scot:
[27:32] Yeah yeah and.
You know one Wall Street analyst kind of rolled all that together and kind of put a 6 billion dollar number on it which which is kind of yeah wow that's a
it's a lot of headwinds that they're facing there so it'll be interesting to see do do they read the tea leaves and take that capacity out or do you just kind of keep it in place for a holiday because the cops will get easier through the year right because
you have things were less crazy covid Wise from second half of last year.

Jason:
[28:06] Yeah and I you know I mean they both rightly pointed out like Hey we're glad we made the Investments we did,
like they put us in a strong position you know as I don't don't pay too much attention to year-over-year comps because we're competing against such a weird year the way to think of this is,
um
That sales are way up in there mostly staying up right so that's kind of the the management spin on the circumstance but there for sure our head winds and I would say.
If Amazon is feeling head wins the vast majority of other retailers are feeling like a head storms because,
you know Amazon has more levers and more scale to insulate them from a lot of these challenges.

Scot:
[28:54] Yeah so so rough spot on on the cost side how about usually the bright spot is AWS how did that.

Jason:
[29:03] Yeah so that is exactly the opposite like,
I demand you know one of the things they talked about is like a lot of people rethought their their infrastructure needs as a result of covid and it's greatly accelerated.
People's migrations to the cloud so it had a good run during the pandemic and it continues to go gangbusters so it was up.
Um 37 percent year over year for Q4 I think it was up forty percent so that that's a.
A huge highly profitable business that's continuing to,
um to go well I you know I think their total revenue was like eighteen point for tea.

[29:48] Four billion which was above the consensus and you know I don't like a lot of the other businesses this is like a 35%.
Gross margin business so that substantially beat the expectations which were like I think just under 30%.
And it's interesting they didn't so much cover this in earnings but an indie jassi's shareholder letter,
he spent a lot of time talking about some of the,
amazing Innovations on silicone and the Amazons rolled out that have dramatically improved their their efficiency on AWS so it seems like they still have.
They feel like a lot of Headroom to keep driving their cars down even as demand for capacity is,
is growing really fast so AWS continues to be a good story I would say though I don't sleep on the ads and interestingly,
they didn't talk a lot about ads in earnings they didn't talk about ads in the,
the shareholder call but they sold seven point eight billion dollars worth of ads in q1 which is up 25% from last year q1 so not growing quite as fast as they WS.

[31:04] That does mean 30 their last 12 months they sold almost thirty three billion dollars worth of ads and so a couple things to bear in mind.
That's 33 billion dollars at like 75 percent gross margin so.
Pretty you know appealing business even compared to if you call a WS like 75 billion dollar business at a 35 percent gross margin and you know.
Thirty three billion dollars in ads Twitter just sold for forty four billion dollars and they sell less than 5 billion dollars a year in dance so so that that is a,
highly profitable and still strongly growing business.

Scot:
[31:52] Yeah yet kind of doesn't get enough sunshine I think the how big this is getting.

Jason:
[31:58] Yeah I will say every other retailer has noticed this even if no one's talking about it and so the if the number one conversation I have with retailers is about inflation right now the number to conversation I have is about retail media networks which is
code for like part of the way we'll deal with inflation as we'll get more money from the manufacturers.

Scot:
[32:17] Yeah and again I kind of circle back to those apple changes when when Apple gets rid of all this tracking the companies that are best positioned to,
to benefit from that
have closed loop data which is retail retailers because they have that transactional data and you know I think that Apple change is one of the unintended consequences is going to make
Amazon's ad business huge at the detriment of Facebook and Snapchat and,
Twitter in those kind of companies but then also a Walmart and Target and anyone that has you know hundreds of millions of people coming in there and and doing closed-loop transactions now is in a better position to build in that ad Network than Facebook who was
so dominant for so long.

Jason:
[33:07] 100% And if any of these social networks like you know really start to lose value because of these challenges like don't sleep on on seeing a retailer require them right because,
what you do is you swoop in with all that first party data in a choir that Network in China a lot of the big social networks are owned or aligned,
by big retailers and if you remember when B dance was going to have to sell tick-tock,
like it was a bunch of retailers lining up to to be involved in that transaction so yeah you know that,
first party data that the Retailer's own is very valuable and you can expect they're going to look for multiple ways to monetize that you did tease one other takeaway from the.

[33:55] The Q and A after the earnings were at least,
was Andy they mentioned that that the rate of prime memberships is is now growing faster than pre-pandemic.
Which that was a surprising bit of good news to me because I think they disclose their over 200 million Prime members now so you would.
Assume like 60 percent of that's in the US that's pretty good saturation,
in the US market you would expect the rate of growth to slow and then with all these macros and consumer confidence going down you would expect people to be cutting back on these.
You know kind of optional subscription services and so you know apparently Jack Reacher and The Marvelous Miss maisel are good enough that that Prime is continuing to kill it.

Scot:
[34:47] Jack Reacher's Beyond good it was excellent.

Jason:
[34:50] Absolutely I saw a few people that said their new use for for Twitter is just proposed changes to propose plots for Jack Reacher season 2 so I think that was funny.

Scot:
[35:03] Cool and then with Wall Street it's always not what have you done for me today but what's the future look like and so all eyes were on Amazon's forward guidance which was kind of a this this quarter in Wall Street that kind of use this would you do this quarter and what's your projection and this would be
a missing lower kind of quarter which is like,
death quadrant of results so the forwarder forward guidance Wall Street had a consensus of 125 billion for the Top Line.
In Amazon's range came in well below that their range was 116 to 121 which let's see it
so 18 and a half kind of in the middle versus Wall Street was expecting 125 as kind of where they thought things would be and then
gaap operating income Amazon said will be minus a billion to 3 billion positive
and Wall Street had a consensus there of 6.7 billion so they basically took down the top line by a good seven,
billion ish and then the midpoint of operating income by another 4 billion so this could begin I've mentioned Facebook kind of kitchen sink to it in the fourth quarter if
if you're the CEO of Amazon and you're relatively new on the job.

[36:25] This is a good time if you're going to have a bad quarter you might as well lower expectations and make the rest of your easy for you and I feel like there's a little bit of that in there but but again you know maybe they also
they see all these things going on macro and it's also a good time to be really conservative on guidance because you don't want to
you don't want to be the one cheery voice out there and then then miss it and and that that's cataclysmic in the Wall Street world.

Jason:
[36:50] No I think you're exactly right.

Scot:
[36:52] Yes so having done I don't know how many ways we've been doing this for so we've probably done 20 to 30 of these kinds of shows and this is you know this is except for that you know that.
For as long as I've been watching Amazon except for those 08-09 years this is this is
this is kind of a rough one so it's going to be interesting to see how the market reacts tomorrow after hours things were down about nine percent and you know this is a 1.5 trillion dollar market cap company and when it's down 10% that's
150 billion dollars so it's like,
losing three shopify's kind of to put it in that context so it's interesting to see how the market reacts tomorrow and if it causes a broader concern Shopify hasn't reported yet we're going to talk a little bit about that and then
yeah so yeah it's going to be interesting to see how Wall Street reacts has.

Jason:
[37:42] Indeed so what what other news did you want to talk about Scott.

Scot:
[37:46] Yeah well it is interesting thing about Shopify because in this world with the Apple privacy.
You and I have talked a long time this may have to go back at my holiday predictions Shaka is in a really rough spot right now so they,
so on one side many of their Merchants were using Facebook to advertise and that was really efficient so that's been cut off now there's been articles talking about how Facebook really wants closed-loop data they don't have it,
so the best way to build it is to,
need to have that close look data is for Facebook to build out a shopping platform there's a lot of talk about friction between Shopify and Facebook.
You know if your Facebook buying Shopify just makes that easy but Shopify Toby at Shopify has kind of famously never wanted to sell the company and wants to stay independent.
So you could see a day where Shopify is best partner Facebook becomes their biggest competitor so that's that's kind of an interesting thing so that's one,
one attack front Shopify has kind of coming the other one is Amazon and you know I've talked on the podcast where for the longest time Shopify has been,
poking the bear at Amazon and you know,
I've been at this 27 years and anyone that has ever thumped Amazon on the nose has not really survive that and so so I think that's coming back to roost here because Amazon seems to have a lot of.

[39:13] Programs targeted at you.

[39:18] Taking the gmv back from from Shopify that's over there what are the ones I found most interesting is this idea of by with prime now a.
You know skeptic would say Amazon's tried these buy things for a long time they've never worked what they've lacked in my opinion is
as a merchant out there having a new payment thing you kind of famously have that NASCAR logo thing that you do and and you know it doesn't really move the needle at this point there's so many payment options and there's already by pay with Amazon,
and this this program isn't there so I'm kind of reading the tea leaves here a little bit.
But if I'm Amazon and I can go to a small Merchant and say all right if you add this by with Prime.
We are also going to add you into the discovery side and exposure to all of our prime numbers that starts to get really interesting because now you're bringing me new customers and I think,
I think that's where Amazon is going to go with this quote-unquote by with prime new thing and that.
That is a perfect this is a perfect time to offer that because if you've your Shopify merchants and you're reeling because you've lost all this Facebook traffic.
And then suddenly Amazon throws you a life preserver and you're going to take that life preserver even if Amazon is going to see some of your data and you know then it's really interesting because if your Shopify.
Do you block that like do you stop your Merchants from taking this and it's a it's a bit of a gordian knot that they've put them in here that it's going to be interesting to watch.

[40:46] One reaction to all this is we talked about it on the show last quarter Shopify announced they were going to spend a billion dollars to really beef up their delivery,
and I kind of mocked that because the Amazon spin.
Like 200 billion so so to think you're going to compete with Amazon and some material way with a billion dollars is kind of not serious they did acquire a company called deliver which has an extra are I don't know if how you say it deliver.
And you know that's interesting but and I think they paid like three billion so they are starting to get pretty serious about this.

[41:19] And I think they now see that Amazon is going to turn their Logistics Network on on them and leverage that side,
the delivery side and the supply side the traffic side to hammer them the thing that makes me nervous about this these networks that are just built on existing 3pl infrastructures out there they're not going to really solve a lot of problems because,
you know Amazon's got.
200-plus fulfillment centers and thousands of dsps doing last mile delivery and just building on existing old-school 3pl infrastructures even with a more friendly software
isn't going to solve the same economic problem that Amazon is yes you may be able to get two day shipping,
but it's going to be like $12 and Amazon's going to be at like three dollars at some point and they'll be able to offer that and they'll be able to Merchants and say the standards two days do you want to do this deliver Network you thing that shopify's doing for $12
or do you want to use our Network for three dollars and obviously you know.
The choice is obvious in that room so I think it's really fascinating to watch these really big,
Titans battling it out in a way that that is changing very rapidly and Amazon is really good using these these downdrafts to really Hammer a competitor and I think I think we're going to see this cure they're going to get,
Shopify in a vice and I be interesting to see if shop of I can get out of that.

Jason:
[42:49] Yeah no I think your analysis is spot-on I do want to,
clarify or clean up a couple of things the last I heard they they actually haven't closed the deal with deliver like so,
you may have more recent information than me but I read like there a lot of reports that they're in talks and that there's like a,
a two billion dollar price on the table but I don't think they actually announced the acquisition yet so maybe you might have you may have called it first.

Scot:
[43:18] It was just yet still rumors at this point I think they'll do it yeah I'm assuming they're going to do it.

Jason:
[43:23] So just for listeners that may not be quite as in the deliver is a 3pl so you know you there.
Company you can hire to store your goods for you and ship them for you when you sell stuff and you know part of their value prop is they can,
ship stuff from orders you get anywhere so you get orders on Walmart marketplace they'll ship them you get orders on Amazon they'll ship them.
You get orders on your own Shopify special site they'll ship them and.

[43:52] You know if Shopify serious about building out the logistics Network they need some jump starts off he's,
3pl so an acquisition would make sense but to put things in perspective the very best 3pls can kind of match Amazon service levels,
and when they do they can be part of this program called,
vendor fulfilled Prime which essentially means we're going to ship just as fast as if we were in Amazon's Network and so Amazon's going to you know offer Prime benefits for that shipment.
Deliver is not a 3pl that has that status so,
like when you talk about even if Shopify acquires them this it's not going to put them in a position to compete with Amazon I would say you're absolutely right like not only are they weigh smaller in scale,
they don't have near you know they don't have the service level to even get Vineyard fulfilled Prime,
and like almost all 3pls they're dependent on the traditional parcel carriers to deliver the package and they're the they're forced to pay the market rates for those deliveries and.

[45:02] Amazon just has this huge Advantage from being able to deliver their own stuff so.
Not saying it's not smart for Shopify to acquire some 3pls and I'm sure they'll be able to leverage them but that definitely is not going to make a fair fight with.
With Amazon and then you were talking a little bit about Amazon's new offer but I'm not sure we said exactly what it is so last week Amazon announced this new service called by with,
and what essentially it is is it's taking app Amazon pay and bundling it with.
What Amazon would call fulfillment by Amazon.

[45:43] And I think technically it would be FB am which is it fulfilled by Amazon merchants,
um and so this is a program Amazon hasn't offered very often and doesn't offer widely where you put your goods in Amazon's fulfillment center and you and Amazon will ship goods for orders that didn't happen on Amazon.

[46:05] So Ernie early you can only put Goods in Amazon's Warehouse to fulfill orders that happen on Amazon so if you sell something on Shopify.
You have to store those goods somewhere else and you have to have kind of your inventory split but implied in this by with prime is they did this clever bundling of.
Hey we'll let you fulfill orders that happen elsewhere so that could be on Facebook or on Instagram or Tik-Tok,
or on Shopify and we'll bundle it with,
um the Apple pay I'm sorry Amazon pay and we'll give you the badging so it essentially if there's a Prime member shopping on your website
they'll see a thing saying hey get the same fast delivery you're used to you know same day delivery or next day or two day for free
don't have to type any of your payment information don't have to pick any of your shipping addresses because we have all that it's a dramatically lower friction check out and it's,
it's going to be super appealing for a bunch of sellers especially if you selling your own site and you sell on Amazon.
It's going to be really appealing and it's kind of a deal with the devil because you are giving more data to Amazon and you are making Amazon a stronger potential competitor.

[47:19] I think it's going to be hard for a lot of people to turn it down I think the only thing that makes it.
I think it's a death blow to a lot of 3pls out there the only thing that I think makes it not completely devastating is that they will only it will only work for Prime members so.
You couldn't for example launch your Shopify site and say by with prime is my only checkout flow.
Because you wouldn't you wouldn't be able to sell anything to non-prime members so you still need an alternative solution for non Prime members but if.
Amazon ever expanded this program like you know it that that would become.
Super devastating to a lot of the 3pls and and folks that are looking to compete with Amazon in the space and I just.
I think it's a super scary / clever way to both leverage that excess capacity that we just talked about and you know kind of.
Um pull up the ladder behind you know after that after they kind of use their their fulfillment as a competitive advantage to,
too kind of you know acquired 200 million Prime members now they make it way harder to compete with him bye-bye you know letting letting people use that service wherever they want to shop.

Scot:
[48:38] Yeah you had the one thing I'm still trying to get my arms around is I think deliver started building fulfillment centers and then they decided I think they have one or two and I think the rest of their Network ended up being a network and not
ones that they own and operate so I don't think they really bring into the world to new delivery capability or capacity.

Jason:
[48:59] Ya know I as far as I'm aware they don't either so I think we.
Yeah so I do think that's big news I think there's gonna be a lot of talk about it 11 kind of Niche use case but you know there's a lot of established brands that only sell through wholesale and they're all secretly figuring out how they sell.
How they added direct-to-consumer component and in this this this offering is going to be right in all their wheelhouse right like if.
If you're a big brand and you suddenly need to figure out how to you and you're used to shipping pallets to Walmart and you suddenly need to figure out how to fulfill each as and you.
Party have a bunch of inventory at Amazon it's going to be super appealing they just say what use Amazon for.

Scot:
[49:42] Yeah and then you beat me to the punch and you read the shareholder annual letter I have not had a chance to read that with what was interesting in there.

Jason:
[49:50] Yeah well quick reminder for listeners Jeff Bezos wrote the shareholder letter every year,
the 1997 when was particularly amazing and in fact Jeff agrees with me on that so,
every year since then Kiri copies the the 1997 shareholder letter in it so this was a point of particular interest to me because this was the first shareholder letter written by someone other than Jeff Bezos,
so Andy jassy in the new CEO and I think it very much follows the.
The kind of pattern in the Cadence of the typical Amazon shareholder letters up to and including having the 1997 letter embedded in it at the bottom.

[50:32] I wouldn't necessarily say there were any huge Revelations or or huge new takeaways.
From from the letter like a lot of the letter talked about.
Kind of the iterative nature of all of these successful Services than Amazon launched so they kind of painted the picture that like people imagine that.
You know Kindle was just born as this amazing fully form business or ews was an amazing business,
and he talked about how the first versions of all those Services were pretty mediocre right and he used this term that a few others have used.
Minimum lovable product and he kind of Paints the picture about how they evolve like how they launch.
Um AWS and it was very rarely useful because they couldn't offer both compute and storage which most people tend to need and storage was going to take another year and a half so they launch compute without storage.
And then later added storage and then later added their own silicon and how each of those iterative steps made it a much more powerful offering until it reach today's Juggernaut and.
Similar stories for Alexa and and Prime and a bunch of these other things so he was kind of painting this,
this picture about how things iterate in the back of my mind I'm thinking.

[51:54] My my Alexa is disagreeing with me the.
In the back of my mind I'm thinking he's setting us up for some of his initial initiatives being kind of mediocre at first I don't know I don't know if that's,
really where he's going but then he did kind of highlight the autonomous teams principle that we've talked about several times on this show he talked about how important it is to,
expect and accept failure that you really you know can't be successful if you don't have some failures and well that sounds obvious I can't tell you how many times I've talked to,
potential clients that you know said hey we want to do some crazy Innovation but we can't afford to fail.
And that you know seems like a recipe for disaster so I do appreciate that advice and then this may be really nitzsche but he did he talked a little bit about there.

[52:47] Their press release and their six-page narrative principle that they use and we've talked about this before like so you go to a meeting and you read The six-page Narrative for new idea and at the back of that narrative they have a press release,
that is kind of written to paint a picture of the press release will be able to issue if this initiative is successful so it's kind of begin with the end in mind idea,
and in this Cheryl the letter he also alluded to the they now make you write they frequently asked questions to go with that press release which I hadn't heard that before and I thought that was interesting so,
so those are kind of.
The the main recap of the the shareholder letter but you know if you haven't if you have a few moments I would definitely it's worth a quick read and checking it out.

Scot:
[53:32] Did he explain why they do the frequently Asked question.

Jason:
[53:35] He did not he just referenced it and maybe maybe one of my Amazonian friends will correct me but I feel like.
Most of the the kind of external stories about that process have focused on the narrative and the press release and I just had never heard.
The Q&A being part of the or the FAQ being part of that that package before so I just thought that was an interesting.
Interesting tidbit.

Scot:
[54:03] Recall any other e-commerce news you want to cover.

Jason:
[54:08] You know there's always more stuff we could talk about but the good news is we always have more shows and it has happened again we've used up more than our lot of time for this episode
so I think we should probably call it quits let everyone get off the exercise bike,
hopefully you write us that that five star review and we'll pick up some of the other exciting industry news in the next show.

Scot:
[54:31] Thanks everyone and until next time...

Jason:
[54:34] Happy commercing!

View Details

EP290 - Shoptalk 2022 Recap

ShopTalk held it's first in-person show since 2019, May 27-30th in Las Vegas. The show made the move from the Venetian to the Mandalay Bay. Nearly 10,000 attendees joined more than 600 exhibitors at this years show. Making ShopTalk one of the first industry events to truly feel like it did prior to the pandemic, and living up to the billing as the retail industries reunion. Shoptalk has truly established itself as the preeminent digital commerce event in the US.

In this episode Jason and Scot recap all the major keynotes, trends, and themes from the show. If you wren't able to attend, this show will catch you up. If you did attend, they episode will help you write that event recap you owe the rest of your team!

Episode 290 of the Jason & Scot show was recorded on Thursday April 8, 2022.

http://jasonandscot.com

Transcript

Jason:

[0:23] Welcome to the Jason and Scot show this is episode 290 being recorded on Thursday April 7th 2022 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host

Scot Wingo.

Scot:

[0:38] Hey Jason and welcome back Jason Scott show listeners

well tonight we are excited to talk about shoptalk Jason you went for the show I was not able to make it this year unfortunately but you went and you are going to report on all the happenings and I'm excited to hear how it went.

Jason:

[0:57] I know I feel like listeners should know that your April Fool's joke is you told me you were there and I kept waiting like at the Starbucks to meet you and you never showed.

Scot:

[1:06] Not true not true I was a good co-host and I let you know with plenty of time I wouldn't be able to make it.

Jason:

[1:12] I am teasing but I do think shoptalk overlapped April Fool's this year.

Scot:

[1:17] It was her a lot of shenanigans.

Jason:

[1:19] There there was not any there was some usual trade show Shenanigans but I'm not sure I would say there was any April Fool's related Shenanigans but it was a good show you missed a good one.

Scot:

[1:31] Before we dive in what was the Starbuck situation.

Jason:

[1:33] So the Starbuck situation I would give it a B+ so it's a

for people for a long time treat your followers shoptalk started out at the Aria as a small show and then it outgrew the Aria and they moved to the Venetian which

it was nice because the Venetian does have on-prem Starbucks but the Venetian is a,

kind of very big and they did it there for a number of years and then they right before the pandemic they announced they were moving it to Mandalay Bay and so this was the first one in Mandalay Bay

and Mandalay Bay is good because it has.

To Starbucks one in the casino area and one on the way to the convention center so so ordinarily I would give that a plus

but they one of the Starbucks is still closed from the pandemic it hasn't reopened and the one on the way to the convention center normally takes mobile orders which is awesome,

for the convention they turned up they turned off mobile orders every day of the convention.

Scot:

[2:41] I don't need it.

Jason:

[2:43] I stayed very well caffeinated and in my new world where I drink iced coffee from Starbucks branded iced coffee from the grocery store I got to augment my stops at the Starbucks by having a couple,

jugs of Starbucks iced coffee in my room as well so no one should be worried about me.

Scot:

[3:01] That you can say in your backpack or strapped to your head like I have one of those beer hats.

Jason:

[3:06] Exactly and I showed up at a couple morning meetings with like to Starbucks and it's always this great debate like should I go hide in a closet somewhere and finish one so that the people in this meeting won't know that I was double-fisting it or should I just embrace my,

my problem and I embraced it.

Scot:

[3:22] Everyone listens to the podcast Selena it's a well-known thing no one judges you for your Starbucks.

[3:35] We live all coffee we're pretty agnostic on the coffee.

We'll call what were the so that's the Starbucks what about the this whole thing called retail and e-commerce.

Jason:

[3:50] Yeah so before we jump into all the the topics and going ons it's a I would just say like I think there,

I don't know what's the official or The Unofficial theme but they called the retails reunions and I feel like it was pretty apt this is the first big show,

that to me felt like it did before the pandemic they had 10,000 attendees which.

If it's off from from 2019 it's only slightly like maybe they had 12,000 attendees in 2019 so,

10 felt like a big show they had a 650 exhibitors.

It felt pretty normal which was awesome and one of the best things about shoptalk normally is the networking and catching up with friends and I feel like that was in full effect and,

extra fulfilling this year because you know I just got to see a bunch of people that I enjoy spending time with that I hadn't gone to Sea in a couple of years.

Scot:

[4:52] Prickle yeah so it's kind of a I like this post covid lifestyle where it just feels like nothing happened it uh it's a it's a joy.

Jason:

[5:00] Yeah yeah I feel like the biggest Debbie Downer for me is everyone I was excited to see was like mostly just asking me about you.

Scot:

[5:07] All right sir I'm through through Outlet cool what did any.

Jason:

[5:15] Throw out because maybe I'll throw a contrary position at the end but I would say the overall mood at the show was also interesting to me it felt very optimistic like people were upbeat people were.

Kind of like enthusiastic about the year ahead and you know I don't know it was it was a good vibe.

Scot:

[5:36] Yes I was tracking a lot of the social media and it was interesting a long this so you had shoptalk which is like you know it was like one

one track if you will and all the positive things there but at the same time and there was like some some

chaos in e-commerce land where we had the single click checkout thing called Fast kind of falling apart we had,

lot of the rapid delivery companies,

go puff is not one of them but you know them better not be a gorilla and like three or four of them kind of imploded kind of right during shoptalk so there is kind of envisioned you guys like yeah this 15-minute deliveries the future while right outside the conference center it was kind of falling apart.

Jason:

[6:17] There was some version of that there was you know Uber instacart and doordash all talking about instant delivery well a lot of the,

the tenuous VC funded ones were,

we're announcing their their shutdowns and for sure they're there was I mentioned 650 exhibitors I think about 620 of them were payment providers.

Or buy now pay later surfaces and what like if you walked around the show you'd think that was the biggest thing ever and and yeah / your point like you know one fast runner fast as a payment provider

was kind of spinning down and laying everyone off while this while the show is going on so not a lot of talk about that at the show.

Scot:

[7:05] Yeah weird will call I'm excited to hear your take on things let's let's jump in.

Jason:

[7:10] Awesome so I kind of am dividing tonight's talk into two sections the main Keynotes and kind of what my highlights were from the Keynotes and then,

some of the main trends that I sort of picked up on from the show so they will start with the key notes

and all the big media companies you know had a keynote So So Meta was there not with maybe the most senior met a person like that like shoptalk tends to get big names for the Keynotes

and The Meta was like a track keynote from Benjy Shalimar who's like the VP of Commerce which you know big roll it

meta but it wasn't like they had Sheryl Sandberg or someone,

they had Alan Siegen from Google who's like the president of America's Partnerships and they he talked about Google and YouTube,

and you know from those platforms,

meta was like super bullish on social commerce as you would expect but they were highlighting that like hey the biggest growth area at Facebook in the short term is Commerce,

and he specifically called that stuff you talked about all the time that like there's a huge amount of untapped buying intent and Facebook groups,

and Facebook Marketplace and then they're very bullish on the live streaming via reels in Instagram.

Scot:

[8:40] This guy's a genius.

Jason:

[8:41] Yeah so he was he was pitching that and you know he didn't.

Again people don't tend to break news at this show but you got the impression that there was going to be some some new product launches in the in the near future that we're Commerce related you definitely don't get the impression that that,

Netta is exclusively focusing on VR and moving away from Commerce,

and then very similarly Google was like Hey Commerce is where it's at,

you know they always have fun data to share that you know they always share some Trends about like,

search and you know one of the interesting things is they were saying was that while there's a lot of evidence that people are returning to stores as the pandemic abates,

that it's not at the expense of digital it's in addition to digital so they were.

They now have a lot of geolocation data in the Google ecosystem and so they were talking about how like fifty-four percent of shoppers.

[9:40] Have been to five different shopping channels in the last two days so in-store and online and they're they're super bullish on YouTube as a Commerce platform so they're they're both talking about,

lot of new shoppable video formats and shoppable video ads and YouTube is a live streaming platform for influencers.

In you know increasingly they have so many add products on Google that it can be hard to figure out where to put your money and what to invest in and so they have kind of one new,

new ad product they seemed to be leaning into pretty heavily which is called performance Max and the idea is you just close your eyes and give Google its money your money and Google figures out the best places to put up for you.

Scot:

[10:26] It sounds a little suspicious I'm going to get Sr some machine learning in there that just going to magically spend my money for.

Jason:

[10:33] It's got like a bunch of real time optimization and and you know the obviously like you should be cynical about those things I'm a little dubious but I would say that a lot of these.

Real-time allocation and bidding systems like you know they do tend to work pretty well like they do tend to outperform humans that are trying to make make you know decisions based on.

Historically wrong stuff and opinions.

Scot:

[11:01] Yeah the we've been experimenting with some of the stuff that spiffy and you used to do

narrow match and Broad match experiment and then as you as you do some of these under the hood as we watch what they're doing at least you have some visibility it's not like a black box you know it actually seems to be doing a

pretty good job and it takes a lot of manual work out of what some of the best practices that you would do so so I like to poke fun but I do think there's definitely a there there.

Jason:

[11:28] Yeah ya know I tend tend to agree and prove your point like you can put all the parameters you want and so you can run a test and see how it works and kind of,

increment into you know a bigger chunk of your budget,

but then we had like one real retailer on the main stage which was Catholic a who's a CEO of Sam's and she was pretty interesting she was talking

because you don't normally think of Club as being a super digitally engaged category and you know digital being super important to club like the,

the most famous club retailer in the world is Costco who I would argue is why quite famously a digital Luddite,

and Kathy was talking a lot about how important omnichannel was for Sam's and how like successful scan and go has been and that like.

That that specific particularly with younger Shoppers with Millennials that there's that there's a preference to scan and go over you know traditional checkout and the scan and go customers,

shop more frequently and spend more so they're they're the best customers and that Sam's Club is even running ads promoting,

the scan and go functionality and that was interesting to me because.

[12:51] Walmart has kind of tested and moved away from scan and go a couple times I feel like they're kind of leaning back into it at the moment,

but it seems like it's and it's club like they're pretty convinced it's a no-brainer that it's a net positive so so just walk out.

Type technology you know sort of more proof that customers appreciate.

Scot:

[13:14] Nursing J W for the win.

Jason:

[13:16] Exactly and then the Big 3 key notes as far as I was concerned that were most interesting where all the the.

I'll call them local Commerce is what they want to be called now or we might traditionally called them rapid Commerce but so it's the.

CEO of instacart Fiji Simo,

the president of doordash Chris Payne and then the CEO of uber dhara and I can never pronounce his last name but but so that would,

he begets as far as I was concerned and those are you know three interesting companies in our industry right now and.

[13:57] You know at least two of them maybe all three of them you don't necessarily first think of as Commerce.

Or if you do you think of them exclusively is kind of food Commerce and they all were kind of talking about their General Commerce Place so so it instacart,

it's all about becoming the platform for local Commerce right and so exactly kind of like.

[14:19] GSI pivoted from being a turnkey solution to being a platform that retailers used instacart is launching all these white label Standalone services so carrot ads and.

Carrot fulfillment and they're opening their own rapid Commerce distribution centers that you can stage your products in and,

and you know offer 15 minute or 30 minute delivery windows,

so that you know it's kind of interesting instacart was really trying to sell their their stuff as services and and white labeled services and not just for food so across all of Commerce,

the same with doordash doordash seemed to be talking about hey we're we're all general merchandise,

were you know doubling down on using.

Fulfilling orders from stores helping stores either use us as their own last mile service and even helping.

[15:28] Create inventory locations for retailers that are closer to Consumers and Chris Payne talked a lot about,

these delivery promises and it was interesting he was like.

You know we can all do 15-minute delivery but there definitely is not a path to doing 15-minute profitably and there's a lot of operational challenges and he was kind of arguing,

that he felt like 30 minutes was The Sweet Spot that that like he thought it was totally viable the offer,

in a peeling assortment of items for 30-minute deliver and meat delivery in major Metro areas and that that was going to be the focus of doordash.

And then Uber,

same thing like you know right now ubereats makes as much or more than then Uber rides,

and if you've been watching TV you may have seen they have a national ad campaign right now which is pretty funny called Uber not eats and it's you know promoting all the non edible stuff that you can get delivered from.

From from Uber and and that like they wanted their kind of phrase for themselves was we want to be the local business operating system so all the stuff.

That a business needs to do kind of local Last Mile does that get you all fired.

Scot:

[16:49] Chris Payne was that a it does Chris Payne was a team I know him from her.

He always has he was at like MSN and then eBay he's been all over the place he said he's kind of a he started I think it was a CTO for a while but I think he's now more operational.

Jason:

[17:09] Yeah I mean he was good and you know it was interesting to hear from all of them I do think all of these like startups that are you know.

You know I think there is a significant infrastructure disadvantage when when kind of uber doordash and instacart are all weaning into your space.

Scot:

[17:28] Yeah it's hard to hard to compete with them on one side and Amazon on the other it's a bit of a crunch.

Jason:

[17:36] Yeah and it kind of my big takeaway from the these these key notes in aggregate is,

the swim lanes are off by each of these companies might have been born in a slightly different category of the gig economy of you will,

and they you know they each had kind of their home market and they all have decided that the growth opportunity is to expand into each other's market so I think these three companies,

feel increasingly like direct competitors to each other.

Um so that was kind of my Keynotes and then and I did not get to attend every single key note it was a pretty busy show and I was over programmed,

but so then I did attend as many other sessions as I could and here kind of the big themes from my perspective and you tell me of any of these resonate with you.

[18:26] There are a lot of sessions about buy now pay later and like it was very optimistically covered,

in these sessions and Mackenzie did a session where they were sharing some consumer research that you know more than sixty percent of consumers plan to use it I thought all the,

the buzz around being PL was interesting because,

in my world it almost feels like like that that trend has already peaked and is starting to decline.

[19:00] So you know part of a lot of retailers adopted be in PL they originally World on their website now the ruling it out in point-of-sale and a little known fact,

it's more expensive for most retailers than a traditional credit card transaction and the argument was,

that it would bring incremental customers and higher value customers,

um and like that hasn't been universally true amongst my clients that have tested it,

and the kind of the world has changed a little since these Services first rolled out now these services are all showing up on credit reports which,

for a while they weren't and so that was a reason a consumer might have chosen to use this versus traditional credit card was if you know,

they already had a spotty Credit Report or didn't want to risk getting a spotty credit report and there's a lot of talk about like default rates starting to really creep up on these things so I kind of wonder.

[19:57] How durable they're going to be in the long-term especially if you know the economy keeps being challenging for a little while.

Scot:

[20:05] Yeah and one of The Shining examples was Peloton which is kind of Hit the skids pretty hard and I think they were like half of a firm's volume or some some crazy number you know of one of the.

Jason:

[20:19] Meaning a lot of protons where bye.

Scot:

[20:21] That's got a great ahead.

Jason:

[20:22] Installment plan yeah okay.

Scot:

[20:25] Yeah like something like 80% of peloton's had an affirm plan and so but also I think it was by far our firms biggest Merchant.

I've read you know like a very material percentage of a firm's,

what do you guys call it transaction payment volume through those bmps I don't know whatever the metric is of the transaction volume flowing through I think I think Peloton was a big one and it's there in a world of hurt so I wonder if that's creating some pressure on the industry to.

Jason:

[20:50] Yeah at the very least I don't think the world needs as many as we have right now so I would expect at the very least that we're going to see some consolidation in that space and it,

you know it certainly has a place in the ecosystem but there was a while when I was like oh my God the Magic Bullet to every Commerce problem is buy now pay later.

Scot:

[21:11] Yeah there is was there any good consumer Behavior though that you believed or was it all felt like the the buy now pay later guys had just funded it that consumers love it.

Jason:

[21:26] Yeah well yet I mean I don't think the Mackenzie research was funded by by a particular company but you know it was this stated preference survey from customers and you know how much I love.

Stated preference service from from consumers.

Scot:

[21:41] Yeah.

Jason:

[21:44] Side note 99% of all alcoholic say they can stop drinking whenever they want if you want to do a survey.

Scot:

[21:53] Absolutely and everyone says they'll spend more money for something environmental friendly than they never do.

Jason:

[21:58] And a hundred percent of people are of above average intelligence.

Scot:

[22:03] Yes and handsome.

Jason:

[22:05] Which doesn't yet turn out to work out so.

Another big talking point at the show was everybody's favorite word to hate is omni-channel like there were a ton of omni-channel sessions there's a lot of interesting talk about,

people returning to stores like there is mixed messages about the rate of digital adoption declining and I would say.

[22:34] The rate of acceleration is declining but like digital is not diesel is not shrinking in any like absolute basis.

A lot more of these omnichannel amenities and so this was like that was a lot of the Sam's Club talk was about that Dave gilboa who's the one of the cofounders of Warby Parker

he was talking a lot about Omni Channel and the role of the stores in their business model

and how they've kind of gone back to Virtual try on like the I don't know people know that the original plan for Warby Parker was,

that you could use your phone to try glasses on and.

The technology wasn't quite there when they launched the company and people didn't like it very much so they end up having to do all these,

tried for five pair for free as an emergency stop Gap but now they feel like with the lidar and the latest iPhones they feel like the virtual try and experience is working better than the,

the tripe are model and so they're starting to see a lot of uptick in that but people still want to come into the store to buy the glasses so kind of talking about,

Omni channel for the win.

Scot:

[23:45] That's not harmonized.

Jason:

[23:48] Yeah no only 44 what's his name Steve Dennis.

Scot:

[23:56] Dennis yeah.

Jason:

[23:57] Sorry I missed her bifurcation is how I think of them but.

Data is always a buzzword at this show which again I like data as much as the next person but I'm not sure like as a tactic that it's a standalone thing but a lot of people wanted to provide case studies about how they were,

you know leveraging data in new ways and particularly omni-channel data so John strain who's the chief digital officer Gap was talking about,

all the new initiatives that Gap is doing for first-party data and he was arguing that like you know with the two doing personalization with first-party data like they were saying.

[24:41] Did that,

they were able to acquire customers that were like 40 percent more likely to be new file customers as opposed to Labs customers and it had a 30 percent higher order value than,

then kind of their their pre data-driven customer acquisition tactics.

The Steve Miller who's the head of digital at Dick's Sporting Goods he was talking about a lot of.

Sort of the data collection techniques that they were using and how they were getting way you know better outcomes out of personalization they had a kind of cool example I like.

Dick's Sporting Good launched an app called I think it's called Game Changer and what it is is it's an app for your phone to keep score at a baseball game and by keep score do you know what I mean like track all the stats.

People for a long time have Branagh book and like.

Scot:

[25:37] Book yeah.

Jason:

[25:38] Manuel keep score the game so they created this app they give it away for free but what it does is it now like get wet them get 27 million.

Like weekly Baseball fans like in their ecosystem that they then get to Market you know they have first-party data on and get to Market to so it's kind of like when.

Um Under Armour bought MyFitnessPal for example like kind of interesting places where retailers are,

are like building or buying these digital utilities that aren't necessarily directly related to Commerce so I just to get closer to customers that they can then Market.

Scot:

[26:21] Yeah that is color all Trojan Horse strategy.

Jason:

[26:24] Exactly and then Julie Bornstein who's the founder of the yes,

I think a past guest on the show she was kind of talking about her first party data and she was throwing out red meat to all the Consultants that are selling personalization so here's going to be the money quote that you're going to see in every brochure you get for the next year,

our first party day I driven first-party data experiences drove a 75% increase in annual spend a hundred percent annual order frequency and 125 percent better retention rate.

So sounds great sounds like they got some improvement that move the needle for them I'm excited for them,

here's going to be the thing when you see all these personalization vendors that are now pitching that to you like.

Personalization isn't like a binary thing it's not like you don't have it and then you do have it and these are the results you expect when you do have it right like everybody's doing personalization to some extent and like how much,

Improvement in results you're going to get is going to be directly related to how bad your experience was before and how far you improve it.

Scot:

[27:33] Yeah yeah could so it could be just started with really bad bad numbers and then didn't kind of.

Jason:

[27:40] Exactly so I wouldn't I mean I wouldn't be like putting too much stock in these like benchmarks are case studies as like

predictive in any way of what an individual user will get but like of course if you can get more customer data and use it to have more relevant experiences that's going to be you know benefit.

Scot:

[27:57] Now one thing I'm noticing is previous shoptalk sweat with this whole panel format this is sounding much more like individual speaker was that that kind of change of the format.

Jason:

[28:08] Not necessarily so they kind of have a few formats so they have like they have the key notes which is almost always,

an interview that presenter an interviewer and that that was still true so then they have

track key notes and attract keynote is usually in individual speaker or an individual speaker

followed by an interview and then they have these panel formats and so in some cases,

I'm cherry picking what I thought was interesting from one speaker and a panel of three but in a bunch of cases these were track Keynotes.

Scot:

[28:47] Got it.

Jason:

[28:49] And we'll get to the very best track keynote in a minute which you know was obviously mine.

Scot:

[28:56] No bias there.

Jason:

[28:58] Yeah,

so a lot of talk about the best and most cost-effective ways to acquire customers so you know there was a ton of sessions talking about live streaming and kind of the,

the kind of at this point I'll call it the kind of predictable tripe that like oh my gosh you live streaming is huge in China and may or may not be coming to the u.s. but you should be testing it like you know Google obviously had a big keynote talking primarily about live streaming

a ton of practitioners were talking in particular about like their experience on Tik-Tok and successful live streaming

HSN was obviously talking about their success and then there were some,

shop shops is a live streaming platform that you know gave an interesting case study and then,

I would say there's always a couple of vendors that like emerge I don't know if they're necessarily the best or not but like kind of win the show for share of voice

and so every time someone's talking about live Commerce the vendor that they were talking about partnering with was firework which is a enabler of live streaming,

Commerce and so it felt to me like they they did a good job showing up in all these conversations are you bullish on live streaming.

Scot:

[30:17] I am but it's because you have trained me that it's so big in China and then you know it's one of those things,

a lot of the stuff in China we thought would be good kind of come across as not like chat Commerce and why bow and all that so but it's one where you know I see these influencers and I think it will catch on because we've got,

the Kardashians and if they ever did a live stream or something like that it would be huge we just need we need like that spark and kind of a unique American take on it,

probably from a Content perspective not underlying technology but it all has to come together.

Jason:

[30:52] Yeah so I don't like we may need a an updated deep dive on live streaming in China because it's actually,

it's evolving super rapidly like there was this interesting phenomenon at first where all the live streaming was happening on retail platforms so it was like,

kind of influencers that got made famous by Ali Baba and j.d. on their platform so think of it as people were consuming live streaming on Walmart.com not on tick tock,

and then the government kind of crack down on some of these influencers who apparently weren't paying taxes,

and and it kind of shifted the live streaming to the social platform so no like now Dao Yuan which is Tick-Tock in China is.

The destination for live-streaming so it's just been interesting,

but one wave live streaming I really like and I think coach was talking a lot about in their their track he noted the show,

is sales associates as in as micro influencers and doing live streaming either from the store or after hours which.

Scot:

[31:55] Yeah we'll have to get caught up on them.

Jason:

[31:58] It's a related Trend that got a lot of Buzz this show as another way of acquiring customers as micro influencers that's another one that I'm kind of bullish on and there were some good case studies there,

so Jill Ramsey is the CEO of AKA Brands was talking about like micro influencers being their most successful new customer acquisition strategy there are a bunch of apparel brands,

um one that I hadn't thought of that I feel like I need to get updated on more,

Alyssa Walt is the chief business officer for Burton Snowboards so you know all the snowboarding accessories,

and she was talking about they were having huge success using NCAA athletes as influencers,

and of course if you're not following it closely that used to be illegal for or not illegal but like it was a gainst the NCA term so you lose your college eligibility of you made any money as a,

influence our sponsor and now their college athletes are all permission to.

To endorse products and make money and so it's kind of open this new,

new channel if you have a product that's appropriate to be.

[33:13] Advocated by college athlete so that seemed interesting that they were a fast mover there,

and then I mentioned coach was definitely leaning into influencers and particularly using sales associates as influencers.

Scot:

[33:29] Cool aunt heard the NCAA thing yielding some some fruit so that's interesting to hear.

Jason:

[33:35] Yeah I've seen some funny like local case studies where do I go up a car dealership hired some NCAA athletes and as you could imagine,

like some of them are awful and some of them are awesome.

So I just like some of the like the quality of the deliveries have been pretty funny and uneven.

[33:55] So another big talking point that kind of it was not the topic of a lot of sessions but it got mentioned in a lot of sessions including mine was the emergence of retail media networks and I would say that was,

something that came up at a lot in hallway conversations more so than in like content on the stage.

But everybody and their brother you know now has a retail media Network and they you know they're all doubling down and one thing they're all doing is expanding,

Beyond digital search so you know more different ad platforms on their websites but increasingly a lot of.

Media opportunities in stores so you and I were talking about some of these offline like you know you know in-store displays and things like that,

and then also a bunch of these retail media networks are offering dsps and letting you buy ads on Google or Facebook using,

first-party targeting from the retailer so you know you think about the depreciation of cookies in your ability to buy your own look-alike audience on Facebook,

you know you can still pay Walmart to buy look like audiences on Facebook for you and that can be pretty successful.

[35:14] So we already talked about the payment Trends another big Trend that came up a lot we kind of covered it in the,

the Keynotes was the rapid Commerce being a big thing and then what I wanted to put on your radar screen.

When the came up an awful lot a few times in sessions and then a lot in the hallway is everyone is metaverse curious.

Scot:

[35:41] Yeah yeah I read one of the summary as was everyone's talking about metaverse but no one thinks they'll actually be an e-commerce down there so I don't know we're people thinking there's actually going to be some Commerce happening or they were just.

What is this wise.

Jason:

[35:56] So I don't know that's a good question I tried to ask probing questions and like the vast majority of people you talk to don't actually understand what they even meet like there's a lot of confluent,

compilation of terms right like web 3 metaverse,

um blockchains cryptocurrencies and so it's it's you know you're talking to someone about the metaverse and then they're telling you why they invested in Bitcoin and you go well like those are related but they're not the same thing.

Scot:

[36:28] Yeah it's like 13.

Jason:

[36:30] Yeah but so there are a couple case studies from some gaming companies that we're doing some in-game Commerce again Mackenzie like kind of had some consumed like part of their presentation had all these like,

evolving consumer Trends and they again there's a stated preference for take it with a huge grain of salt

um but they ask customers how many hours a day they expected to spend in the meadow verse five years from now and the average answer was 4 hours a day,

and for for Jen's he's the average our answer was nine hours a day.

Scot:

[37:03] You know every pretty much every waking hour or sleeping hour will be the members.

Jason:

[37:09] Yeah and,

you know I'll tell you about my evolving opinion The Meta verse in a minute but you know a really interesting question is what it like is like are we in the meta verse right now like like a zoom call the metaverse is.

But Facebook messenger chat the med over like you know the there's a lot of gray area in definitions.

Scot:

[37:34] Nursing.

Jason:

[37:36] And so if you can't like if all my time on Twitter is in the meadow verse then I might be close to that average now.

Scot:

[37:44] Yeah yeah I don't know I don't think that counts.

Jason:

[37:49] And so I will highlight like I di think we have a metaverse Commerce Deep dive in in our near future,

everybody wants to learn about it and understand it like I've been doing some kind of meta verse 101 Commerce conversations with a bunch of clients,

and like at the very least if you're going to be an early mover and do some piloting like there are a bunch of easy to make tragic mistakes to make early on that you should.

You should be aware of and so it just you know it might be an interesting topic for us to do a deep dive on.

Scot:

[38:25] Yeah we'll put it on the list.

Jason:

[38:27] Yeah and I got corralled by everybody's favorite venture capitalist Andreessen Horowitz and they're wildly boyish on the members.

Scot:

[38:36] Which which one of the folks steamer.

Jason:

[38:40] So they now have like a whole team,

dedicate like that and you probably know them better than I do but you know they're trying to have this spin of providing all these services to entrepreneurs so they have like a lot of kind of.

Share real sources and so you know the pitch to me is like,

you know man if you have any client projects like we can play matchmaker and help introduce you to the right you don't companies in our portfolio and stuff like that so the these were not like Investment Partners these were all operating partners.

There were trying to accelerate business for their portfolio companies that were pitching me.

Scot:

[39:25] I knew they had crypto Focus I didn't know they had a team thinking about the meadow verse that sinners.

Jason:

[39:29] They do have a crypto focus and I'm saying metaverse but I'll tell you what they really have their their their in addition their trip to focus they have a web 3 Focus.

Scot:

[39:38] Okay they're kind of loving it all together.

Jason:

[39:39] Um yeah which there is an important distinction between metaverse and web 3 which would be fun to talk about it we do a deep dive.

Scot:

[39:47] Yeah alright good teaser.

Jason:

[39:49] Awesome,

lot of talk I mentioned this already but there was a lot of talk about the return of stores which is funny because you know I wasn't where stores went away,

but maybe the buzz of the stores went away and you know now like stores are coming pretty well against their soft pandemic numbers and digital is comping,

not as well against their Mega pandemic numbers and so,

there's a way in which you look at it and go oh man you know store growth is unusually high and digital growth is unusually low.

[40:22] I think that's kind of a misunderstanding of the data a little bit in a lot of cases but that was,

a big hallway conversation and then the conversation that I didn't hear that really surprised me I mentioned the mood was really kind of Rosie,

I have to be honest all my one-on-ones with clients leading up to the show have not been Rosy like there's a,

awful lot of concern amongst the folks I work with about what everybody's calling the macros and you know by that they mean,

like inflation persistent supply chain problems you know consistent persistent like economic instability like housing supplies and cost-of-living going up like all these,

these kind of Doom and Gloom Financial measures and then you throw you know gas prices in war in Europe,

on top of all that and I'm talking to a bunch of people that are like really worried about the Financial Health and spending ability of their customer base and there was none of that at the show.

Scot:

[41:24] Yeah yeah you know the consumer confidence numbers taken a precipitous fall which I always use is kind of my barometer and I'm I am also worried about the macros.

Jason:

[41:36] Yeah I mean you know I get these wrong all the time but there was a time early in the pandemic when,

when you know my narrative was like

the pandemics probably going to cause a recession and it's probably going to end with a period of like crazy accelerated spending similar to The Roaring 20s and the irony is,

the opposite kind of happened like the pandemic like drove a two-year period of crazy spending and it feels like it's now ending in her session.

Scot:

[42:07] Yeah yeah it's kind of kind of backwards from what we all thought.

Jason:

[42:11] Yeah I hope that's not how it all plays out but.

Scot:

[42:14] Shown up in the numbers like you know the numbers that you talked about the retail numbers the but so it's either not happening or its early indications and we haven't seen it yet that's just kind of the big concern.

Jason:

[42:25] Yeah yeah no and I will tell you like if and it's going to come up here pretty soon I think another week.

Last March was a mega month for retail and so the comps this March.

Are copying against are really hard number and you know a lot of people feel that like the macros like really started to show up in the consumer numbers this March and so if,

like there's a chance that like the comps are going to be really ugly this March it's going to be a interesting month to watch.

Scot:

[43:02] All right we'll keep an eye out.

Jason:

[43:03] Yeah I did say the last best session best session for last,

I did a track keynote talking about achieving digital profitability right and I so I was the one Doom and Gloom session I'm like hey there is a bunch of macro concern over out there like obviously there was a bunch of extra digital,

um activity and now the challenge we all have to face as we got to figure out how to bring more profit to our digital business and so I did a whole,

track keynote talking about,

um opportunities to improve the profitability and then I had a guest Jerome Griffith who's the CEO of lands and like I did a,

like a 15-minute presentation and then we did like a 20-minute fireside chat talking about the best strategies to make money in this climate.

So I tried to channel my inner Scott as much as possible.

Scot:

[43:56] What were some of the what are some of those strategies.

Jason:

[44:00] Um I mean it's it's black and tackling stuff we kind of you know talked about you know typical framework of,

reducing cost getting more customers you know generating more revenue from each customer and then we kind of hit on,

our favorite tactics within each of those three buckets Jerome like you know by far feels that the,

the easiest best place to start is on the cost controls right and he's in the apparel space historically the apparel space does a horrible job of demand forecasting.

[44:36] So they make the wrong stuff and they make too much stuff in that really hurts costs and you know just just fundamental costs of goods and and having good rigor around controlling,

manufacturing cost is his kind of home base but like the part of his.

[44:56] Feedback that was super interesting to me is lands in was a direct-to-consumer company so they were a company that was born as a catalog that sold 100% direct-to-consumer,

they got acquired by Sears so then they were exclusively available on the lands in catalog and in Sears stores,

and they were acquired by Sears I greatest years was starting to get distressed and turning into a fast Eddie Discounters and so suddenly lands in which hadn't done any discounting was heavily discounted,

and then they got spun off from Sears and you know tried to recover their non discount price point and,

they expanded into a bunch of other channels so today you can buy lands and direct from their website which is still about 50 percent of their sales but they sell wholesale through Macy's and Kohl's,

which you know our discount channels and then they they also sell 1p on Amazon and so it was interesting he talked about wholesale and marketplaces being,

a very important and vibrant customer acquisition strategy for a direct-to-consumer company and so he felt like.

[46:07] Like the customers that he was meeting at Kohl's were incremental to the customers he met directly and that like partnering with coals and Macy's was,

way more cost-effective way to acquire customers then Facebook ads.

Scot:

[46:20] Nursing and then I like the marketplace take that's a that's a good one.

Jason:

[46:24] Yeah yeah yeah so he I mean he was kind of like you got to be where the customer is control your costs,

and then you know there are things like if you are direct-to-consumer like you should launch a retail media Network and try to supplement your,

your Revenue with those kinds of tools and you know I did some stuff just on basic block and tackling and on mobile experiences that we all still get wrong and improving mobile conversion and stuff like that.

Scot:

[46:54] The was there a standing ovation at the end of the session.

Jason:

[46:59] There was there was because I said I was going to shut up now and that that generated incredible standing ovation.

Scot:

[47:05] Did you do the whole Spiel of if you like this I've got 290 hours out there on the internet for you.

Jason:

[47:11] I did but it's 3:00 because even though we only have 290 shows the average one is longer than an hour.

Scot:

[47:17] Nice yeah yeah good yeah some guy we interviewed somebody's like I've listened to all your podcast is like I'm not really sure yet.

Jason:

[47:28] Yeah although I will tell you I ran into a ton of people so many nice comments I'm so grateful like the thing I feel bad about when you miss a show is,

just so many random people like recognize our name on my badge and I had a Jason and Scot show badge,

and like we're honest with Sinners and had great feedback and I was just found out talk to all these people and and it's nice to hear that people appreciate what we do and if you don't know the most common,

comment I get about the show is that oh yeah I listened at 1.25 speed or 1.5 speed while I'm at on my exercise bike.

And I want to say for the first time ever I met a guy who's a regular listener to the show that said he listened at 2X and that I found I sounded kind of sleepy and tired in real life.

Scot:

[48:18] This is in your holding two coffees did you have the thing where you're speaking and someone recognizes your voice and they're looking around like a weight had I've heard that voice before that happens to us it.

Jason:

[48:32] It's Starbucks every single time because but I mean hey I spent a lot of time standing in a Starbucks line and I spend a lot of time talking so a lot of people have the chance to hear my voice and go wait a minute you sound familiar.

Scot:

[48:43] Did anyone make fun of your title that's my favorite part.

Jason:

[48:46] So yes but like in fairness there mostly people that are friends of yours or mine that just like on team Scott.

Scot:

[48:55] Okay they're just just carrying on the chief digital retail analytics customer Journey officer.

Nice cool did you guys did your company have a been big shindig was it a good show for you guys.

Jason:

[49:11] It was it was it was also fun because I had a fair amount of co-workers their it was fun to spend time with them and we had a team dinner that was awesome.

The most purposes agencies wouldn't necessarily exhibit but we own a company that helps

Implement a lot of retail media networks called Citrus ad and so they had a booth there so I it was fun to hang out with them a little bit their founder by the way we might have I try not to put pupusas people in our show very often but we might have to have him on because

he's a two-time very successful entrepreneur he tricked us into buying his his most recent company.

He also is a former professional Australian Rules Football player like legit.

Scot:

[49:58] Oh ah yeah that's that weird football that they have yeah it's kind of fatter and stubby or than our football.

Jason:

[50:06] What version of football is not weird that okay yeah.

Scot:

[50:08] Cool well yeah and we should talk about if pupal sis needs to acquire any car washes with you you and I can have that one offline.

Jason:

[50:18] Yeah yeah for sure you I get as you can imagine that's that's most of the cycles that that I spend it purposes is pitching on us leaning into the car wash space.

Scot:

[50:28] Cool did you get a chance to walk through the booths and the the show floor and see Annie was that well traffic to an any any kind of.

Jason:

[50:38] Yeah it's always it's always hard to tell I do think shoptalk one of the things shoptalk does well is two things they try to have some events in the floor.

so so you know like the lunches and stuff you kind of have to walk through the tradeshow to get to the lunches so they try to artificially create some traffic but one thing I really appreciate about shoptalk is,

they have down time in the agenda when there's no track or keynote content like they have like two hours a day and part of the reason is they have this

this function cut these out meet up so I can retailer can attend shop up shoptalk for free if they agree to take like five meetings with vendors and then these vendors pay for these meetings

and so they have to have a window to do those meetings in and so I appreciate that,

it creates a more natural opportunity for people to walk the show and discover vendors without feeling like you're missing something.

Scot:

[51:36] Crinkle how many retailers did you meet with.

Jason:

[51:40] Yeah so I do always try to walk the show and I do try to stop and talk to some booths I got to be honest there's a weird dynamic Scott and I feel like you would appreciate this but Walking the Floor makes me feel old because,

I walk the floor and,

here's basically what goes on in my mind I don't recognize the name of any of the vendors and then I agreed to sign for a second and then I figure out that there are vendor I know super well that's changed their name three times.

And so it's like I feel like the Wikipedia that's like remembering oh yeah you used to be this and now you're this and now you're that and then I know I go oh and I know these 3 people that work there right now.

It is now the case that all the people I know that work at all these vendors are too old and Senior to be in the booth so.

I know I never run into any folks I know in the booth that's always the the Next Generation.

Scot:

[52:33] Yeah and then I'll get excited that you're a retailer and then you're a podcaster and they're like.

Jason:

[52:39] Yeah and that's my my unfulfilled young Lame Game I play with all of them is.

You know by and large they're like so what do you do and I go I'm mostly just talk about this stuff all the time and there and they like think I'm lying when in fact that's exactly what I said.

Scot:

[52:55] The new about the 3:00.

Jason:

[52:58] Yeah exactly.

And then in a couple cases it Dawns on them wait a minute you're the Jason and Scot show and they like chase me down in the hallway and go you I listen to your podcast.

Scot:

[53:08] Very cool.

Jason:

[53:10] Then we go into those sleepy tired thing anyway but in the interest of bringing the average down I feel like I've covered all the show do you feel like you caught up on everything you missed by not being there.

Scot:

[53:23] I do the one thing that I've heard chatter from the folks I talk to is this

continued pressure on Shopify you ever seen they announce their last quarter's earnings Q4 their stock has been on a

precipitous slide that they haven't seen since their IPO and like 2016 I think,

maybe 15 was that that come up at all or no.

Jason:

[53:50] It didn't come up a lot and I'm trying to remember like I actually don't think they had a booth at the show which is interesting.

I could be wrong on that but I kind of don't think they had had a big booth,

and yeah I mean you know obviously they're totally lumped into this whole category of companies that did amazing in the beginning of the pandemic and then like you know seem like they acted like they would continue to,

to grow that pace and obviously couldn't and then you know the their stock got punished for it.

Scot:

[54:23] Yeah yeah and there's been a lot of Wall Street notes out saying you know that I think what freaked everyone out is the fact they're going to invest in infrastructure meaning warehouses and there's a lot of Wall Street folks trying to say.

It's not that bad it's only a billion dollars but I remain skeptical that that's going to be enough and then,

yep so we should just wondering if that was.

Jason:

[54:48] Yeah I mean if anything I would say there are a lot more fulfillment companies that would be competing with a Shopify fulfillment Network and a lot more you like I'll tell you where Shopify has a ton of competition at this show are like.

POS systems which is actually a meaningful part of shopify's offering now and you know like kind of.

Solutions as a service besides the e-commerce site the payment systems and all of these things that you know Shopify does and I will say it's kind of funny.

I still think like a lot of people try to describe themselves as the Shopify of X which.

Like doesn't sound as good as it did a couple years ago and you still hear people trying to say like we're the word be Parker of X and I'm like have you looked at worry Parker stuffers.

Scot:

[55:37] Yeah how about how about some of our friends from The Headless Commerce industry was there a lot of a lot of Buzz there with the.

Jason:

[55:47] Yeah,

so those platforms were there in full strength Fazal and fabric had a big presence there you remember they raised some good money right before the show,

we had Kelly on from a Commerce tools you know a number of episodes ago and he talked about the mock Alliance and that mock Alliance,

has really gained a lot of traction like I'm seeing a lot more and more vendors emerging that are now members of the mock Alliance so it seems like.

You know that that's not just a marketing thing that's kind of like a legitimate Trade Organization for all these headless providers.

Scot:

[56:27] Nursing was there like common badging throughout or something like that.

Jason:

[56:31] Well yeah there's a mock Alliance logo that was on a bunch of booths I they may have had events I wasn't able to like attend any of their.

There are social events but yeah it seems like it's getting traction I don't know if this is a perfect show for that like.

There was an ERA when like everybody needed a platform you need to go to a show to meet vendors and find out about platforms like I kind of think the average attendee here has a platform today and so you know maybe there's some that are thinking about switching.

But I have a feeling that those booths have gone a little bit more from customer acquisition to.

Customer relationship management and retention at the shows.

Scot:

[57:11] Yeah yeah nursing will cope well we appreciate you going out and braving the wild environs of the Las Vegas hotel circuit and this the Starbucks to report back to us.

Jason:

[57:25] It was my pleasure and if she's listening definitely congratulations to Christina Gibson and the whole team at shoptalk I do think they put on a good show and it's,

like I think it's definitely set itself up as the preeminent kind of digital Commerce show in our industry now.

[57:59] Yeah and until next time happy Commercing.

View Details

EP289 - ShipBob Co-Founder Dhruv Saxena Dhruv Saxena is the co-founder and CEO of ShipBob, Inc. ShipBob is a tech-enabled third-party logistics provider (3PL) that fulfills e-commerce orders for direct-to-consumer brands.

We discuss ShipBob's origin story, how the e-commerce fulfillment industry has evolved, as well as the challenges and implications of Amazon and Shopify's various fulfillment initiatives.

Episode 289 of the Jason & Scot show was recorded on Friday March 18, 2022.

http://jasonandscot.com

Transcript

Jason:

[0:23] Welcome to the Jason and Scot show this is episode 289 being recorded on Friday March 18 20 22 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott Wingo.

Scot:

[0:37] Hey Jason and welcome back Jason Scott show listeners

Jason as you know we did a Amazon Fulfillment deep dive a couple weeks ago and that was quite a popular

Topic in episode and we've been getting a lot of questions from listeners about what's going on in the world of

and we are now living in a world where products used to be if you get it in a week that was amazing and now anything that's longer than 2 days feels like a lifetime

so we thought it would be good to bring on one of the top startups in the Fulfillment area the shipbob and we have with us the CEO and co-founder of shipbob dhruv saxena dhruv welcome to the show.

Dhruv:

[1:20] Thank you so much Scott and Jason for having me excited for our conversation.

Jason:

[1:24] We are looking forward to it as well I'm getting tons of complaints on the feet already that people were expecting Bob to be on the show today so you'll have to tell us how it became dhruv started shipbob.

Dhruv:

[1:36] Yeah for sure I'll give you a quick back story on me if that's the opening question and tell you how did we come up with the name shipbob.

Jason:

[1:46] That would be perfect yes I asked it very awkward we Scott is laughing at me on the back Channel.

Dhruv:

[1:51] Yeah so.

Quick back story on us you know I grew up in Delhi India came to the u.s. in 2007 to pursue engineering my co-founder on shabaab device is also from India we've known each other all our lives.

And so we after we both did an engineering in the midwest here I went to Purdue we came back to Chicago and started.

I'll booking in a full-time jobs at software programmers and on nights and weekends as most Engineers do.

We were trying and experimenting with a bunch of thought of ideas and one of the start-up ideas was in e-commerce.

And be Engineers we were able to automate effectively everything in that e-commerce business except the part around shipping and Logistics.

And so every time you would have a bunch of folders we would have to run to the post office here in Willis Tower Chicago in the basement,

they have a post office and we would have to stand in line and basically ship out those orders out and that became the most manual and painful part of our e-commerce business.

And we wanted to find ways of automating that.

[2:58] And we would call up a bunch of these existing companies 3pls who helped companies with the shipping and Logistics take all three pills third party Logistics providers.

And none of them wanted our business because we were too small for them,

and so that got us thinking as to hey how do others small to mid-sized e-commerce businesses figure out their shipping and Logistics we realize that there really isn't a good alternative for businesses like ours who are you know ramping up e-commerce businesses and that caught us into,

thinking what should pop can be.

And how did the name come about you know so when we started thinking about building a company for helping businesses with their shipping and Logistics needs.

We were going for like like people want fast shipping so we should have ship and a fast you know like an animal name or something like a ship park or a ship Cheeto something on those lines so that it conveys.

That heylia company which helps you with fast shipping and all of these that domain names were taken,

stop after a while godaddy's recommendation engine you know started recommending you no other alternative domain names and one of them was shipbob for 299 or something,

and so we say you know we don't have money but this seems like a cool name and so if you just turned shipbob.com for 299 and that's the story of her name and so now we have a good messaging around hey,

Bob Means bending over backwards for your shipping or Bob can be a plumber Bob can be you know any

use for gyves but as Bob kennels to be a shipment so that's like the marketing angle on shipbob.

Scot:

[4:24] Very cool so it's interesting because this kind of parallels a lot of a lot of companies in e-commerce they start with people building e-commerce stores and then they're like,

this part of it stinks I'm just going to focus on solving this so what is your original e-commerce store do.

Dhruv:

[4:42] So we started were doing a lot of like printed photographs and so you know this is like 2013 2012,

bear Instagram had just been acquired by Facebook for like a billion dollars and so we thought oh wow that's photo-sharing seems to be like a heart,

market right now and Instagram is all about digital photo sharing so what if we brought back the Retro way of sharing pictures which is people would print and mail pictures to each other so our e-commerce business was that you would send us a photo.

Honor text bot we would print that photo we would frame it we would write a message at the back of the for any personal message you wanted and mail it to your friends and family all across the world.

And so that was sort of you know our big idea then like physical photo sharing.

Scot:

[5:28] Cool car like frame bridge I think does some of that now cool yeah so then you you did you wind that down as you kind of pivot it over to the Fulfillment center.

Dhruv:

[5:39] Yeah it won't down on its own to be honest because once we started focusing on on shipbob E that business wasn't really taking off with shipbob first was was so we started spending a lot more energy on shipbob.

Scot:

[5:52] And then so that was 2015 earlier kind of also 2014 yet.

Dhruv:

[5:58] Now 2014 2015 we got into this incubator called y combinator Scott so.

That allowed us to you know quit our full-time jobs because y combinator gives you like a hundred and twenty thousand dollars so that was enough money for us to like put in you know our notices on a full-time jobs and go all in on shipbob.

Scot:

[6:20] Brickell so you got no Y combinator and then that usually requires you to go out to Silicon Valley for a period of time did you guys do that or are they at some point they introduced remote but I think that was later.

Dhruv:

[6:32] Much later yeah no that's a good question so.

This is another great sort of Peace around you know building startups and Chicago so when we go into YC.

We were one of the very few companies you know.

Who did not relocate to California so it was it wasn't mandated or Partners there were very comfortable we okay with us traveling back and forth.

So every week on Tuesday they have these partner meetings but you go and tell them the progress you've made.

And so we would fly every Tuesday morning to our Mountain View California do our pitch and you know and learn and then come back and because,

we had to fly and I was you know what a red eye flight Etc it was a lot of effort so we would always try to make sure that we have enough progress that we've made in a given week

to make that trip worthwhile otherwise we would go there and we will just come out looking like we didn't really do much and that would be a waste of our time so that pressure of making that trip by productive I think in the early days for stars to work way harder,

that may be a lot of other companies simply because you know we were putting a lot of effort and these so and capital in making those trips and but we headquarter the business in Chicago.

I'll see you know which turned out to be you know pretty good decision I guess in hindsight.

Scot:

[7:49] Yeah and then you know what's really interesting and I kind of live this every day so I'm curious how you

path you took here as software people you know we love to solve things with software and at some point

shipping is not a software problem right you can you can build the world's best shipping but at some point some human has to and maybe a robot but you know some something has to move a package from point A to point B

sometimes Point c d and e and then someone has to you have this middle Mile and this last mile when did you guys

realize that you're going to have to actually have like fulfillment centers.

Dhruv:

[8:26] Um right from the prions yeah pretty much.

Because you know coming out of the running your own e-commerce business and then also a couple of other startups before then.

Like.

Be being Engineers yes we were very accustomed to writing a lot of code and then just hoping that users will show up and none of the startups are for shipbob for us worked out,

and one of the realizations that would be in the way had is that just because you build it doesn't mean that people will come,

and so you would have to spend a lot of your time and energy in making sure that you actually spend you know time on sales marketing and distribution and so when so we were very.

Early before even adding code we were talking to our customers and these customers you know who would eventually become users or loyal users.

Told us very clearly that we don't really care about great software what we care about is a great product or a great service which helps us in packaging and shipping so that influence the decision-making right.

We can't be a pure software company these Merchants are paying us because they need great fulfillment service so having our own fulfillment centers probably requirement for us before we can start scaling.

Scot:

[9:36] Got it okay cool so you go do y combinator and then women did you like build your first like when did you have your first fulfillment center.

Dhruv:

[9:48] So right at the you know when you started the company like our office and my apartment became sort of a file template.

Fulfillment center very Loosely here so you won't really be able to.

Call the Department of proper fulfillment center but you know it did the did the work so there was enough room in our apartment and enough first office.

Which is like I think thousand square feet for us to have some room for people to send us their product and we would store their inventory.

And then have couple of hours basically pick pack and ship you know those boxes out so my apartment was on the 31st floor so every evening we would get a big.

Little trolley and put all the packages and that's all a and then use the freight elevator to bring those packages to the ground level where Michael ejector words you know use the car and we'll take it to the post office.

Scot:

[10:41] If you're in Jason's building he would have reported you as like a probably a drug dealer some suspicious Behavior going on up on the 31st floor.

Dhruv:

[10:50] Yeah no.

Jason:

[10:51] I'm just grateful the city planners that do the zoning didn't hear this story.

Dhruv:

[10:56] Yeah you know it.

Scot:

[11:00] It's not illegal if you don't get caught.

Dhruv:

[11:02] You know we did get in trouble in the early days with the local post office so what would happen is again you know because we had been.

We didn't have a lot of successful startups before shipbob Beaver like way paranoid about finding customers.

And we none of us came from the sales and marketing background so we tried to run for this position where you can we find customers in the most cheapest and fastest way possible and the obvious answer to us was let's go outside the post office because there's always a line,

people don't always seem very happy or to go to a post office and so if he.

Can find a few e-commerce merchants in those lines we can pitch them that idea while they are still in the line and convince them to give us their package and not go to the Post Office the second webinar.

And so we spend the first three during by see it is like a first three to six months of our shipbob basically standing in lines outside different post offices in Chicago to convince people walking in that shabaab is a better alternative than you going inside the post office.

So the post office Forks very nice people thought that we were trying to take business away from them.

[12:10] So they were sent they would call up these post office apparently post office has its own police do something so they would send out these post office cops,

who would comment she was away and so we would just go from one post office to the other like based on you know which one had last called the cops on us and so,

I think some post office might still have a picture of Jessica and the way to make sure that they don't show up again.

Scot:

[12:33] Hello.

Jason:

[12:35] Those cops are federal agents by the way they're not messing around.

Dhruv:

[12:38] Oh man I hope they did especially because we were immigrant Founders so we can't get in trouble with the the federal police.

Scot:

[12:49] The federal jails and I hear pretty nice though so good they have tennis and stuff.

Jason:

[12:54] What we're going to have a separate episode about how Scott knows that.

Scot:

[13:00] Okay cool so you did your wife see then you came back to Chicago and then maybe kind of update us like the bullet points to where we are today.

Dhruv:

[13:10] Yeah so once we you know got back to Chicago post why see we were fortunate enough to raise a seed round of a million dollars and so that allowed us to,

you know take that top pill and hire a couple more engineers and hire a few more sales people and then expand the business so we opened up a warehouse in Chicago.

Where we were headquartered and then we quickly expanded to New York as well so we added a location in Brooklyn New York.

[13:38] And based on the progress that we had made you know in Chicago and New York and remember let's also limited so it requires Capital because you're opening up these fulfillment centers at the very beginning and you're also writing a lot of software which powers.

The inside operations of the Fulfillment center and so we have to raise Capital simply by the nature of the business we are in also fulfillment I'm sure like,

all your list has no it's not like a software business it's not an 80% gross margin business we have very tight margins,

and so you are you require a lot of captains in this business to scale and so every couple of years we've had to raise Capital simply for us too,

add investment dollars into building,

either the software which powers are fulfillment centers or to open up our own fulfillment centers and so The quick summary of f Bob is today is that over the last five years or so,

we raised you know close to 400 million dollars or so of venture capital,

we've added you know be as close to 1,000 employees now a lot of it on the product and Engineering teams and sales and marketing team for us too.

Add many emotions to our network but also write a lot of great stuff in which power is the back end of almost we know back-end systems of all of the e-commerce businesses using a platform.

And the business strategically also has you know evolved where we don't now need to.

[15:02] Operate our own fulfillment centers because we have four of our own social incentives each one in Chicago New York Texas and California so we kind of know how to run fulfillment centers we now partner with existing.

3pl Zone fulfillment centers who have empty capacity we bring in our software our know how our physical infrastructure into those locations,

we bring them up to the shipbob standard and then we are able to Route our Merchants into those locations and so the business now requires a lot less capital in scaling the infrastructure side of things

but not all of that Capital goes towards you know basically growing out the product capabilities and adding new Merchants into our Network.

And we have fulfillment centers in the u.s. in Canada in UK Europe in Australia.

And we of course added a lot of capabilities on a network all the parts on this wall so truly today now shipbob is a global.

Omni-channel fulfillment solution for a Merchants where we can we are probably you know on power if you were starting an e-commerce business and you wanted to compete very effectively with Amazon and Walmart supply chain we are a great alternative.

Scot:

[16:13] Pickle the way I explain it let me see if this pencils for you so if someone asked me how this you know how

this kind of what I would call your one of these next-generation fulfillment companies my pitch is you had these 3pls but they were really designed for

you're kind of almost like a real estate thing where you go in and say Hey I want a corner of this fulfillment center and I'm going to lease it and do X Y & Z and then Amazon's Innovation was FBA where it was you know what much more aligned with the

the e-commerce model of yes I want you to hold my goods but they're going to turn over quickly and I want to pay more of a per transaction kind of a thing,

and I also want a lot of flexibility about how

fast I can get products to Consumers so 3pls were in this kind of old world where they weren't really built that way so then part of what you guys did as you built your own fulfillment centers with this new model and then you can kind of take that model and put it into Old 3pls bring them up to kind of like the FBA level of

above standard is that a fair summary of how you explain shipbob to other folks.

Dhruv:

[17:20] Yes that is very real articulated Scott I might actually use that going forward and and the only piece I would add to it is,

of course you hit on the fast piece of it which is very relevant for a merchant,

the second big element of wine Merchants choose us and our network is our ability to customize the unboxing experience which is unique for that particular brand so you know when you order something on Amazon it shows up in Amazon branded box

for a merchant they want that unboxing experience to represent their brands you know.

Ethos and the brand value so whether that's a custom box you know whether it could be eco-friendly material it could be custom gift notes accustomed shipping labels Etc the ability to customize that you know that.

Transaction is very relevant for them it's almost on par alongside speed and and so that's the piece the second element of.

Of customization I guess that should Bob's been able to unlock that I think FB it doesn't offer.

Jason:

[18:18] Got it and just to sort of clarify for listeners like so the goal then is it feels like it got shipped by the vendor right so it has whatever

packaging the the manufacturer would want to use and a bill of lading that has their logo and those things on it as opposed to I ordered something from cuts and then I got an invoice from shipbob or something like that.

Dhruv:

[18:41] Yep exactly right we want to be.

In the background you know where the Shopper is building a direct relationship with the brand and and the Shopper is agnostic to whether shipbob ships or whether the brand shifted.

Jason:

[18:58] Yep so and just to kind of frame this like back in that time frame the the idea of B2 C3 PLS was not common today

it's a it's a pretty crowded Market space there's a lot of a lot of options but they're back then is got kind of pointed out like there was a thing called 3pls but they were more of like a B2B service really right.

Dhruv:

[19:22] That's right yep and so,

the reason why even we were able to even build a business here is because majority of the 3pls out there were focused on the palette and Palette outside our transaction because most of their customers,

but the bands who was selling predominantly in retail stores like Macy's no storm or Target Etc and so the concept of this High Velocity two to three units per order was very foreign to them,

and all of the infrastructure was designed to store large number of palettes worth says having inventory in each has or in single units stored in bins and shelves.

And so far from that perspective,

the reason you know if you are doing pallets and pallid out like getting into e-commerce and then getting working with small and mid-sized e-commerce businesses where you don't make a lot of money for customer Justin.

Pencil for these for these B2 B3 Tails because they were used to having.

A small number of very large customers and then designing their entire operation inside the building's only for that few number of merchants because they would be able to make a you know the entire earnings ones from that limited set of merchants,

word says it shipbob you know we we have a whole large number of merchants none of our Merchants you know are these are all birds or these massive Brands but these are growing emerging bands and.

[20:50] Productized what is very much like been away service-oriented business.

Jason:

[20:55] Yep and so the profile of the typical shipbob customer is a start-up that's intending to sell direct to Consumer mostly through their own website is that a fair characterization.

Dhruv:

[21:08] That's how we got started his and so you know today that is definitely evolved as a capabilities have grown as well so,

I would say like if you have to break down the merchants that we serve are so,

on one end of the spectrum we have these Merchants you know they could be ought to pronounce what just getting started and they're doing anywhere from you know less than a hundred thousand dollars of annual revenue on the website all the way up to maybe a million dollars or so.

So that's one and then we have Merchants who are from 1 to 15 million dollars of gmv,

and they are predominantly selling on their own website but they're also selling on marketplaces like Amazon eBay Walmart.

And then we have a mid-market segment of merchant these are relatively established Brands they are doing anywhere from 10 to 150 million dollars of gmv across all the different channels that they're selling on,

and for them you know they are in e-commerce which is direct-to-consumer they're also in marketplaces but they're also in retailgeek,

and so they and they also are thought getting to be Global and so for them,

they use shipbob because under one umbrella they are they get not only great technology but the Fulfillment solution is able to carry it across all the different channels that they're selling on,

and it allows them to manage inventory Under One Roof so in the.

I guess the value proposition over the last six years for shipbob has definitely evolved as a capabilities have grown I've grown.

Jason:

[22:33] Makes total sense and I'm assuming so in my day job one of the the new categories of business that I see you like getting into direct fulfillment more are

traditional products that used to exclusively sell through wholesale and in some cases these could be quite large companies

that are used to sending pallets to Target and Walmart and now they're starting to sell some of their own goods from their own website and just like those those startups from 2014

they've got to figure out how to do the each's Fulfillment and I think they turn to folks like you as well now.

Dhruv:

[23:06] Yeah absolutely and so you know that's the exciting piece of direct-to-consumer is that.

The technology and the infrastructure needed for you to start your own e-commerce business and be able to reach your consumers is has massively evolved so these traditional.

You know Brands who are predominant retail now they are able to participate in e-commerce in the pretty meaningful way as well and they have access to Great infrastructure and.

I think you know the.

They've also realized that the infrastructure that they need it for their retail shipping doesn't look anywhere close to what they need for the direct to Consumer so on the record consumer side maybe you choose Chopper 5 for your front end platform.

Are you choose to do a lot of your advertising and marketing on through Facebook Instagram Snapchat social media is the predominant digital marketing channel effectively.

And then you choose shipbob for your fulfillment and and running your supply chain and maybe use a form or you know or care enough for your buy now pay later like those credit financing options

and so this technology stack that you need to run your direct-to-consumer e-commerce business you know now exists,

and is completely different from what you might have used for running a full wholesale retail operation.

Jason:

[24:27] Yep and I do want to just double-click on one other thing before we turn to two marketplaces and the Frenemy situation there but the

so a couple of your advantages why you develop this software to make the Fulfillment center much more efficient than traditional ones were and obviously efficiency is a huge differentiator and in the Fulfillment

you you enable all this customization and personalization

which is a better match for The Branding that all of these clients want to do one of the other things that I think of is.

3pls from that era that was sort of problematic and that kind of Amazon disrupted is like they used to make you manage your own inventory so if they had to.

Fulfillment centers you as the merchant had to decide how much good you are sending to the West Coast and how much good you are sending to the east coast and and you sort of had to do all those things and.

Amazon through their fulfillment by Amazon kind of took that that

that Inventory management burden away from some of their their merchants and sort of did all that for them and did the load balancing and all those sorts of things

so do you do that like you now it sounds like you've got four of your own fulfillment centers and a bunch of virtual fulfillment Centers do you do all of that sort of AI based

inventory allocation for your customers as well.

Dhruv:

[25:56] Yep absolutely so and that's sort of I guess we can break that inventory allocation into two parts so one is choosing where in the network,

to send your products from your manufacturer.

[26:08] And so that's based on you know we provide all of that information upfront to a merchant base where you know based on historical

purchase data that we captured from all the different sales channels that you connect into Shabbat we can be have a model that,

Delta to fairly well as to how much inventory to store in which parts of the network,

and so that's and so you can but we don't necessarily mandate that because for these brands

you know they want to be one them to have the ability to make those decisions for themselves we provide them with all of the information and if they choose to they can have shipbob distribute that inventory for themselves for them or they can do it directly from the manufacturer

my following our data you know that we give out to them so that's on the

first half of like sending like the right amount of inventory to the right location so that's a little bit of a optionality for these bands.

And then the second part of it where we do a lot of the work ourselves is once we start getting these orders into our platform once you buy something from our,

from a branch

choosing which fulfillment center that particular order gets routed to and what shipping carrier is used for that particular transaction that is something that we that we definitely do you know

in the house and so that is a pretty important element of it because as a brand you might off be offering two day shipping on your checkout page.

[27:32] But you actually don't want you know to be using Ups 2 day or FedEx overnight to do that today transaction because that will be very expensive,

and sociable because we've captured a lot of far,

carriers performance data over time we have a pretty built out model which tells us hey if we even if you use this local Regional carrier for this particular order we have a very high likelihood it will get delivered in 2 days or less

and we don't have to pay for a UPS guarantee today service and so we are able to bring down the cost of two days significantly down at this almost the same price point

as a USB as ground shipping which is a total which is the cheapest form of shipping simply by placing inventory

in better you know better placement of inventory and a fulfillment centers but also choosing where which fulfillment center ships that particular order and what shipping carrier we use for the transaction,

for that was a little long answer but I think that is sort of the secret,

Elemental why brands of any size are able to offer a two-day next a sort of a shipping experience on the checkout page.

Scot:

[28:37] Yeah if that's helpful at

when I've talked to some people about this kind of stuff they're always like how hard could this be like this comes up in the

Shopify so a lot of Shopify Wall Street folks you know they'll say well why is this so hard and you know one of my favorite things about e-commerce is going to

tour warehouses because once you get inside of warehoused you realize that this pretty complicated and the way I explain it is once you've committed to a.

[29:09] Yo an asset like a warehouse and all the people in everything then it becomes an optimization problem in optimizing warehouses is pretty complicated right so let's let's take you guys have

X number of customers in a fulfillment center let's just keep it one of the ones you own and operate to make it even

simpler and you know there's a there's a bazillion questions like how do you if you take

customer 1 through 100 do you intermix there things how do you do the packaging you talked about how do you

how tall are the shelves do you use conveyor belts do you do two floors or one floor and your fulfillment center

so what's fun about that is an engineer there's a lot of fun problems to solve their and it's a lot,

you know your explanation of the shipping is interesting because that's like yet another one so a lot of people feel like this is too easy is really easy and then they kind of run up against the the the hardness of it and they kind of have to

step back and redo it do you have a point of view of.

You know what Shopify kind of did it seem like they tried to do a software-only kind of a solution and it kind of didn't work and now they're trying to get more involved in it and you have a point of view on that.

Dhruv:

[30:18] Yeah for sure but you framed it really well Scott which is.

Once you you know once you go inside the Fulfillment center the number of problems of that that you can potentially solve or almost endless,

and the reason it's important to attack these optimization problems is fundamentally you know fulfillment is not a software only problem.

And it doesn't come with 80% gross margins

and so it's in your best interest to optimize once you get to certain scale because every cent and dollar you share from those operating costs is a dollar that flows to your bottom line

alternatively is a dollar that you can then reduce you know your cause to your brand which then allows them to reduce their fulfillment costs and that way allows them to offer free shipping which then drives,

you know more sales on the website which then drives you no more orders into your platform which allows you to get to scale faster.

And so optimization is you know is key for you to be operating at the lowest cost possible because there are advantages of doing so.

And so there are a lot of different ways to get to Optimum to try to optimize but if you don't own and operate your fulfillment centers at least the onset you simply don't know what problems to solve,

and so at shipbob you know what I believe worked really well in our favor is because we operated our own fulfillment centers we saw firsthand.

[31:45] What are the consequences of the choices that we are making.

And that involves you know the physical infrastructure do we mix products of different merchants in the same aisle where in the,

we're in the Fulfillment Centers do we place the fast-moving skus do we take the loaf slowest moving skills and put them at the back of the Fulfillment centers away from the rest of the merchants inventory or do we place them high up in the,

under racking system how do we think about Labor planning is Mondays.

[32:15] 20% higher than Friday so do we need to staff up in the morning shift Etc and they are all and material handling and and Idol walking is such a big.

Cost of the Fulfillment centers operations how do we try to minimize that and at what scale

there are hundreds of these optimization decisions that we've had to make over the last seven years,

which then have been productized in our software in our warehouse management system which then now is being deployed across these Partners sites,

and so I think if we were to

to you know jump ahead and just do our partners sites that we don't own and operate we don't own or operate on a day-to-day basis

we would have missed out on all of these optimization decisions that we made over the last seven years which then allows us to operate,

at a much lower operating costs than any of the competition so I think Shopify I don't know,

you know the products are actually there but I think they might have tried to short-circuit their way into running virtual fulfillment centers to early without having

learned the lessons of our without having experienced the lessons of running your own building which I think they might be course-correcting now.

Scot:

[33:25] Yeah it gives you the ability to go to a 3pl and say hey here's your you know 3pls are kind of V1 and you guys are like V10 so you can go in there and say

take this section do it this way here's how you know here's the barcode reader you need to use yours there's like all this stuff that has to come together seamlessly with the software to kind of execute and you guys have figured all that out and you can just kind of plop it right into the 3pl I imagined.

Dhruv:

[33:50] That's right yeah exactly out pitch to these existing 3pls is that you have this unused capacity.

This is like a warehouse in a box that we are providing you and if you follow

you know the product or the our operating protocol then you will be able to make X dollars and order or Y dollars a square foot,

Which is higher than what you are achieving now and by the way you don't have to spend any money on sales and marketing and servicing because shabab you know these are shipbob merchants and so you should be able to make.

You know.

You should be able to generate a return on that on that space in a relatively short amount of time which makes it a pretty interesting proposition for these existing 3pls who want to participate in e-commerce but they necessarily don't have the infrastructure.

All the capital to do so as yet.

Scot:

[34:44] Interesting cool so give us an idea of your scale so I saw on crunch basis it says you've raised over 300 million so congrats on that the I've been raising capital in this kind of more asset heavy World in it's not not easy so so

kudos to you for being able to fund us at the scale you have

maybe like how many packages a day are you guys processing or anything you can tell us around scale would be kind of interesting.

Dhruv:

[35:10] For sure I won't be able to get to the.

Exact are approximate taxes but here he is maybe a good proxy you know we have close to.

30 or so fulfillment centers in our Network today we are

adding one fulfillment center a month that's the relative scale and majority of the reason why we're adding these fulfillment centers that are rapid clip.

Is because we are you know reaching.

Pasty in these fulfillment centers fairly quickly and the amount of space that we take inside of a fulfillment center is anywhere from.

30 to 40,000 square feet on the lower end as much as 90 200,000 square feet on the higher end so that's the sort of every sight every node in the network represents at least you know maybe call it average 50,000 square feet and we have close to 30 of them.

Scot:

[36:04] Furcal and then it wouldn't be a Jason and Scot show if we didn't at least throw you an Amazon question.

So so it's easy to kind of you know again for someone to kind of look at this and say hey you're competing with FBA and I I get that you know.

Amazon's talked about doing you know a you know just non-market play Style Style fulfillment.

And then but then and then they've also talked about yeah you can use your own packaging and but you know my understanding is they're not really doing that at scale do you

do you guys feel like you compete against them or do you see them the other thing that also blows people's minds a lot of time is

software and sinners like you guys operate frequently will ship stuff using Amazon's API so that it can be prime eligible which is also kind of a so-so the 3pl the

shipping partner can be Merchant fulfilled Prime which thus means their products are prime eligible so maybe talk a little bit about how you feel about Amazon.

Dhruv:

[37:03] Yeah for sure and yes you're right so we do ship inventory sometimes into Amazon Fulfillment centers as well for,

for the fpaa.

[37:15] And some of our some of our Merchants do also you know use the what you call the seller fulfilled Prime option but more on your question on the do we compete with FPA I think it is servicing a slightly.

Different segments of the market and so if you talk to most of our brands,

you know they were they won't really say that we trust Amazon with all of our data.

And so for these brands that we serve as passing that customer information or who their buyers are,

to Amazon seems like a big business dress because Amazon competes with them,

you know on the Amazon to the Amazon Basics line or you know placing the product slightly differently on the the listing speed and sector so they want to build a supply chain,

and demand you know sort of website which allows them to control their own destiny without having to rely on.

On Amazon which could potentially be problematic for them down the road.

And so in that context they want to stay away from Amazon as much as possible of course they also do sometimes have Amazon listings because Amazon is such a great.

Aggregator of demand that maybe it has a lower cost of acquisition than having to do it yourself on your website but you don't want to rely on Amazon for.

[38:40] Majority of your sales and so in you know under that,

through contacts then we don't necessarily compete with Amazon FBA because for these Brands using FPA is not even an option and so and two because then we are there under this ethos of like if I have.

Slightly Superior brand and my brand is represented through all aspects of my branding website supply chain I can I can be a better business,

then you know shipbob stability to provide us a plethora of customization options,

is a real value sell because and I know our ability to match you know this two-day Prime life experience.

I think it's a real value add and the third aspect of it if I may add is as these Brands grow larger being able to have inventory globally is.

Something which I don't think is possible with FB and fourth is if you're also getting into retail,

you know doing being able to ship Ballads of inventory to these retail distribution centers again is not an option with fpso if a brand is thinking about their supply chain as a whole I think shipbob FB is probably not a solution.

Jason:

[39:51] Yeah so that really makes sense

I'm kind of curious how this is going to continue to evolve I mean it seems like there's some risk that some of these big retailers like or marketplaces like Amazon and Walmart might eventually start selling their fulfillment as

as a third party service that could potentially compete in the 3pl area and I think the the FedEx is and UPS is of the world are leaning more into it as well is.

Is the future going to be kind of all of these different Services kind of colliding and meaning in the middle or how do you see the future of this industry playing out.

Dhruv:

[40:26] Yeah that's a hard question to answer,

because yes you know e-commerce is growing so quickly that there are so many Greenfield opportunities for different companies.

To play a part in so but I think each one probably you know like this industry benefits from scale.

And so and of course this is a hard business because you're dealing with physical products and physical inventory and physical assets.

And so I don't know if the industry would sort of all of us will start doing each other's work simply because it's by doing our core businesses by itself pretty hard and getting to scale in our Core Business is very relevant so.

[41:07] I think UPS and FedEx might

I think might have dabbled an e-commerce fulfillment but I think majority of the business still very much remains around transportation and and same for shipbob I think majority of our business is around fulfillment

we are looking at ways of adding value to a merchant Base by taking parts of the transportation and seeing if we have enough density on certain routes,

that can be that can allow us to reduce the overall fulfillment calls for a Merchants but again I think there's so much you know there's so much to be done in this space that if you.

Lose focus you can lose the advantage that you have right now so you know I and and businesses are able to grow,

simply by focusing in the core business area so for us at least you know it's mostly fulfillment and maybe pieces of Transportation sprinkled in.

Jason:

[41:58] Well that seems like a toy reasonable perspective and it certainly is going to be fun to watch but I think that's going to be where we have to leave it today because as per usual we have used up all of our allotted time as always if this is episode was helpful to you we sure would appreciate that five-star review

but we really appreciate your time today and sharing a little bit more about shipbob with us.

Dhruv:

[42:21] Now thank you so much Jason and Scott for having me this was a good conversation.

Scot:

[42:25] Dexter even if folks want to follow you online do you pontificate or should they just follow the shipbob socials.

Dhruv:

[42:32] The shipbob Socialist would be a great great dad.

Scot:

[42:35] I know I would advocate for you doing more would love to read anything you write about the industry as it's been a good discussion and you know at least Jason I would read it so we can guarantee that.

Dhruv:

[42:47] It's great to read as I got I got it.

Scot:

[42:49] Boom and Jason's mom she always follows Oliver stuff stuff.

Dhruv:

[42:54] I can convince my mom as well.

Jason:

[42:59] The audience is growing by the minute well thanks very much everyone and until next time happy commercing.

View Details

EP288 - News and Q4 Earnings Reports News * Amazon Stock Split * Shopify Fulfillment Network * eBay “The Vault” * Twitter E-Commerce Pilot * Retail Media Networks are on fire * Inflation continues to rise

Q4 Earnings Reports Winners * Dicks Sporting Goods * Walmart * Target

Neutral

Best Buy
Ulta
Kohls
Gap
Nordstrom
Ralph Lauren

Losers

Dollar Tree
Abercrombie & Fitch
Macy’s

Episode 288 of the Jason & Scot show was recorded on Thursday March 10, 2022.

http://jasonandscot.com

Transcript Jason:

[0:23] Welcome to the Jason and Scot show this is episode 288 being recorded on Thursday March 10th 2022,

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 Jason covid is defrosting and you are getting yourself back on a plane and I saw that you went out to eat tail.

Jason:

[0:50] It is true I don’t know if listeners can see me knocking on wood when you say that but yeah I yes went to my first post covid trade show that felt like trade show from before covid which is cool.

Scot:

[1:04] Sprinkle what was what was the buzz in the like the first time and well I guess in RFC some folks got together did you end up you didn’t go to.

Jason:

[1:15] I did not go to in our app and an attendee and sit in our F was I think there are people that went in and found a good but attendance was significantly down from a normal and RF show.

Scot:

[1:28] Was kind of the first normal.

Jason:

[1:29] Yeah and the interrupt timing was just rough because that was kind of In the Heat of the Omicron variant like re-emerging and.

Um but so e-tail is in Palm Springs in February you know.

People are like turning off Mass mandates and it felt pretty good and so the show was sold out the hotel was fully booked and if you if I just popped you on at the trade show for.

It wouldn’t have felt any different than e-tail 2019 felt to me so I think people were like frankly pretty excited about getting back together.

And took full advantage of the you know typical trade show activities that cocktail parties and and all the frivolity.

So I did a couple of sessions I did a keynote interview with the chief marketing officer from Signet Jewelers and they have a pretty interesting story during the pandemic the,

you know they even have an interesting story in the metaverse that like I didn’t realize this but millions of people have gotten married on the metaverse and are buying jewelry for it.

Scot:

[2:39] Nice can you buy a is your diamond and ft.

Jason:

[2:43] In some cases yeah.

Scot:

[2:46] I’d like to see picture I found it.

Jason:

[2:49] Yeah

I don’t want to actually bring up the topic of buying jewelry and then tell her it’s digital jewelry because that won’t that won’t go where I was wanting it to go.

But so so that was good I did a panel on on sort of growth tactics with a bunch of kind of younger digital native Brands and so that’s fun to get

you know some some different perspectives and some novel stuff and I did record a couple podcast there so listeners have that to look forward to will drop those over the next few weeks and so some good

good conversations with with real people in the industry.

Scot:

[3:26] What was the back of the hall conversations the you and I have talked a lot about the impact that the Apple and Google privacy changes have had was that kind of one of those

yeah you’re on the stage everything is Rosy but behind the scenes I was like oh no what are we going to do with this this whole thing that’s crashing down around us.

Jason:

[3:44] Yeah it depends I because I feel like there’s a couple of different cohorts at Eddie tell like there is a cohort of them

kind of smaller direct to Consumer Brands and I think those guys are right in the Wheelhouse of those impact so that absolutely was coming up

you know it there is a pretty big like e-commerce vendor community in the show and so there you know weaning into the

the super high P Trend so everyone’s talking about metaverse and,

in ftes and trying to convince you why they’re the world needs 107th personalization engine,

so you know there’s a fair amount of that stuff and then you know there’s some of the big wholesale retailers and there they were like more interest like the trends that are impacting them the most right now are things like retail media networks and stuff like that.

Scot:

[4:38] Brickell all right so anything else I need to run jump in the news.

Jason:

[4:45] No not yet let’s we got a lot of news to cover so let’s get to it.

Scot:

[4:50] Cool well it wouldn’t be a Jason Scott show if we didn’t talk about a little bit of Amazon news.

Jason:

[4:56] Amazon news new your margin is there opportunity.

Scot:

[5:08] Yes so one of the things it’s been a busy week for Amazon so

just yesterday they filed one of their SEC documents their annual report effectively and surprised Wall Street with two little good nuggets so one of them is they’ve they’ve expanded their stock buyback

over time as you issue stock options and restricted stock units to employees as incentives your stock count grows and EPS is calculated by earnings

/ your Share account so when your chair count goes up it puts a natural pressure downward pressure on your EPS number.

[5:44] So Wall Street loves the buyback so they increase the available by back to something like 20 billion which is pretty big number,

but then more and more interestingly Amazon’s been one of those stocks that has kind of refused to split and then just recently alphabet,

I think ask is the after microphones off that announced a split and Amazon did that to this is this is one of those

kind of fascinating psychological things so when you do a stock split does it change the economics at all right so you just say hey we had 500 shares in there worth a dollar and now we have

to let’s see if they usually do a reverse split so you have there were.

So 500 shares the dollar and we’re going to get down to 50 cents we have a thousand and fifty cents so the economics are the same but

what happens is in many brokerage accounts you can’t buy a fractional shares so

it makes the retail investor Amazon stocks kind of around over a thousand dollars so when you do a split it does make it so more people can buy and then there’s a psychological thing that’s irrational where people just feel like it’s cheaper.

[6:55] Even though it mathematically is so so all that was really well received and then and it’s been interesting because,

they also signaled that.

They’re not going to be doing as much capital expenditure this year as prior year so so Amazon goes to these invest in Harvest phases and on the call the you and I covered it they were,

they were pretty cagey about it and I think Wall Street didn’t like that they were going to be an investment especially after covid it didn’t kind of make sense they built so much fulfillment centers,

so there were some elements of this where they clarified some things and it gave Wall Street a really nice kind of vibe that they’re not going to be investing a ton on capex

and then I thought it was interesting they announced they’ve announced a lot of these little kind of Acquisitions and they did one recently this company called Vico if I’m saying that right veq oh

it’s kind of like a multi-channel shipping solution so they’ve you and I have long.

Posited that Amazon is not a fan of Shopify and all the gmv that they’ve grown in that’s going through there and in Amazon’s eyes they view them as a competitor and so you know.

[8:09] There’s a lot of speculation that they’re going to come out with some kind of a Shopify killer or some kind of competitive offering to Shopify so this gives them a pretty interesting shipping kind of non Amazon shipping solution

kind of like a ship station they acquired point of sale system

that was based out of India then this goes back like 18 months ago they acquired a little e-commerce player out of Australia so it kind of feels like they’re assembling some pieces to something so it’s either

little local groups doing random things or there’s a big plan and they’re assembling things I’ve said this before I’m still think.

[8:48] I think the best strategy here is to take all these Services create microservices out of them,

and then sell them and compete with like the fabrics and the Commerce tools is that the other one always forget it yeah you kind of so have a headless option

and put it in aw that’s because you already have so many developers using AWS that would be a great entry point into people that are like pay I need I need a cloud-based point-of-sale functionality of some kind or I need any of these little pieces

that’s my guess who what’s going on and then and then some people

that talk to you said all right if they do that then cows an SMB how are they going to compete with Amazon with Shopify do smbs going to use these micro services and,

I think then they also build a little kind of Shopify killer on top of those microservices almost like a,

demo that basically says look what you can build with these micro Services of a Shopify like platform that’s what I think is going on but I’m curious to hear what you think.

Jason:

[9:49] Yeah so I kind of think you’re wrong we’ll see the I could easily see them

like they’re they’re releasing a ton of microservices on AWS all the time right and so I will not be surprised at all if they release a stack of Commerce oriented microservices for AWS that.

Could compete with Shopify I just don’t think they would do that by acquiring these companies that are on like a whole disparate set of Technology stacks and you know don’t have significant scale and aren’t necessarily like,

have some competitive IP like I’d like Amazon could buy all these could build all these capabilities that these companies have.

With very little effort so I look at each one of those companies and I’m like it kind of solves a practical problem for a particular.

[10:42] Stakeholder in a particular Market I mean you know Amazon’s trying to expand their into Australia and they bought a Marketplace that had a bunch of sellers in Australia right

Amazon’s trying to capture more share in India and in India a bunch of the orders don’t get shipped to the consumers home they get shipped to a retailer

the Aggregates the orders and then customers go to that retail and pick it up so now they bought a POS system that a bunch of those retailers run in these small villages in India and I do think Amazon is,

interested in is certainly going to make a bigger move in shipping and.

You know I think if you’re trying to get people to use Amazon Freight and Amazon shipping for non Amazon packages one of the things you need is a is a shipping manager software package to give to all of those,

those companies so I think that’s what the qos so I think I don’t see these Acquisitions as some sort of super strategic set of Mike rolling up of microservices.

But we shall see.

Scot:

[11:48] Yeah we should go back in the hot tub time machine and we record our annual predictions but next time.

Jason:

[11:56] And side note I will one other prediction I’m glad we’re not going to go back and visit is.

Um Whole Foods did open their first just walk out store in Washington d.c. this month.

And I will readily admit a year ago in this show when we talked about the significance of just walk out I said.

Probably be a long time before we see this in a Whole Foods because there’s all these logistical challenges that like are not an Amazon go store but are in the much bigger grocery format like you know.

Each has of fruit and stuff you know bulk items that have to be weighed and you know retrofitting this technology into an existing store that wasn’t designed for it is a lot harder than building a purpose-built.

Environment and you know there’s there’s challenges with things like bathrooms I listed all these things and very smugly said so don’t expect to see.

Just walk out in a Whole Foods anytime soon and then less than a year.

Scot:

[12:53] I remember you saying it was pretty much impossible.

Jason:

[12:55] Yeah clearly I thought it was impossible and I feel like that that created a moonshot team at Amazon which then did it.

Scot:

[13:06] Because Jeff is just like oh Jason’s challenge me now the gauntlet is down.

Jason:

[13:12] Exactly so so congratulations to team Amazon I have not gotten a chance to shop that I have shop the the Amazon Fresh stores with just walk out so which is kind of an intermediate step so so I’m excited to see how that plays out.

Scot:

[13:27] Yeah kind of a a

tangential Amazon news story we talked about this on our last episode which shut out the listeners we had really,

your kind of strong engagement from from you guys about the Amazon

Logistics deep dive we appreciate everyone not only listening to that at you know we were concerned it would be a little boring kind of going through all these counts of what they’re doing but at least

I find it riveting and but we got really good feedback on that and we appreciate when listening to that buried in that at the time we did talk about

shopify’s earnings where they basically came out and said their previous iteration on partnering with 3p else to do chipping hadn’t worked,

and this was actually predicted by by facile over it fabric I think he mentioned on the show he’s been pretty vocal on Twitter about it too I’m not revealing some secret and,

um Wall Street was then they said they’re going to spend

what was it a billion dollars on fulfillment centers which seemed laughably small especially in the context of the.

[14:30] 260 ish large fulfillment centers Amazon house and that would get them two day shipping which just doesn’t logically make sense to me and then Jason you pointed out that’s not

not even where the market is now but the update on that is Wall Street was not amused and what happens is.

When you’re high-flying stock with a big multiple and your your your model.

[14:56] Becomes part of the story and your Shopify has these really high both gross and net margins and relatively high growth and so their growth has slowed down and then Wall Street kind of it was kind of a

doomsday scenario so all streets like all right you’re slowing down your growth you’ve got the shipping problem you always talk about how you’re not worried about Amazon but something’s going on here and then on top of that you know they basically,

said to Wall Street we’re going to change our margin structure because we’re going to take all our ibadah and plugged it into this

spying warehouses so Wall Street hates it when you make a change like that and you kind of say I’m a 80% gross margin business and now

I’m going to be a 60% right whatever it is so the stock has like been in a world of hurt so it’s basically gone down by half I think

depending on whatever timeframe you look at and then there’s been a lot of stories about folks leaving and it’s kind of create a little bit of chaos so it’s going to be interesting to see

can Shopify executed on this can they do it and not

I’m really freaked out there investor base what happens with employee turn so so it’s kind of the first time they’ve had a bit of a misstep or or a resetting of their valuation so it’ll be interesting to see how that plays out.

Jason:

[16:12] Yeah yeah I I’ve been following closely I side note on facile dazzles the CEO of

fabric which is a headless Commerce company that in some ways competes with Shopify and

I actually ran into him in detail and side note he just raised they just raised like two hundred million dollars at a billion dollar valuation.

Scot:

[16:33] Yeah I’m a super jealous of his ability to raise capital.

He seems to preemptively do it he was always like I know we just raised a hundred but these guys really want end so we’re letting him in for like 200 at a you know a bazillion dollar valuation so high class problem.

Jason:

[16:49] You would know better than I but I have heard the advice frequently repeated that the best time to raise money is when you don’t need it.

Scot:

[17:01] It is true yes I always raise money when I’m down to my last dime which is the worst.

Jason:

[17:06] Yeah I did tell him I was expecting like fancier suits in a bigger Booth a detail and he seems like he’s not spending the money on that stuff it’s.

Scot:

[17:17] Now he’s hiring Engineers like crazy.

Some other news and I know Jason you have some to run through Saga through this quick the still follow eBay because it’s kind of an interesting story and you know they’ve even been to the pandemic they.

Jason:

[17:34] Sorry for our younger listeners eBay is a website that sells stuff like Amazon but before Amazon.

Scot:

[17:41] Yeah it’s this auction format where you like you takes a week to figure out if you bought the product or not it’s not not great in today’s instant,

instant feedback but to be fair most of their products are sold with buy it now so they’re auctions is not the majority but they’re still kind of always called the auction company so they’ve had that.

There’s all these startups that are nibbling away at eBay in different categories because for the longest time I felt like eBay should have vertical buying experiences because if you’re a comic book collector you want,

to search for certain things that matter to you versus a shoe collector versus a,

electronic Gadget buyer versus whatever but they stubbornly would never vertical eyes that experience and so now they are very closing the experience so they’re finally kind of waking up to this there’s

let’s see they’re going to have some some different experiences for what was it,

it was couple luxury goods shoes sports cards then this interesting there’s this kind of one interesting Trend in Collectibles that I think is going to go into other areas is.

[18:50] Different ownership models so taking a physical good and putting a digital ownership on top of it so there’s a site called dibs and

this actually came up Greg Bertinelli we had on the show two years ago he’s a VC that really kind of execs eBay guy and he’s

focuses on these kinds of models but what dibs does is let’s say you have some really cool rare baseball card and you could certainly sell it and then extract all the value but what if you could.

[19:19] You put it in a digital Vault a vault somewhere and then you could sell 40% of it so you could get some liquidity from your baseball card but you still own it and then you you could you don’t have to sell the whole card,

and then you know some of those fractional rights could be shared and and whatnot or if someone wanted to buy the whole card they could and then you could transfer to them and it would stay in the ball so there’s all these companies that are doing really Innovative things around this

all this this side of digital marketplaces

is within the purview of the SEC so all this is this is not crypto which is kind of over on its side the side kind of going rogue outside the SEC for the most part these are all blessed by the SEC and

and then there’s two that are very popular ones called Rally Road in the other ones called Otis and they do more

they actually go out and buy various Collectibles and things and then you can have fractional ownership

so for example in the comic book world one of the most famous comic books in my generation is called Amazing Fantasy 15 and that’s the first Spider-Man.

I don’t have that comic book because it’s like 300 thousand dollars or something like that and that’s that’s crazy and but you know.

[20:31] But it’s actually an interesting investment because I’ve watched it for 30 years and it’s gone from five thousand dollars when I was a kid to three hundred thousand dollars now so.

You can invest in that by buying a fraction so eBay announced their starting this thing called the eBay vault which is going to be this 31,000 square feet secured facility we’re going to be able to store all these assets

they say it’s going to the largest one in the world which didn’t make a hundred percent since me because that just doesn’t I guess we just had you know Mark on,

talking about million square foot fulfillment center so 31,000 square feet just doesn’t seem huge but I guess it’s full of vaults.

Then that also enable them the whole eBay model and this is kind of like the Shopify story we’re for the longest time they refused to touch a product because you know they’re their margins are super high because they never touch the product,

so it’s a zero asset business well all these companies have come along that touch the product so there’s.

I mentioned some of them but then there’s like goat and the shoe company’s stock X where they’ll actually get the sneakers in and they’ll thumbs up and say we’ve looked at these These are really you know Michael Jordan error.

Sneakers and they we’ve authenticated them there’s a lot of companies that do this in handbags who’s the one that does it for apparel.

We could put all your apparel you want to sell in a bag and they’ll take it and.

Jason:

[21:57] Rio Rio our thread upper.

Scot:

[21:59] Thredup thredup that’s what I’m looking for so it’s interesting if you look at it every eBay category someone has kind of come in and added a high-touch experience and chewed up a fair amount of the GMB that used to be on eBay so they’re finally kind of reacting to them,

and then I thought you would find this interesting they are going to launch a,

they’re gonna let you put videos on your listings and then they’re going to have a live video streaming pilot for sellers so that could be kind of interesting.

I’m kind of excited to see you like what your average eBay sellers live stream looks like it’s going to be it’s going to be kind of a.

You know a menagerie of things to look at there that’ll be funny

and then I thought you being a payments guy you’d be really excited about this Innovation that call it the digital wallet and

lets you store balance from your eBay sales and then you can use those let’s say Jason you sold one of your widgets for $100

you can use that hundred dollars to now go buy stuff.

Jason:

[22:52] Wow that’s an amazing idea.

Scot:

[22:54] Yeah it’s also known as PayPal 1997 so so so let’s.

Jason:

[23:00] For our younger listeners as Scott’s not being sarcastic PayPal did start out as a eBay digital wallet and they spun it off so this is kind of a redo.

Scot:

[23:10] Yeah yes they’re basically having to you know.

They’ve got divorced from PayPal they had this they got separated from PayPal and then they went their separate ways and now they’re basically having to just reinvent PayPal instead of eBay it’s kind of.

Kinda weird but they you know being eBay they didn’t just say well let’s do it everyone else doesn’t just license stripe they’ve got all this features they had to kind of like go do it all themselves so

they’re now just finally getting a digital wallet so there’s been this period of time where if you sold on eBay there was no way to take this fund and then put them back on eBay you just you know and I’ve been doing some eBay selling and it’s like super painful it’s like constantly

emailing me and it’s like it feels like literally like,

the first version of PayPal so so doing some Innovative things there and then other areas they’re just kind of like they’ve been hobbled because of some of the corporate structure things that have gone on.

Jason:

[24:01] Yeah and we are teasing eBay a little bit but In fairness they still are like the second or third largest e-commerce site in the u.s. so.

Scot:

[24:09] Yeah I love eBay and I wish I still feel like there’s this big kind of nugget of goodness in there that needs to be unlocked they just needed to kind of do it faster and kind of more aggressive with.

Jason:

[24:21] That now did you talk about the vault already.

Scot:

[24:24] I did.

Jason:

[24:25] Yeah so prediction for next year that I’m going to put on my list is there’s going to be a Nicolas Cage movie where he has to break into the Vault and steal something you heard it here first exactly in Ft.

[24:45] Yeah there’s nothing Scott likes better than than talking about like Amazon antitrust and inflation has his two favorite topics but I should note while we’re covering all the news that the,

the monthly inflation numbers came out and there’s there’s a ton of different numbers but one that gets talked about the most is this Consumer Price Index which is kind of a random basket of goods that were selected in the 1950s,

and based on that index over the last 12 months that index has gone up by 7.9% so that’s the.

The highest it has gone up in the last I don’t know more than 30 years,

so that’s pretty significant and that was one of the big talking points at e-tail is.

You know what what are the impacts of inflation going to be on the market and in Howard consumers going to react so,

there is significant inflation out there right now and it is like factoring into a lot of retail and e-commerce players plans are you worried about inflation at all Scott you think it’s overhyped what’s the.

Scot:

[25:53] Now I’m very very worried about its going to hit that.

I don’t think it’s in control at all and it’s in this kind of spiral I think we’ll hit the this stagflation thing so you know imagine your retailer your labor is going up

imagine you’re an e-commerce gas prices are

you know hitting between four and seven dollars depending where you are in the country so now you have all these yeah I’m shocked we haven’t seen fuel surcharges for everyone maybe they have and I just missed them so now it’s going to be,

more expensive to ship stuff and then you have to raise your prices and then that causes more inflation and then you know

and then people need more wages to afford the stuff you just raise the prices on it that there’s a vert there’s kind of a worry there’s a bit of a flywheel there that I don’t know how you break out.

Jason:

[26:43] Yeah no and even before all of this fuel unrest like fuel was already the,

the category with the highest inflation and now it’s you know likely to go even much higher so that that’s in very unfortunate and it does I’ve seen some studies,

and this is may be counterintuitive but when you think about it it makes sense.

Inflation is impacting the the low price sellers the most right so if you if you have a little extra margin in your product you can act as a shock absorber a little bit and absorb some of this inflation but if you are,

are selling at razor-thin margins so think dollar stores like they’re getting hit the hardest by inflation and.

Scot:

[27:30] The other three dollar stores now.

Jason:

[27:31] Exactly and the consumers that shop lower-priced retailers which you know tend to skew younger consumers so Jen’s ears.

[27:42] They’re feeling inflation much more than older cohort so it’s.

It is in unfortunate and definitely has a potential to be stifling on on a lot of the growth we’ve been talking about over the last couple of years.

So awkward transition off of that.

Ring in a piece of news from from last week Nordstrom became the the latest retailer to launch a retail media Network.

And I will talk more about.

What I think the prospects are for a Nordstrom retail MIT media Network on another show but I just wanted to use that to sort of highlight.

It’s one of the topics that’s coming up most in my conversation with retailers and Brands is.

Every retailer is leaning into launching these advertising networks like we talked on our Amazon Deep dive about Amazon disclosing,

the revenue from from their Network and it’s huge so every retailer and their brother is trying to launch one and they’re trying to collect dollars from every brand and the brands don’t really know how where and why they should be investing in them so there’s a,

a lot of discussion and test and learn.

And debate at the moment about retail media Network so I did knock out my position on them on Forbes article that I’ll link to but I was going to propose to you that we should,

finder there I guessed and do a deep dive in retail media networks in an upcoming show.

Scot:

[29:12] Yeah I don’t think anyone knows more about it than you are so maybe it’ll just be a jacen solo deep death.

Jason:

[29:17] Yeah I think 10 of my co-workers and pupusas just rolled over in their grave when they’re just say that they’re like dude that dude doesn’t need his head to be any bigger and we all know more about it than he does.

Scot:

[29:27] Well we get a lot of listener feedback that’s essentially more Jason so can never have too much Jason.

Jason:

[29:34] That may have something to do with I have the direct email to the feedback account.

Scot:

[29:38] Me

Jason:

[29:39] And then one last piece of news that happened yesterday is our friends at Twitter,

um expanded in e-commerce pilot that they’ve been running so they have had this this limited pilot where you could essentially on your Twitter account.

Sell three items so you kind of you had a carousel that could show up in your Twitter account for these three items and the expansion is

that they now let you upload a product feed with 50 or 10,000 items in it so you can you can send

Twitter 10,000 items you sell and at any given time you can,

activate up to 50 of them so you kind of have a little mini store with kind of like a,

you know a category page with a bunch of product tiles in it and you can you can shop through any of these these 50 items,

and it’s it’s what we would call a non-endemic check out so if you decide you want to buy one of these items you don’t buy it.

From Twitter and give Twitter your payment information you click on that product tile and it takes you to.

The that Brands e-commerce site on their on their store and you check out there so it’s kind of a.

[30:59] Twitter cause it e-commerce but it’s really a referral site to these Brands and it’s interesting that there.

They’ve tried a lot of different Commerce experiences none of them have been a home run,

this is a new one and I have to say and I know you have had similar feelings about this I’m kind of skeptical that the referral is a very good customer experience because what tends to happen is.

You upload this product fee that you know was probably accurate when you uploaded it but this is all Dynamic data something that you upload goes out of stock or the price changes or

you you fix an error in your CMS on the URL and so that now the product listing on your website,

doesn’t perfectly match the product listing.

On Twitter and that you know customers really don’t like that when they click a product at One Price or in one color or you know that that you say is available and then you get to the website and it’s,

a different price or a different color or not available and on launch day they had five.

Different vendors that could sell stuff and I click through all of them and three of them you know,

had we’re selling five products that were already wrong on day one so it looks a little problematic.

Scot:

[32:17] You have literally had this like conversation with five iterations of the Scituate ER and it goes like this is super.

They tend to be this isn’t just one of al-ahly Silicon Valley companies they’re like super arrogant where insert

company name and we know all about software

okay and hey we’re going to do this Marketplace and it’s gonna be great and here’s how it’s going to work we’re going to sell stuff and we’re going to run people through this check out and then at the end we want to figure out how much inventory there’s and I was like

well you could do that but that’s exactly wrong right because you want to

before someone dies something you want to make sure you have it in stock or else it’s a consumer is going to get really frustrated and leave and they’re always like well it’s a beta we can fix that later why invest in real time inventory now and then they never got a beta because us so then they’re always like I’m like how’d the test go and like well consumers hated it

and I’m like so we’re not moving forward and I’ll say will you realize you set yourself up to fail,

like no our data indicates that they wouldn’t have engage with it even if the inventory thing worked you’re just like.

[33:23] I don’t understand so we’ll see if yeah they don’t don’t understand the importance of this stuff and that the customer Journey they want you know people want,

colors to be the same variance the all the all the blocking and tackling of e-commerce is actually

pretty hard if you don’t think it through and most of these companies this kind of say oh my God third party cookies are going away we need an e-commerce solution and then it travels down to an engineer that that has no idea how to how to get it done.

Jason:

[33:55] Yeah and I guess In fairness I don’t there’s no easy answer like one of the five beta

clients is Verizon and I don’t know this to be the case but highly likely the Verizon told Twitter we don’t want you to take the customers money because then you’re the seller of record we want you to send customers to our website right so like the.

You’ve got this conundrum that that like the brands that want to sell stuff want want to own the customer they don’t want to rent the customer from Twitter but then you know when you do have this kind of two step

experience it totally breaks and it’s got as you know we have these kind of consistency problems,

just on our own website so when you add Twitter to the mix like it gets much worse and it’s it never works for customer experience.

Scot:

[34:42] Yet built a whole company to solve this and it has like 120 Engineers working on it all the time it’s a hard problem it’s not it’s not going to be something you can like put like a five-person engineering team on and have this great integrated e-commerce experiences just like not going to happen.

Jason:

[34:56] Yeah but that company you just mentioned sound like such a good idea though that sounds cool.

Scot:

[35:00] Thanks thanks it’s been a good run.

Jason:

[35:03] Especially after you turned over the keys to competent leadership I feel like that was been a.

Scot:

[35:08] Finally hit its stride after I got out of the scene.

Jason:

[35:11] Exactly so I thought we would try something new we just covered a bunch of interesting to us but random news over the last two weeks it also kind of is,

quarterly earnings season and so a bunch of retailers over the last couple weeks since our last show have had their their Q4 earnings which of course also gives us their their 2021 earnings

and we could do it a tower show on all these earnings but what I thought we would just try to do is a earnings rapid fire.

Because we are known for for being able to summarize things really briskly and and concisely what do you what do you say to that.

Scot:

[35:54] Plus rapid fire this puppy lightning room.

Jason:

[35:56] Awesome so what I’ve done is I’ve taken all the companies that I thought would be relevant to our listeners

and I’ve bundled them into three buckets what I’m calling the winners which are companies that had a really good year what I’m calling the neutrals which kind of you know tread water and when I’m calling the losers,

um which are you know the folks that lost ground so in my winners category the first earnings is Dick’s Sporting Goods they actually had a mediocre Q4 they were up 5.9% versus,

20:21 there in 2021 was up 28% versus 2019 so so decent growth,

um the their digital was actually down Q4 of this year so you’d go Jason why are there winner well,

the if we look at their full year their sales in 2021 were up forty percent from their sales in 2019 so the so,

huge growth throughout the pandemic and they were such a big winner in the first year of the pandemic that they still had growth in the second year but it was on top of these huge comps so,

um so you know forty percent growth on a two-year stack you know for a retailer of their size,

is a huge win and just a fun stat I’m trying to track for a bunch of these guys that now puts them at 27 percent digital sales so one out of every four dollars that dick stakes in,

is from their e-commerce site.

Scot:

[37:24] Does that purpose.

Jason:

[37:27] It would include both of us are curbside pickup.

Scot:

[37:32] Okay that’s Jean.

Jason:

[37:34] Um so then my second winner is Walmart.

The their Q4 was up 5.6% you know again they’re the largest retailer in the world so they have the hardest number to move,

and 5.6% is considerably up from there they’re sort of historical average and that’s on a big comp because they were up 8.6 percent this quarter,

last year but the real reason they’re a big winner is e-commerce.

On a two-year stack was up is up 70% so this was.

The third largest e-commerce site in the United States two years ago just behind Amazon and eBay there now the second largest e-commerce site in the US and they’ve grown 70% in the last two years so that’s astronomical and again.

They’re their full year sales were pretty good up 6.4% last year up 15% on a two-year stack and this is a company that normally goes up two or three percent a year so.

So I another big winner and then my biggest winner for the year is Target so.

[38:47] They had great numbers across the board they were up eight point nine percent for the quarter they were up 20% this quarter last year so too.

You know big numbers on top of big numbers again on the full year they’re up 20% versus 20 versus two years ago and their digital is a standout in all of this there there.

Two years ago their digital was up 145 percent and then they grew another 21 percent last year on top of that.

So monster numbers and I like how they break out their sales so so just a couple of things to know they’re the only company I’ve seen that report two.

Segments they report store originally needed sales versus digitally originated so where did the order get placed,

and they also separately report store fulfilled sales versus fulfillment center fulfilled sales so.

[39:46] Eighty percent of their orders comes from a store 20% of their stores,

of their orders come from digital but 96 percent of all their sales are fulfilled from a store so virtually all their e-commerce has fulfilled from the store what’s interesting about that is what that means is they are selling.

The 60,000 items that fit in a store are all of their sales versus if you look at,

Amazon eBay Walmart a huge chunk of their e-commerce sales are this super long tail of millions of skews so it,

Target had big numbers and they’re doing it differently than everyone else and then the the number I talked about the most is.

[40:30] You know they’ve been really successful with their own Brands and to kind of put that in perspective about 26 percent of all of their sales

where sales of of exclusive stuff you can only buy at Target so those own Brands were 30 billion of their 106 billion in sales,

so that’s phenomenal and then you you were talking about curbside pickup the curbside pickup numbers are also silly in 2020 during the pandemic curbside pickup went up six hundred percent at Target and then last year,

you know that six hundred percent is crazy but you go oh yeah because all the stores closed and people had to drive up

but then last year when stores reopened you’d expect that to dip way down and they

curbside pickup went up another 70% on top of the six hundred percent from the previous year so so curbside pickup is a huge growth they,

you know they bought a curbside company right before the pandemic and so I like they’re kind of clicking on all cylinders right now.

Scot:

[41:33] The 96% number 95.

That’s so I’d go to a lot of targets and I’ve never seen like,

most stores that have shift from Storer there’s like some corner where it’s like a total poop show of people trying to,

package stuff in the middle of the store and things Target is that true I never see that and it’s kind of fascinating to me it seems like the stores would have this huge shipping piece that I’m not seeing somewhere,

and it’s not like they have a ton of storage in the stores.

Jason:

[42:04] So they did a really.

Scot:

[42:06] Just a shipped is it shipped that’s doing it is that kind of what they’re coming in there.

Jason:

[42:09] No it like they did a remodel for most of the Target stores where they actually Shrunk The Selling space so they used to have no back-of-house like they’d have all the live inventory on the floor and they actually Shrunk The Selling Space by like 10 or 15 percent

and built a shipping center in the back of the stores that you can’t see right,

and so they now have dedicated shipping they like they literally had to go like negotiate with other carriers because carriers are used to delivering stuff to these stores but not picking stuff up from these stores

so they had to work all that and they’re there

doing so much volume now that you know what they’re big players got they have their own sortation centers and they work differently than Amazon the search the stores instead of shipping to the customer.

Like do multiple shipments a day

via private trucks to the sortation center and then all the items are shipped from the sortation center and so that lets them use this like hub-and-spoke and have super stores that have extra inventory for these orders but all the inventory is sitting in a store until a customer orders it

and then it goes through this this multifaceted distribution system to either go to the front of the store for curbside pickup via shipped or to the back of the store

out to a sortation center and then via USPS to a customer nearby.

Scot:

[43:31] You want ship from store came out everyone in e-commerce kind of laughed because you’re taking the most expensive commercial real estate,

and using it as a shipping and warehouses are dirt cheap well it’s inverted so.

Jason:

[43:46] I say that used to be true.

Scot:

[43:47] So now it’s actually probably more economical to ship from the store than anywhere else from open Pure commercial real estate angle because covid is killed so much retail space and then at you know at some point like office parks.

That that that used to be the highest and then you so you should be Office Park retail and warehouse and now it’s Warehouse retail and Office Park so so it’s totally

all all mixed up and creating a whole nother economic model that we’ll have to kind of see what happens there’s you know a lot of people are taking these malls and converting them into fulfillment centers

I was in one I was in a Sam’s the other day and I was like.

Billy I’m in feels like a Sam’s that I guess it was a Sam’s and it was one of those sounds that he commissioned and they turned it into this weird kind of open Office Space and it was it was very strange because it felt like.

Literally having an office in a Sam’s.

Jason:

[44:41] Yeah yeah that doesn’t sound appealing when you describe it like that.

Scot:

[44:44] And they had that whole what do you.

Jason:

[44:46] Do they still have like like samples necks.

Scot:

[44:48] Well they were saying they were saying.

They had a hard time putting some like 3D printers in it they had a hard time because the floor was angled and it was because it was like where some freezers were and they dangled the floor to act as drainage and I guess they had to come in and re-engineer like a whole big section of it.

And I shopped in this house before too so it’s kind of weird like a new kind of where all the stuff was in her but they also do that what is that we some of your buildings do it where you check in and you don’t have a spot every day as a fan.

Jason:

[45:21] Like hoteling.

Scot:

[45:22] Yeah hoteling so they like the couldn’t they couldn’t understand like why no one wanted to come to work so like make it so you know Dad like all these impediments for people to come to work and they’re like we don’t know why more people aren’t coming in it’s like well.

You’ve made them feel like you know kind of fourth class citizens they kind of they don’t have a place to sit every day they can’t bring any personal items it was kind of funny and they’re basically sitting in a Sims.

Jason:

[45:48] All right yeah I think there’s going to be an interesting question about like reuse of all this the the brick and mortar space then closes so but it doesn’t sound like you’re you’re going to be investing in the we work 2.0.

Scot:

[46:02] Pregnant.

Jason:

[46:04] Side note and I

I miss the most by far important and Brilliant move in that whole Target Whitney the major feature they announced is that you can now order Starbucks to be included in your curbside pickup order.

Scot:

[46:20] Game changer.

Jason:

[46:22] That that does feel like a game changer.

Scot:

[46:25] I was picturing you being first alone.

Jason:

[46:27] It feels like they’re targeting a couple people than I know.

Scot:

[46:30] Well as fellow Starbucks kind of Sword the target ones I have found out you’re not as good or know that you like the.

Jason:

[46:39] Controversy.

Scot:

[46:40] Some of it the taste is not the same.

Jason:

[46:43] Their franchisees.

Scot:

[46:45] Yeah and you can’t mobile order which is government I guess this is mobile ordering.

Jason:

[46:49] Yeah

yeah so I think it is a clever move to like so these impulse and consumed on the way home items at curbside I bet we’re going to see a lot more of that but I am with you if I have the option I usually like to go to a Starbucks Company Store over a franchisee because the

the experience is more consistent at the company store but I’m saying that to someone that’s selling a bunch of franchises so we should maybe be careful about that.

So neutrals I have my first neutral is Best Buy they had a slightly negative quarter they were down 2.3 percent they were up 12 percent this quarter last year.

You know they actually did decent their kind of,

two-year stack they’ve grown about ten percent which is you know above what what a lot of retailers grow,

but they they are in a category that in my mind like seems like should have really benefited from the pandemic and you just don’t see.

Like this huge huge benefit in their full year numbers so I put them in my neutral.

They are now at 39 percent of all their their sales are digital and at the peak of the pandemic it was over 50 by the way.

[48:10] So certainly increasingly their most important store Ulta beauty you know they’re their company that was probably pretty negatively affected by the the pandemic and they had you know a decent year their full year comps.

Um we’re.

[48:27] Pretty significantly this year but it was because they were so awful last year so they were down 20 percent last year they’re up 30% this year so they’re up on the two-year stack but not amazingly,

and then all the apparel guys like in my mind there’s two kinds of apparel guys there’s apparel guys that had a horrible Court year last year and or two years ago and did better last year and ones that,

had a horrible year two years ago and are still really struggling right so Kohl’s Gap and Nordstrom and Ralph Lauren are all in that kind of.

Had an atrocious year two years ago and are having a decent little recovery this year.

Um and then like Abercrombie and Macy’s I would put in that category of had an atrocious what your.

Two years ago and you know so far pretty weak recovery this year.

So those are my first two losers are Abercrombie and Macy’s and then someone who you would think would be really poised to benefit from,

the kind of economic downturn but have really struggled over the last two years are the dollar stores and and especially Dollar Tree,

their Q4 was decent it was up.

2.5% but they’re they’re basically up 1.1 percent for the year.

Which is you know pretty slow growth when the industry grew like 20%.

[49:53] So that that is my super rapid fire earnings recap are you impressed.

Scot:

[50:00] Nice I am I like how you segment it do the dollar guys.

But I didn’t listen to the reports are they signing inflation is kind of basically or is it like so it’s their own pricing but I imagine going after that value or any consumer unfortunately they’re they’re the ones that get hit the hardest with inflation is that was that kind of what’s happened in there.

Jason:

[50:23] Yeah so that that is happening now like most of their negative performance over the last two years is kind of

dollar stores are the least digital so in the pandemic when people are going to the stores last they they became a less viable option right like if you didn’t want to go to a Target you could shop from Target online like pretty seamlessly but dollar stores

very often don’t offer e-commerce they were disproportionately impacted by supply chain disruptions right so

you know if you’re a big General Merchant you could make all these plays to try to line up merchandise but you know the dollar stores are trying to buy.

Distressed inventory in remaindered remainer remaindered inventory so they like didn’t really have the option to be as proactive as some of the the,

the discount General merchants and so so they had a lot of supply chain disruption so that those were there,

they’re bad news the last two years there’s a school of thought that they’ll,

have a they’ll be decently positioned in an economic downturn but but we shall see.

Scot:

[51:29] Coble thanks for doing that.

Jason:

[51:31] If that was helpful for you we will remind you that the way you can repay us as you can jump on iTunes and leave us that five-star review.

Scot:

[51:40] Thanks everyone we appreciate it and until next time.

Jason:

[51:44] Happy commercing.

View Details

EP287 - Amazon Supply Chain Deep Dive with Marc Wulfraat http://jasonandscot.com

Marc Wulfraat is President of MWPVL, a global supply chain and logistics consulting firm, and one of the foremost experts outside of Amazon, into Amazons supply chain.

In this episode to do a deep dive into all the elements of Amazon's supply chain, how it compares to other third party logistics providers, and most importantly if and how other retailers should think about competing against the enormous advantage that Amazon's logistics infrastructure provides

Episode 287 of the Jason & Scot show was recorded on Thursday February 17, 2022.

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 287 being recorded on Thursday February 17th 2022 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 show listeners
Jason were about 300 episodes into what I would like to call our podcasting journey and sometimes our timing has been terrible over that 300 episodes sometimes we roll the dice and
it comes up the right way tonight's episode is probably the best timing episode we've ever had
I mention this because yesterday Shopify announced their Q4 earnings that were pretty strong
but then they dropped a bit of a bombshell on Wall Street they announced that they're going to spend over a billion dollars on the next 3 years on what they call sfm Shopify fulfillment Network and they're going to compete with Amazon's FBA capabilities
and they also kind of said and we're going to essentially get to 2-day delivery across 90% of the United States
you and I were skeptical about that on on social media I said that's nice but Amazon has spent over 80 billion to get there and then you said.

Jason:
[1:37] Yeah that there are also targeting a service level that's kind of antiquated like like to day is Amazon 2010 here in 2022 you know it's
at worst next day and increasingly at same day for millions of skews so I was a little surprised that they
their big splash was that they were going to invest a billion dollars to get Amazon service level from 10 years ago.

Scot:
[2:00] Yeah that's where our timing gets interesting because you and I have long wanted to do an Amazon Logistics fulfillment Deep dive
and the person that knows more about this than anyone except for the folks inside of Amazon
is Mark Wolfe rat he is the president of mwp DL and we are really excited to have him on the show talk about all things Logistics.

Marc:
[2:23] Well thank you kindly for having just gone through some really appreciate it before this.

Jason:
[2:27] Oh my gosh Mark were thrilled to have you
Scott's too shy to mention it but but this is a rare circumstance where Scott is a fanboy of you because,
every time there's there's new data about Amazon's investment in their various elements of the
fulfillment Network he's forwarding stuff to me and he's like hey did you see what Mark and cover this week so I'm probably not gonna be able to get a word in edgewise but before Scott jumps in with the questions we do always like to get
a brief background of our guests and I'm super curious
understand how you got into the supply chain space and and sort of what led you to found em W PV l.

Marc:
[3:12] Oh gosh well did I was a mathematician in my University days and,
I just accidentally got a job as a consultant you know what I got out of school and it was we didn't know what the word supply chain was back then it just didn't exist so I started a Consulting and distribution and then,
eventually went out and founded my own company and you know today we called Supply chains for 35 years I've been,
what the cost supply chain Logistics Consulting all over the world and it's been a blast I've enjoyed every minute of it.

Jason:
[3:48] Very cool and does
I think of you as publishing all this Amazon specific data I assume that there's a non philanthropic commercial aspect to MB
mmm
W PV L are you selling consulting services to people that are trying to solve supply-chain problems to analysts like what can you tell us a little like what's the elevator pitch for your firm.

Marc:
[4:16] You know that the whole thing about Amazon that we do is really for intellectual curiosity yet there's a little bit of money there but it doesn't it doesn't pay the bills so to speak,
you know really we work for other retailers that compete against Amazon and about 15 years ago when Amazon was becoming a household name.
I realized that they were very secretive about everything going on around but they didn't talk much about,
how they went to Market and as a supply chain practitioner I said well.
To wouldn't it be interesting to start diving into this and and I hunkered down in my basement and started to you know research the company and over the last 15 years 11 bowled we put together you know,
we'll put all the grease and we put our 10,000 hours into this we've got a huge database on every building they operate globally.

[5:13] We monitor the people that work in those buildings we have engineered the economics underneath the hood so to speak,
productivity rates than unit volumes package volumes Etc and that's enabled us to understanding your economics for their e-commerce operation,
including things like one of us automation done for them.
And that enables us to be more powerful as a consultant when we go to market for the rest of the industry and and they greatly appreciate the abilities that we have in terms of being.
You know conversant on areas like strategy which is a big part of what we do so I'll stop there.

Scot:
[5:55] Yeah very cool so yeah I mean if you got to study the best to figure out how to you know,
scale up other other folks
so we definitely want to jump into this a kind of defer to you on the best way to explain to listeners the shape of the Amazon infrastructure from where I sit you've got kind of the core is the Fulfillment centers and these are these giant multi million square-foot buildings that house and ship product then there's sortation centers delivery stations then they've built this kind of airplane Network across that
how would you if you were at a if you were going to Justice and our listeners are pretty Savvy on this so how would you describe kind of the the core infrastructure that Amazon has right now.

Marc:
[6:41] You just mentioned the core of it the I think a lot of folks don't realize that even before the Fulfillment center gets the inventory,
there's an important component to their supply chain which is called the inbound receiving Center and the inbound receiving Center is a holding tank,
sir inventory it is not meant to serve the public it's meant to if we to replenish inventory at the Fulfillment centers,
so typically what happens is when imported merchandise hits the apart.
It's brought from there into one of these inbound receiving centers it stays there until it's needed at the Fulfillment center.
And not doesn't just apply to Imports there's quite a bit of domestic merchandise that follows that logic as well so instead of,
ramming the Fulfillment centers with inventory like Christmas wrapping paper and I arrived in say the month of June or July,
instead of overstuffing and bloating the Fulfillment centers the hold it it means inventory tanks at the ports and then one month Christmas wrapping paper is needed at the Fulfillment centers they'll start shipping that say closer in November December.

[7:55] So that's really the first component of the supply chain are all of the major retailers like Walmart Target Home Depot they all do something similar they just called an import Distribution Center.

[8:06] Sanders come in various flavors the one that I think most of us recognize is the small sortable fulfillment center,
with goods are small enough to fit inside one of those yellow totes that can ride the conveyor system and go from picking the packing,
large not suitable for Fun Centers.
And they are usually a million square feet of me contain all the product that's too big to fit in those yellow totes and anything from an umbrella to a gas barbecue to an appliance that kind of thing.
We have specialty for Fun Centers that handle merchandise categories that are unique for a reason that perhaps they need some type of material handling.
Um you know requirement that is different.
For example apparel and Footwear or jewelry and even things like car parts or textbooks.
And then from there you have after the performance center I mean think of the Fulfillment center as being.
A place where inventory is kept and where orders are picked act and put into the shipping carton.
From there the typical shipping carton will now flow to us for Tatian Center which is a primary sort those buildings typically handle a 200 mile radius.

[9:25] They hit the packages get sorted by ZIP code palletized and then Trot to the nearest delivery station for that zip code.
Yes it's an Amazon Logistics delivery.

[9:38] Otherwise you will go to a post office or USPS post office that handles that zip code and that's typically,
the packages that are destined for the room low population density areas areas where you have high population density like Urban Suburban areas,
Amazon has built out their delivery Station Network.
So that they can deliver those packages themselves to have better speed more control and you know shall we say the capacity energy capacity to handle their package volume that's consistently growing.
And then of course there's UPS UPS picks up at the Fulfillment center so they don't go to the circulation Center the pickup directly at the foam in Center and they handle all the packages that,
are what I call out of region you think of a customer that might live in Montana or Amazon has no infrastructure,
PS would be delivering packages to Montana because Amazon doesn't have any Traditions Energy Delivery stations out there.

[10:37] So that's kind of the threefold passion others also are free and to that extent Amazon currently leverages 43 airports around the country.
Packages that are going are free or typically.
Adam should have picked in a fulfillment center for a customer that's Amazon Prime at lives very far away from where that item was picked ideally in a perfect world you'd never have your free because every fulfillment center Woodstock every item.
And everybody would live close to a fulfillment center so you want me to do this because it f8 in general cost seven times more than brown free.
So you don't want to do are afraid of unless you have to but it's an important part of Amazon's competitive positioning because if you're going to offer first to Coast to day service level for Amazon Prime.
Then you need her for you you can't get from Seattle to New York using ground free that would be five days.
So that's an important component to very expensive component what they do so packages will go fulfillment center to the air hub,
their hub from their planes will typically fly at to our regional airport public Dallas or Hebron Kentucky where their brand new airport Hub is been opened up last year,
and then from there the plans will take the packages to their respective regions and then from there to the delivery stations that end up delivering to the customer.
So that's where the I would say the main components of the supply chain I haven't talked about everything but that's the main just.

Scot:
[12:06] Prickle and then so so when it goes to air it's kind of a bug right because you know
when it should have said Jason orders an Xbox and it's not near him in Chicago and it has to go out west or east and then fly it to him to since he's in the center of the country that may be a bad example but let's say there's someone on the west coast they order an Xbox it's not in stock and they have to ship it from the east coast and what does the network gets smart so do they have
the software that would then say all right we flown six of these across the country we need to kind of rebalance and get a lot of those closer to the West Coast is that kind of how it works.

Marc:
[12:40] Yeah I think you're exactly right there's artificial intelligence you know where do you stock an item,
becomes a pretty important aspect of their business so I don't want to put windshield wiper blades that are for the winter in Miami,
in the Fulfillment center there right I'd rather have that open Detroit or Chicago so having the smarts to know if you're going to have 15 million items in a fulfillment center.
You want to have the smarts to position the rate 15 million items in each one of those small sortable fun answers.
And similarly if there's called 360 million items on the Amazon Marketplace that have been sold.
You're not going to be able to put 360 million items in every building.
So you have to have the smarts to be able to say if I see something will be frequently.
Um and it's going long-distance how can I fix that problem and save money and increase,
quality of service by adding either stop him or places or stock in different places so that's all part of the artificial intelligence behind the scenes that is part of the Amazon secret songs.

Scot:
[13:50] Yeah let's put some members on this so we've got inbound how many of those do you think are just kind of roughly are there in the system.

Marc:
[14:00] The inbound receiving centers.

Scot:
[14:02] Yeah.

Marc:
[14:03] We can't 29 right now within the US and there's about 11 more on the way.

Scot:
[14:10] Could you be more specific.

Marc:
[14:11] Sorry I.

Scot:
[14:12] I'm just kidding that's what I love that's why I love about your data it's like down to the like you know decimal points of square footage so your how about fulfillment centers just all all flavors I guess.

Marc:
[14:26] In the u.s. there's author fulfillment centers add up to roughly about 287.

Scot:
[14:37] Jason for the longest time didn't Walmart have like eight is mm I remember free comes.

Jason:
[14:43] Yeah Yeah by 8 to 10 for a long time yeah.

Scot:
[14:46] Yeah I'm sure they've increased that but still they don't they don't have 287 I'll Hazard to guess.

Marc:
[14:52] Northern the third scruffy but what Mark's been doing is they've been retrofitting many of their existing facilities to play a partial removal for e-commerce.

Jason:
[15:02] I think that's why it's tricky to count because they have a pretty robust store infrastructure infrastructure for Distributing the stores and increasingly they're repurposing a portion of those.

Scot:
[15:16] And then how about sortation centers that's a little tricky because some of them are attached to fulfillment centers right or do you keep track.

Marc:
[15:22] Now we track those step we track those those are clean they've got 96 active sortation centers that's an area of the business has really grown in the last 12 months and then 22 on the way instruction.

Scot:
[15:36] Wow that is big Cecil get 20% growth and then how about delivery stations.

Marc:
[15:44] So two flavors of the delivery station one is the small package delivery station which is what most of us,
think you know think of them get an Amazon box and then there's also the heavy bulky.
Where you know they have a box truck with a license truck driver maybe two people are needed to unload the coach or whatever moves you whatever it is it's big and heavy that you ordered and so it's 515 delivery stations are active.
And 113 of the heavy bulky ones and we're aware of another roughly about 161 buildings that are in the works right now.

Scot:
[16:21] Yeah and now that's that's probably the newest part of this right because they used to from sortation they would dump it mostly before they had the DSP program they would dump all that into USPS
FedEx and UPS and then that delivery station is that lacks mile where they've built and if you're saying there's 5 15 plus
113 plus 1 so there's like 700 or 800 of these those are mostly in like the last five years is that is that your recollection.

Marc:
[16:48] Well I ran 2014 we got started on the first couple and it was so hard for the first few years but this is the part of the business just skyrocketed you know for the last 34 years,
they've been building these out not only in the cities what's interesting is last year they opened up 30 of these in the tiniest of towns.
No population 5000 kind of thing and short It's seems to me they're trying to get an ecologist The Wagon Wheel they're trying to get into the rural,
areas to do this work as well which tells me,
did you know that lost 50% of the population where it's really tiny towns that's the most expensive part of the country to get to you know lust population density widest geography so it's the most expensive last mile delivery you can possibly make.
But the fact that they're starting out with this lab test to say hey let's try these 30 a talisman,
their goal is to have every one of these zip codes under their control including all of the rural ones so this is an interesting story that's unfolding.

Scot:
[17:53] Yeah and then the thing that's kind of a if your UPS what's tricky about this is
you were in FedEx you were delivering all this stuff for them and then I imagine you know the Amazon robot
in the sky the a I basically said that's a profit or out for us we'll take that over this is a prophet I can just kind of picture them like snipping the tree and then adding these delivery stations and just slowly but surely and conversely someone on the FedEx UPS side watching that
all that margin go away is that kind of how you envisioned they rolled this out.

Marc:
[18:26] I think it's a lot simpler than the AI in the sky you know I think it's just sort the US population in descending sequence right.

Scot:
[18:34] Yeah okay.

Marc:
[18:35] Start out with New York La Chicago and so on and working way down the list until you conquered all the big cities and then keep going down from there and and.

Scot:
[18:43] That's not as ominous as an AI in the sky the.

Marc:
[18:45] Yeah it sounds better.
That's really the way it works is they and it instantly for the Fulfillment center build out you know right now they're targeting towns in that four to five hundred thousand population range,
I like Green Bay Wisconsin that kind of thing and you know the that's on the list of places they're going and it's because they've already done the ones that are 600,000.

Scot:
[19:10] Let's um so two of my favorite areas of the infrastructure to kind of poke around and is the Fulfillment centers and you know so I think the average in your data is something like 800,000 to a million and maybe that's maybe that's the small sort of bulls but,
it's hard for people to imagine a building like that until you're inside of one and you know the one way I've helped people to try and understand it as it's like
22 to the 30 Walmart's just kind of stacked in the cubic volume of that many Walmarts you get inside one of these things and you can't really
see the you might as well be on the moon because you can't really see the Horizon per se because it's just like it's so stack the stuff you don't really know where you are in the if you weren't familiar with it you're not really
no sure where you are how do they and then Amazon is pretty unique in the ones that aren't robotic with how they put product up is my understanding what what what system do they use for that or do you know.

Marc:
[20:05] So you're talking about like the large no shuttle facilities where they are more manual.

Scot:
[20:09] Or yeah we're there more manual.

Marc:
[20:12] Yeah that is actually equipment being used for that is nothing special that's pretty common place it's called an order picker truck and an order picker truck is a vehicle that runs on a wire guidance that's buried in the floor.
So that it doesn't go left to right it stays true to the wire and an operator goes up with the unit load rather than staying at ground level and raising a bow.
The operator rise to the bull head of the 40 foot building takes the boxed off the pallet and then inserts it into the location in Iraq so it's called a man up system.
That's fairly common in most walks of life that's not something you need Amazon.

Scot:
[20:52] Yeah and then don't they do it where the stuff they put on the shelves by shelf height they found it was kind of randomly placed on shelves by.

Marc:
[20:59] They use random stoics that's great and I think when you're trying to manage you know one of those large amounts sort of a building's could easily have two million items,
and one of the small suitable for mysterious could easily have $15 I say items I don't mean units of inventory I mean unique SKU variety and,
even when you're dealing with that are sort meant that that's that's also coming and going you know it's not like there's one new item a day,
or we it's like there's thousands of new items every single day hitting you it would be,
an exercise in futility to try to organize it all in some meaningful way so that the fastest-moving Needham's are positioned strategically in the building and so forth that's the way most Warehouse is try to operate whether,
this is an item that generates a lot of excitement let's put it in a in an efficient place in the world of Amazon,
especially in the world where robots are retrieving the product and bringing the product to the Picker it doesn't really make sense to do that so they use random stowage and it works well for them.

Scot:
[22:04] Yeah and then so they acquired Kiva that's been quite a while now where where are they on the Kiva robot system as it relates to fulfillment centers.

Marc:
[22:14] I have to tell you a true story here I was at a trade show and they bought tear and I had chest,
it's done a huge interview and a big article and Kevo with the prior owners and I said to them you know this is a great system but it would never work for Amazon.
And they said the continent is said hey could you strike that from the article please,
I have no clue the next day they announced that they were acquired by Amazon and I thought what a what a boy Amazon overspent they spent 750 million I said,
all laughing at the trade show how much money Amazon spent on TiVo you know we thought they were fools at that we were wrong,
was I wrong you know I've never been so wrong the whole life that that's been a huge win for Amazon and to my knowledge there's about three hundred and fifty thousand of these Roomba star robots running around out there across the world,
and we've done the reverse engineering on their labor chewing we've put a lot of Manpower and we try to figure out.
What would it what would their roles look like today.
If they hadn't done this if they were continuing to operate with pushcarts people walking 12 miles a day to pick these orders that kind of thing and the math we keep coming up with is she not to push out five million units a week.

[23:36] Out of a small sort of a fulfillment center you need about three thousand people,
if it's got robotics same building no robotics you need about 4,800 people.
So the cost per unit when you look at all the labor cost in in the manual building it's about 95 cents a unit.
In the automated building it's about 60 cents a unit so it's it's been about a 37% labor reduction they have a cost reduction for them.
Now I was on doesn't like talking about that they like to say well actually in our automated buildings we sometimes have more people than in our manual abilities,
but what they don't mention is that they're pushing out way more volume.
With those extra people that they've got in Atlanta so they're at the end of the day you can't look at it that way you have to look at it is.
If the volume is constant how many people would I need manual versus automated and in our opinion they're saving about 37 percent of their love the labor requirements by putting this Automation and that's why they've been,
I showed in every single building that they put up in the US and and in the developed world because of the huge labor cost savings.

Scot:
[24:48] Very cool I had not heard that step the,
so then the other one I think is really interesting is these delivery stations and some of the materials you have you have a kind of a really cool picture for how this is maybe a maybe try to walk people through kind of like how this is set up and what it does
on a day-to-day basis.

Marc:
[25:11] Yeah I think there's a misconception sometimes that are delivering station yeah in the media they sometimes come to the room stations fulfillment centers and they get it mixed up delivery station is purely.
A secondary sortation Center the first sort took place back at this rotation Center we're all the packages for a 200-mile region,
were organized by ZIP code and then for a specific area within that 200-mile region that's very very tight.
Call it an area where the driver can leave the delivery station and go no further than 60 Minutes of drive time to get to the market that he's making deliveries.

[25:53] That's small ships unit circle,
it's what's being serviced by the delivery station in there could be many of those circles within the region that the sortation center serves so this is the secondary sort and all those packages arrive at the delivery station that they got downloaded to a conveyor system,
people sort those packages out,
to route and a route is quite simply a grouping of streets that are close together in a neighborhood,
so that a driver goes into that neighborhood will be as efficient as possible when making that last mile delivery and a delivery station you know in the old days they used to put on so that the Vans would drive through the building,
and the loading process would take place in the building and that is still done in Northern climates like Chicago like where I live,
because you can't effectively load of an out when it's snowing outside and so forth but a lot of the newer ones that they've got.

[26:50] You could easily have anywhere from 250 to 750 Vans pulling up to the side of the building underneath an extended canopy outside,
and they're getting loaded out very much in military discipline stock so you'll have a platoon of 72 Vans pulling up,
in 20 minutes later they've got,
all their packages for their roads and they're leaving in the next platoon of 72 is pulling in 20 minutes later they're gone the next platoon and so on and over the course of two and a half hours,
three hours you Amazon's loaded out upwards of five 600 fans and they're out there on the streets doing those deliveries and it's not unusual for a bad people,
quiet day with operative 175 packages or more on a busy day with upwards of 250 packages or more.

[27:42] And these drivers are going over a 10-hour day and when you do the math on the time it takes for them,
between deliveries some of these guys are average me three minutes per delivery.
Which is astounding because these numbers no one else is hitting them this is unique to Amazon they've got enough density,
and demand for their product and the service that they can go out there and every three minutes make a package delivery it's a,
it's incredible how much volume they've got we think that in the US last year in 2021 the came close to six billion packages delivered through the Amazon Logistics,
delivery Station Network which is incredible because when you look at that volume you compare it to seeing UPS or FedEx,
UPS is our is 120 Euro a hundred three hundred fourteen year old business and they're achieving about that same volume as we speak so they've been able to build since 2014.
Company a transportation company that they're on themselves that is basically doing the same volume as a hundred fourteen year old UPS.
So I find that and that's over and above everything else they've done whether it's at this is just history in the making.

Scot:
[28:57] Yeah it's pretty amazing when they when they go to fill one of the Vans is it prepackaged like on a pallet and they just left a pallet in there or like a swarm of people are dumping packages in there.

Marc:
[29:08] No actually it's pretty smart what they do they.
Each time a package is removed from the conveyor belt on the inbound it's being scanned into a canvas bag,
the canvas bag think of it as kind of like a hockey bag almost,
where you're putting a group of boxes that logically and should be together because they're close in terms of proximity as to where they need to be delivered so they
doctor soil 225 packages on into the back of the van Loosely they organize it by these bags,
and the operator who the driver has to make these deliveries is told what bag to go to in order to retrieve a specific,
parcel that has to be delivered so it takes a problem of say 250,
boxes and breaks it down into smaller subsets to make it faster for the driver to find the actual package.

Scot:
[30:01] So then how many canvas bags are on is it like 25 or something.

Marc:
[30:07] You know I don't know that's a good question that I've never been able to figure out.

Scot:
[30:11] I stumped you.

Marc:
[30:12] You stopped me.

Scot:
[30:14] It took awhile,
yeah it's just fascinating to watch these deliver and then the thing that Amazon does is so they'll have one of these delivery stations and let's say you know to your point they'll Maybe
hundreds of ants may be up to 1,000 bands that service one of these and then there's different dsps running these things and they put them in competition with each other over routes
maybe say a little bit more about I don't think a lot of people realize that's going on so maybe maybe explain how that works.

Marc:
[30:43] Yeah so you know when you when you look at UPS unit FedEx and the other large carriers out there they all have employees.
They sometimes have to deal with units transportation to heavily you know it's sector of the economy so how do you build a transportation business that's non-union.
How do you build a transportation business where,
no one has the ability to organize and come after you and go on strike and start causing problems for your business and how do you keep costs down,
well Amazon her everything about everything you really have to respect about this company and they've done it differently.
And I got thousands of stories that kind I can talk to that,
you know will describe how they just don't think the same as the rest of the world they say they don't allow themselves to be stopped by existing paradigms so what they said was.

[31:40] Last of all and help entrepreneurs get started.

[31:45] Ruth help them get the Vans will help them Finance the whole process of getting into business,
and the other load and higher the employees who will do the deliveries so they're that creates an arm's-length agreement between the driver and,
Amazon it doesn't become their HR problem becomes the HR problem that DS p--
and let's make sure that every one of these delivery stations is not being serviced by 1 DS p-- no no no,
we have to have that with 356 sometimes 90 a speech why because,
yes p number one starts rattling assume that he's not making enough money,
or he doesn't provide adequate service or something bad happens with one of the drivers or you know you can think of a Litany of other reason you fire them,
and you bring in another bsp to replace them so they're all powerless,
and they're all captive to Amazon so it kind of reminds me of the old family days when you know if you went off and sold Emily product at,
and even space is my captive rate what could you do about nothing,
in this case Amazon control is everything these dsps cannot go do deliveries for other people they're captive to Amazon Amazon own SEC passing,
and the dsps have to deal with all the churn and burn that was on a high turnover labor environment that they're dealing with.

[33:10] And I've got to perform because Amazon is monitoring them every step of the way there's cameras on these vehicles they can tell whether or not the vehicle is doing what it's supposed to be doing or if the driver is doing something wrong.

[33:22] And they have to perform and if they don't perform them there let go so it's a way of keeping,
this massive network of thousands and thousands of drivers without the ability to organize and form a union without the ability to,
gain any power and yet they can guarantee fast you'll be there for them when we need it so it's brilliant it's a stroke of Genius.

Scot:
[33:46] They're not franchise right there their 1099 so the kind of like how FedEx set up ground is my understanding is that is it.

Marc:
[33:54] There are there people that often times used to work for Amazon in the warehouse.
And then they took hold of this opportunity and said hey why not give this a try and they became entrepreneurs and now these business people.
Are out there having to manage sometimes 30 40 50 drivers are more and everyday they're under pressure to get this job done.
Show.
Do I think at the end of the day Kudos Amazon for figuring out how to do this and not be saddled with labor costs that are prices high right some of these drivers,
turn twenty to twenty-five dollars an hour you start looking at the wage rates fully loaded that a FedEx or UPS driver is making and,
sometimes those folks are out there making 70 thousand dollars a year to drive a vehicle,
number two new drivers when it's foot when you consider the benefits so that's what happens when you have employees and you know you treat them right and you have benefits everything else Amazon is gone,
hello cost way to db2 see and keep their costume we think the average delivery is coming in somewhere around a dollar 75.
And that's pretty hard to match you know when you start looking at the others.

Scot:
[35:14] Yeah what what would you say FedEx and UPS around.

Marc:
[35:18] It's hard to sort of cost structure is but if you you know you all you have to do is go there and say Hey I want you to shoot this package and it's still going to be 67 dollars,
a portion of that 67 dollars goes towards the last mile delivery function but a pretty big portion.

Jason:
[35:35] So Mark I talk to other people that have kind of a simple model in their mind of how this works that way,
you know gosh Amazon puts one of everything in a huge fulfillment center and puts the Fulfillment centers close to people but I think the problem Amazon solves is even much more complicated than most people realize
did I hear you right a big Amazon fulfillment center holds about 15 million skus is that order of magnitude right.

Marc:
[36:04] That's all that's not a bad number.

Jason:
[36:06] And then how many skus do you think Amazon sells I have seen a number of numbers I thought I heard you say 360 million but I've seen some estimates that are even quite a bit north of that.

Marc:
[36:17] And to confess I only know what I read as far as that goes so the number that I saw last was somewhere around 316 million or so.

Jason:
[36:27] Okay so let's see.

Scot:
[36:28] That's her prime eligible I think I think that's Prime eligible and then non-prime eligible ev's another 300 million yeah I think I think that's where the bigger number is Jason.

Jason:
[36:36] That would totally make sense so to kind of frame this it's it's not like you place an order and everything can get shipped from the Fulfillment center that's closest to you right like the,
you know they're strategically staging different long tail inventory all over this network and then you know.
Impressively maintaining this high level high service level even when that product is in close and that's where a lot of those like are exceptions that you and Scott talked about in the beginning come in right is.

Marc:
[37:07] Write that obscure Halloween costume you're buying for your daughter right.
That is only stocked in the Seattle fulfillment center and you're in New York he wanted two days so that's an example of something that would go by plane if your Amazon Prime.

Jason:
[37:24] Yeah and the.
You mentioned so one funny thing so I live in a multi-unit apartment building a 12 unit Condo building and I like to think of us as an Amazon laboratory because we're in Chicago Chicago has every kind of
fulfillment infrastructure here and and are 12 units get about 50 Amazon Parcels a day and it
every single day in our mailroom there are Amazon labeled boxes delivered by the postal carrier there are
tons of Amazon boxes delivered by Amazon you know dress dsps and their their Amazon boxes delivered by UPS is,
is in your mind is that because people are ordering longtail items and they're having to use all these other delivery vehicles or are some of those boxes because,
their vendor fulfilled inventory or you know things like that.

Marc:
[38:22] You know people ask me this kinds of questions I don't know all of the inner workings of how things function but I can only surmise so,
there is a significant amount of merchandise that's sold on the Amazon platform that's been fulfilled.
So if it comes in an Amazon box then it's probably Amazon Fulfillment right and if it's arriving by the post office and your,
area where you live is being service primarily by Amazon Logistics drivers.
Chances are it's coming the ship from location is such that it will ship by another former Senators far away.
Where for whatever reason the post office was used and maybe that customer that ordered that box was not Amazon Prime so they ship it from a farming fulfillment center,
and it arrived 345 days later and that was the lowest cost way of getting it there.
Right and something for UPS center maybe it's coming from a location where UPS provides the best value to get it to the customer address and remember not everybody's Amazon Prime so the rush to get it,
in two days is really an Amazon Prime only issue right.

Jason:
[39:42] Wait there people in the world that don't have Amazon Prime and I'm teasing
so so now I do want to Pivot a little bit as if this kind of logistics wasn't difficult enough now there's all this demand for what to me seems like even more difficult distribution which is like all these
perishable locally sourced by grocery case.

Marc:
[40:06] Yeah.

Jason:
[40:07] And
what when you use it off all the various types of fulfillment centers in the beginning one thing we didn't talk about that my understanding is that like Amazon is likely also starting
to build a lot of are these smaller fresh distribution centers that are you know located closer to customers you know with various degrees of same day service.

Marc:
[40:33] Yes of the you know Amazon's been very slow to step up to the plate for the food side of the business right so what they did initially was they opened up these Prime now hubs,
many of which had fresh capability fresh or frozen so these are smaller type of operations that are interested in.
My mom wanted to small running with 25,000 square feet type thing.
And they would be there real life was to you know pick your order for food and have it delivered to your house and say two hours.
And it was never a money-making side of the business because primarily everything that's going on here is manual so when they acquired Whole Foods.
And you know they said well here's always starts right we've got those 500 stores let's leverage them as being miniature Depot's that we can depart and do home delivery.

[41:33] And that's really been I think the focus over the last few years is how to get as many of those more food stores delivering your grocery orders as possible and fairly recently they did away with the free delivery,
our whole foods and we put up to ten dollars.
And that's the show I might add even if your Amazon Prime because it does cost a huge amount of money to do a delivery of food might say why.
Well food is the type of merchandise that you can't systematically.
Synergize and build-up Innovation for a day's worth of work when someone orders their food.
Usually what ends up happening at least in the case of Amazon is the delivery function is made in an unrefrigerated vehicle like a car.
You know I flexible driver and wait take several orders that I'm going to deliver them and that delivery function is usually within 15 to 30 minutes of the store.

[42:38] Because you don't want your chicken breasts sitting in the tropical car for 4 hours or you're a scream or anything else that could cause a food safety issue.
So that type of service when you're paying somebody 25 to 40 dollars to deliver a handful of borders that are food.
So often times it ends up costing seven to eleven dollars to perform one delivery.
And in the world of food it's a two percent net margin so you can lose your shirt quickly when you start paying for that and not charging a customer.

[43:09] Amazon is still trying to figure it out and I believe what they've decided on and so the strategy here is that they will.
Very gradually start building out the Amazon Fresh stores that don't require check out our cashier.

[43:27] Rotisserie snout that they're working on those.
And as they build up more of those stores and they get more volume to layer on top of the Whole Foods Network.
I believe that Amazon will start to develop their own supply chain capabilities behind the scenes meaning.
Highly automated distribution centers strategically positioned in at least seven major markets that will feed the stores.

[43:55] Giving Amazon the ability to buy efficiently and to distribute efficiently.
And how we do the automation will be applied to minimize the labor cost in these buildings and then we'll over the next decade.
Below are very robust supply chain that's similar to what Amazon are sorry Walmart big during the 1990s.
Walmart went to town they put 46 million square feet of distribution center space up in the span of a decade.
And they built out all those super centers with food capability during that same decade.
During that same decade Walmart put over 25 companies of business that we're long you know long-standing Regional grocery retailers.
It's so the next big wave or the next tsunami of competition in the food industry will be Amazon.
Are they doing it now no they're just getting started we haven't seen very much activity here I think they've really pushed this one off and they've formed a strategic Partnerships with UNFI and what's Spartan Nash but,
I said come 20/20 special reference start to see a lot more activity here.

Jason:
[45:08] Yeah it's a it's a big chunk of consumer spending I get its lower margin and more difficult but eventually it seems like it will it'll be the place to invest I am curious though do you like I often talk about,
by God this general merchandise as being like deliverable via a route and a lot of this perishable merchandise,
at least at the moment people feel like you have to do point to point deliveries because you got to get the ice cream,
to the homeowner when the homeowner can put it in the in the freezer pretty promptly.

Marc:
[45:40] Yeah and the other the other thing is the homeowner wants to know when you're coming so there's a specific delivery time window.

Jason:
[45:47] Exactly and and pre-pandemic all these two income households there are very you know the there was,
a scarcity of squats win-win homeowners were available and it was the same slot for everyone right so it became so it's really hard some of the people some of Amazon's competitors are experimenting with these novel,
you know very small things but like hey let's put
refrigerators on customers porches and will deliver you to the refrigerators or let's get smart locks and you know deliver to the consumers home refrigerator like.
I don't know do you you imagine the Amazon is going to have to come up with some novel solution.

Marc:
[46:30] No no don't forget there's all kinds of spaghetti get in front of the wall and half of it's not sticking right if so I like the idea where I'm going to let some stranger into my house to put food in my fridge,
um that's not lawsuit written all over it I can't imagine that's going to last very long.
Walmart's doing it and they're expanding it actually but you know I'm going to predict that once a dead duck.
When you get down to brass tacks we work with quite a few retailers in the grocery sector depending on the geography we're talking about.
Some of these retailers have 90% order of the orders that are ordered online or pickup at store.
So some will place an order at 10:00 11:00 at night and arrange to pick it up at 5:00 the next day after the work is over.
And the like that convenience because they don't have to go in the store and waste their time and it's on the way home it's from their local story anyway.

[47:30] And when you think about it 90% pick up at store 10% deliver that's exactly what a grocery retailer wants because that eleven dollar delivery to the house was the way that cost goes away.
Customer likes it because they don't have to spend the money on that bus too.
Start looking at the cost of instacart and what it cost for a valet to go shop you ordered and delivered to your house and after you look at the markups that are put on the product that no one really knows about because they're not looking at the fine print.
After you pay for the delivery fee the tip etcetera it's not uncommon that 100 all orders now 125 to 130 dollars coming out of your pocket as you want to the store would have been 100.

[48:12] And that business model will be what comes Under Fire as more and more people tune into that cost increase.
Amazon's proposition on the home delivery side will with the increase of these Amazon Fresh stores and the Whole Food stores I think they're going to try to go,
to the pickup at store model as well more storage more opportunity for that less expense.
And also try to get more efficient with scale at doing the home delivery model right because it requires scale.
Really touch and if you really want to do it right you won't with refrigerated trucks that's what Kroger's doing so now you can send a driver out for a day's worth of work with a refrigerated truck,
with appointment schedules and all that done and then and now you've got you know a uniform driver and a logo on the outside of the vehicle and it's far more professional than you know some Flex driver showing up at your front door.

[49:08] There's lots of things going on as you can people play with the proboscis down the sidewalk to do the to do the delivery of the order,
wait for a New York is doing that and we'll see whether or not any of these things and you know I've always been about Bethel that a single robot that might possibly thousand dollars.
Is is a good way to spend your money to go and deliver one order 9f you doing 10,000 orders a day when I need 10,000 of these robots have been waived spend capital.
Probably not so I and that's why drums never took off I am 137 million packages a year,
with drones you just can't right here you're going to need billions of drones to make that happen it's just it's not realistic.

Scot:
[49:53] Yeah,
let's pivot a little bit so let's talk a little bit about kind of the future so you've given us your really good good lay of the land of and even some future that they're you know they're there,
increasingly investing in these things one of the things I've kind of long predicted you mentioned the last mile is maybe like
a buck and change to deliver something do you think Amazon will eventually just compete with that axe UPS where I'll just throw some packages on my door like let's say I'm going to ship,
Jason a new microphone I'll just put it on my front porch address it to Jason and when the Amazon comes they'll pick that up and take it to him for three dollars or something.

Marc:
[50:32] The question I get quite often asked quite often and I always start out by explaining you know Amazon is a business that there are days during Q4 were they on the hill quite a few days,
in the fourth quarter the volume this ship relative to an average day is 2X.

[50:54] So like a fulfillment center that there's a half a million units on an average day is spent a million units output on a busy day.
Repeat it and the same thing goes for the delivery stations right you might have a delivery station doing fifty thousand packages now doing a hundred thousand on a peak day,
so during the first quarter of the whole company stressed.
With trying to get all these resources to work longer hours huge amounts of overtime and everybody's tired and there isn't any fat in the system,
to be able to take on additional nice to have volume to try to subsidize your business.
Your just got every pair of boots on the ground trying to manage your own customers and your own needs.
Sorry you set something up where Logistics is a service during q1 through Q3 when you have a lot of slack in the system by frankly.
Matthew 4 well one way you could do that is on your 3p Partners you could extend an offering to them and say hello,
your only business partners will do your deliveries for you during q1 323 but not during Q4 and if they're small Mom & pops and they're going to get a significant cost break because of that,
don't jump on board and now you've got that additional volume that you need during she wants review 3,
to help Finance or subsidize your own Logistics operations and indeed that opportunity is readily available today and I think that's the first Port of Call.

[52:22] 24 on the other hand they might just turn that tap off and say we don't need the revenue and what really needs every boot on the ground to support our own business.

[52:30] If you're a serious ship and by that I mean spend five to ten million dollars a year on parcel free.
What happens is the people like FedEx and UPS first thing in the new you they come into your place and they say look what your business,
you gave us a commitment for the 10 million in volume and we'll take the whole thing and we'll give you a nice juicy discount.
So it's not something that you can carve up by quarter.
Commit at the beginning of the year to doing 10 million shipping volume may give you an extra Cent discount in exchange for that,
and you stay the whole year with that one partner so this Logistics as a service concept is is,
really something that you have to be careful with because it's a bad idea for the first three quarters but not the last one and it's not like AWS which is a commodity that you can sell to everybody.
It's something that requires lots of lots of vehicles delivery stations for patients centers drivers There's real resources that are needed to make this happen.
And you can't put a peak on top of a peak because that 24 Peak that's happening in the Amazon is happening everywhere else in the b2c world as well.

[53:40] So I think they'll become a competitor to FedEx and UPS and I think I'll primarily compete in the b2c spaced delivering consumers because that's what they're good at they're not trying to do,
the deliveries that you know it's 50 packages a delivery at a business and I'm trying to be that work that's still going to be the domain of UPS and FedEx but I see this competition really being something that,
we'll probably wind down towards that fourth quarter of the year.

Scot:
[54:08] Finishing yeah the so we've seen an enormous amount of venture investing and go puff and what are these companies called Jason there's some cool name that you you guys use.

Jason:
[54:20] Like ultra-fast delivery.

Scot:
[54:21] Fast delivery do you yeah the gorilla and all those guys do you feel like you're going to have a better system than Amazon or do you think that they're foolishly going to crash into the Rocks the Amazon rocks.

Marc:
[54:35] Yeah I think I think that's what's going to happen I think all of those especially the 15 minute guys I think they're all going to burn out and I Venture Capital money is going their way of course but.
You know anything to do with food requires volume,
and stale and you're not going to make money and find resources that are going to.
Stick around for the long run in this big worker economy of 15-minute deliveries when you're constantly under stress that that's just a recipe for disaster I wouldn't put a name on to that myself,
um the good parts of the world will see I'll hold off on that when they've got 500 of these fulfillment centers that call but their time kiosks really at the end of the day and,
you know it's a huge cost model to operate that way and I honestly think,
um you know this is all exciting and new but when the expectation to make a profit starts to become a reality I think a lot of these guys are going to go away.

Scot:
[55:39] Yeah this is kind of a correlated question we're so you talked about you know some of the Amazon numbers you are putting out there you know you said they're going to add,
you know,
122 sorts and more another 161 delivery stations where does this stop and you meant also mention the Wagon Wheel where they're actually starting to get out into pretty Loosely populated areas is is there a point in time where,
we're done like and when is it.

Marc:
[56:09] Well here's an interesting sound bite for you know when we add up all the square feet that Amazon added in the u.s. 2021 including the message.
Crossover in fact it came to about a hundred and thirty six point six million square feet okay keep in mind the entire Walmart Network that took 49 years to build.
Totals up to about 150 million so we're talking about company during covid conditions when it's impossible to get lead times that are decent and suppliers to do the work on society Etc,
this guy's built almost almost an entire Amazon just in the u.s.a. sorry and I'm tired of Walmart just in the u.s. in one ear,
and when you look at what there.
On schedule to build in 2022 148 million more square feet will be added in 2022 and that's the size of the Walmart Network that's been built over the last 50 years.
So this thing isn't going to slow down anytime soon even though in the last quarter they announced that they're going to take a breather.
Now you know when you hear that what that means is the number of new facility announcements that we would normally expect.

[57:27] To happen this time of year is down way down compared to last year.
So that means 2023 2024 I would fully expect this speak to start really slowing down.
At least on fulfillment center side.
The logistic side they've probably got another 750 to 800 buildings to put up between now and the next five years in order to hit true Coast-to-Coast coverage across all zip codes,
they may change direction to say about to do that but if they do decide to do that,
there's a good 800 more buildings they have put up that are Derby station since rotation centres and are hubs in the lake and that's not have to have an output of energy and but I would see within the next five years,
we should expect.

[58:22] That this engine will start to mature and it's quite the growth of warehouse space,
for Amazon is directly correlated to the product sales growth that you see on their quarterly statements,
so if sales go up by ten percent they're going to need 10% more space at least from fulfillment center perspective all of the logistics buildings are more geographically driven.
So the question is your how much more will e-commerce grow.
Over the next five years relative to what we know today that's a hard one to answer that I see that,
in the u.s. you know our expectation is 10 percent growth this year in 2022 slowing down probably eight six and four percent over the next several years so I think the growth in just e-commerce in general.
Combined with this mature Network that they've already got combined with the fact that I mean you can only build so many of these anyway.
It doesn't make sense to put up a 300 million dollar building a town of 200,000 probably not.
Now it's better to ship the product further than to spend all that capex and on a small town or small in time so these things lead me to believe that we're going to spoke we're hitting the top of the bell curve and we're heading down the other side.

Jason:
[59:42] Marc this has been great this does kind of trigger one last question that
I maybe should have started with so you kind of have in a different field but the same job I have I jokingly tell people my job is to
unsuccessfully helped other retailers compete with Amazon and yeah you've just painted like a pretty impressive picture of,
like how daunting the the Advantage Amazon has and how far ahead of everyone they are you mentioned you work with a lot of other retailers like,
at the highest level I assume it can't be your advice to anyone that they should try to catch up right like is the
is the answer to like find some white space that's an alternative approach to brute-forcing this like what what do you tell other retailers that engage you.

Marc:
[1:00:33] No one needs me to tell them that they can't compete against Amazon me this is history in the making right we've never seen anything like this in modern in the history of modern man this speed the sheer speed at which this has happened.
I can remember going to trade shows not that long ago when people said yeah but they'll ever make any money,
and you know pooh-poohing Amazon is slow they're going to be extinct in real time and you know what's happened since the mid-90s till today in a relatively short period of time has been devastating.

[1:01:09] To the retail industry to shopping lost every aspect of retail you can possibly imagine.
And it's going to continue to happen and sir you can't say to a company,
wow and become better at e-commerce than Amazon is because that's a losing battle I think you just have to understand when Back to Basics you know what made you great in the first place,
don't try to become a five hour delivery firm.
Because you're not going to get there without huge cock question and it kind of brings us to Shopify and how much money will Shopify end up spending.
In order to get the two-day next and all the rest of it well I think determine the two days but they absolutely need to be competitive,
mom you know go and build you are six or eight fulfillment centers however many that's going to end up being one put those in place either with a third-party Logistics partner through your own resources,
and stop and stop it today because there's no point in trying to be next day,
that just gets way too expensive and then focus on the core values right wider Shopify,
exists with a high degree of success and growth it's because they offer something that Amazon doesn't offer right then it has nothing to do with its owner has everything to do with the vendor.

[1:02:29] And same thing with wafer you know a lot of folks asking what about wafer wafer has a fantastic product offering.
Right I mean they the customer shop on the wafer safe for the products that are sold there not because Wayfair can deliver within the same day.
So don't even try to become an Amazon trying to be the best you can with the resources you have but you know focus on what makes you great first place.

Jason:
[1:02:56] Well Mark that is great advice and that is going to be a great place to leave it because it's happened again we've used up all of our listeners a lot of time but this was an amazing conversation really appreciate your time if listeners enjoyed this show we sure would appreciate it if you jump on iTunes and give us that five-star review.

Scot:
[1:03:16] Marc Lee really appreciate you taking time to share your deep knowledge of Amazon's infrastructure
if folks are interested in reaching out to you maybe maybe you've piqued their interest to help them figure out some stuff what's the best way for them to reach you or read what you write online.

Marc:
[1:03:35] Our website wpbf.com.

Scot:
[1:03:38] Awesome well thanks everyone and.

Jason:
[1:03:42] Until next time happy commercing.

View Details

EP286 - Amazon Q4 Earnings

Amazon released their Q4 (and full year) earnings for 2021 on Thursday February 3rd. In this episode we do a deep dive into all the details.

Key Topics:

Amazon North American Revenue grew 18.4% in 2021, which was just above the industry average of 17.9%
Amazon has broken out their ad revenue for the first time. In 2021 total revenue was $31.16B growing at 32% Year over Year. Ready Jason’s Forbes Article here.
Amazon is raising the rates for Amazon Prime from $119 to $139 per year.

Want to learn about Amazon’s sneaky fulfillment advantage (Amazon Key for Business)? Check out our YouTube video here

Episode 286 of the Jason & Scot show was recorded on Thursday February 3, 2022.

http://jasonandscot.com

Transcript Jason:

[0:23] Welcome to the Jason and Scot show this is episode 286 being recorded on Thursday February 3rd 2022 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.

I’m dying to talk Mandalorian with you but I don’t want to do any spoilers so I’m just going to skip the Star Wars chat this week until I think we’ll give it until all the episodes out plus two or three weeks and then we can talk about so until then.

It’s business only.

Jason:

[0:58] I accept your promise for a later conversation I would only say watch it people go watch it.

Scot:

[1:05] Yeah it’s gotten really good okay so it has been Star Wars dramas aside it’s been a mega cap Tech stock drama this week so it’s been a very interesting week.

And we’re excited to kind of culminates in the Amazon news that came out today so this is this is our hot take on Amazon’s Q4 but I think it’s important to back up

about six steps before we jump into that briefly so setting the stage back in episode 257.

We were super Clairvoyant and in March of 2021 you and I were the first I’m pretty sure and we can get you into fat check this.

A lot of people were talking about am apples I DFA and that’s their new privacy where they’re killing the cookie and doing a variety of things to really limit the amount of tracking available to apps.

Inside of their ecosystem amongst email and a bunch of other stuff but the primary one is apps can no longer really track what’s going on

there’s a lot of talk in the ad World about that but you and I believe were very early talking about the impact on e-commerce so.

So we had that and then you know I went back and looked at our notes and our prediction was that this was going to put Facebook in a world of hurt.

So then Flash Forward.

[2:25] Past this is a in your hot tub time machine and episode 285 which we did a couple weeks ago our previous episode you took us through some really good data we got a lot of really good feedback from that show from folks and everyone enjoyed your presentation.

And except for that one person who said that you’re too verbose and your slide presentations are too long so shame on them anyway they in there.

Jason:

[2:48] They’re probably not listening to our super long podcast.

Scot:

[2:51] It probably we self-selected them out there listening to some 5 Minute Podcast.

Or they’re listening to us on 4X and they’ve totally missed this whole segment anyway so you one of the data points you put out there that is that e-commerce crew 18% that right.

Jason:

[3:09] You do yeah well no retail grew 18%.

Scot:

[3:11] Retail grew 80% okay so that was kind of the watermark and then e-commerce grow a little bit more is that correct like 21 or so.

Jason:

[3:18] So we don’t know for sure non-store sales grew about 20.

Scot:

[3:22] Yeah okay so we’ll call it 18 to 20 then last week and over kind of like the last.

Since College January 20s the stock market has really slid into a bit of an abyss so the there’s the whole saying don’t fight the Fed so the

inflation has been on a terror so the FED has signaled they’re going to do some pretty aggressive raising of interest rates.

So the market kind of did a total sell off and basically went into this let’s throw out all the babies all the bathwater we don’t care everything’s so expensive and it kind of went into what Wall Street people call quote-unquote risk off so

we don’t want any risk anymore we love to risk now hit

so that was the set up kind of coming into this last five days and then on January 27th which was last week Apple had a surprisingly strong quarter.

[4:14] Serving one ever was kind of like on pins and needles because they’re the supply chain really hasn’t improved in some areas it’s gotten worse seven was like surely Apple could not have had a good quarter there’s no way they could get all those complex little

cogs and widgets that go inside your phone but sure enough being Apple they were able to navigate that and they actually had a pretty surprisingly strong quarter

now Apple doesn’t call out anything around there add product or anything like that so it was just kind of a is largely a hardware type discussion

then so the market got a little relieved and then next up to bat was Google or alphabet and that was Tuesday this week so February 1st

and they blew it out of the water so they had very strong earnings and in the conference call their CEO Sundar pichai he specifically several times mentioned e-commerce and

it was kind of interesting because I was thinking you know they’ve really done anything in e-commerce Dave

they’ve they’ve kind of played around with Google shopping and they made it free and then they charge more and they’ve got this experiment to be a Marketplace but if you ask anyone including you and I you know it really hasn’t been like they done anything particular

they did call out I’m pretty sure you probably picked up on this that they’re going to do more Integrations with YouTube on e-commerce and then they have a

Tick-Tock competitor called YouTube short setting.

[5:39] Or short and they’re going to do kind of a livestream tie in there with e-commerce so that was the that was that was the take there.

[5:48] Wall Street was loved this result and the stock shot up 20%.

And when we’re talking about these companies as a reminder these are mini all these companies we’re talking about except Facebook are well over a trillion dollar and market cap.

So when you move something like that 10 or 20% that’s two and four hundred billion dollars of Market.

[6:11] Money sloshing around up and down so so this was an up

and it was like you know it was like effectively three to four hundred billion dollars of value added to Google literally in a.

12-hour day so that was interesting.

[6:28] Then so that was kind of a roller coaster was on the upside and then Facebook now called meta reported the next day on Wednesday and that was the exact opposite it was a total and complete

bloodbath the CFO got on and specifically talked about three reasons that they had a really bad quarter the first one was the iOS changes and then they kind of quickly moved on and talked about inflation and then

exchange rates where the dollar has gotten weak because of this fed tightening

but then as they got into so that was the cfo’s prepared remarks and then in the Q&A

Wall Street analyst being good at sniffing out trouble they spend all their time on the iOS changes the IDF a and it was interesting to asked

Sheryl Sandberg and they finally kind of got her pinned down and I thought this quote was interesting.

And she said Apple created two challenges for advertisers one is the accuracy of our ads targeting decreased so that they’re lost targeting which,

increases the cost of driving the outcomes the other is that measuring the outcomes because we’re.

And then the CFO came back on and said you know just to be specific we missed about 10 million dollars of Revenue this quarter due to these iOS privacy settings.

[7:45] And then and then I said well how how long is it going to take you to figure this out and they said this is going to be a significant headwind for our business and it’s a number of verticals and it’s gonna be a multi-year problem

so yeah that was not good and basically you’re.

You’re the ad Guru here but you basically can’t Target and you can’t measure so you know they’re bad that is not good if you’re spending money on the Facebook platform.

Any any comments on that before I go into a another little piece of the story.

Jason:

[8:16] I think you summarized it really well like I feel like it’s even more acute when you’ve spent the last like 10 years telling people that targeted ads are the best right like that so I think that’s a challenge and I think,

meta don’t really talk about it but I would actually argue there’s kind of three challenges that you can’t Target as well you can’t measure the effectiveness

but also a heck of a lot of the best-in-class advertising on Facebook is what I would call real time optimized wide because they had this like real-time closed loop of performance you could.

Dynamically generate some add content see how well it worked and then change it on the fly so the ads got better really fast and part of the,

the problem with,

not being able to measure it as well is it breaks that real-time Loop so so I would I would say that also is adding insult to injury in terms of the.

Effectiveness on Facebook so I feel like after their earnings there was kind of a consensus that like man,

advertising dollars are shifting from Facebook to Google because Google has a less acute version of this

data problem than Facebook has and Google has more measurable Commerce events on their platform than Facebook does at the moment.

Scot:

[9:37] Yeah and that’s that’s exactly right so.

So and just so listeners understand to the problem is most people are using the Facebook platforms so which the.

They have WhatsApp but they don’t make any money off what’s up that I’m aware of they make a little bit it’s de minimis so where they’re where they make their money is off Instagram and Facebook and ads inside of there

will guess what people use that you know.

[10:00] Instagrams level like 99% mobile and Facebook’s probably 80 90 percent mobile so they have some desktop traffic where you’re still probably getting some decent first-party cookie data but you know.

So then

what’s called 85% in aggregate of their ad businesses on the inside the mobile app a big chunk of that well over half is inside of the iOS

and then the other problem is Google wants Apple to this Google has increasingly decrease the ability of apps to track things to see if it’s just

it’s pretty bad well Wall Street was freaked out and basically the stock went down 26 percent in one day today and that’s the biggest one-day drop ever

and they lost two hundred and thirty two billion Market in market cap so so basically what happened is

you know Google backed up the truck Google and apple backed up the truck and load it up

a big 30% chunk of Facebook and split it between them and drove off into the sunset it was pretty.

Pretty interesting to watch this happened in literally like a 72-hour period and to your point Wall Street figured this out pretty quickly and said hmm.

[11:12] Google was kind of talking about how that they kept talking about e-commerce

Facebook keeps talking about these people that want to really track things so while streets kind of figured out that what’s happened here is e-commerce dollars

the all those Shopify merchants and all the way from mini little Shopify stores all the way up to the big guys they very rapidly this is the challenge in the digital world

you can move dollars instantly two different mechanisms unlike TV where you’re locked into the Super Bowl ad for for six months or whatever so over the over the course of.

Effectively the holiday period dollars sloshed out of the Facebook ad bucket and into the Google and then I imagine also into the Apple ad Network

um as well so and then we’ll talk about Amazon also so that was really fascinating as a third party Observer to watch that happen and how rapidly these it’s kind of funny it was.

I would say these changes.

Have been known but then happened like rapidly and almost makes you start to be a conspiracy theorist right so back in March last year you and I were talking about this and we could kind of see it coming

but then it really didn’t hit until fourth quarter and if you were in hindsight if you were diabolical and really trying to put the crunch on this e-commerce segment on Facebook that’s exactly when you would

would really kind of clamp down on them so I don’t know if there’s any of that going on but it was it was really really brutal for those guys.

Jason:

[12:39] Yeah and you didn’t there’s some slightly weird timing just in that like shortly after these changes happened who took it in the shorts right away was like Snap

and they you know they came out right away and said hey we’ve had a material dip and their stock took a dump and comparatively Facebook wasn’t as hurt in the narrative coming out was we’re better insulated from these changes than others and it’s now starting to feel like

maybe no you weren’t.

Scot:

[13:09] Yeah and then you know it does hurt confidence because if we knew all these things were coming in March why did it take till Q4 for them to realize how much it impacted so yeah I don’t I think

I think we’ll find out a lot more it’s all still fresh information and all these companies also file

more detailed documents later as they file with the SEC and the will be combing that for listeners to see if there’s any other tidbits for what Facebook says about this idea of a problem surfacing.

Jason:

[13:36] Yeah one another tidbit before we go on to Amazon for deep listeners you’ll remember our privacy show where we kind of talked about these these problems wounding and we talked about.

Google’s proposed alternative to the third-party cookies was this cohort based system that they called flock and

side note fun fact Google has already completely abandoned flogged.

Scot:

[14:03] Yeah yeah yeah.

Jason:

[14:05] So like it’s really the wild west right now like they’re they’re you know turning off these old Legacy Solutions and they’re kind of winging it on what they expect to replace them with.

Scot:

[14:17] And in some way they don’t care because they’re you know they’re winning.

Jason:

[14:22] Yeah no rush.

Scot:

[14:23] Yeah not a big rush we’re coming to save you Facebook give us about six years we’re on our way we’re really really coming

coming fast okay so then you know the market kind of held its breath and was like holy cow we thought you know Apple did great and then Google and then we thought for sure Facebook would be doing okay because to your point that kind of signal that everything was good

and then they totally crashed what’s going to happen with Amazon so these stocks are called Feng we don’t you and I don’t talk about

Netflix but that’s the end but you have Facebook Apple Amazon Netflix and Google that’s the Fang and so we don’t talk about Netflix but they’re having a.

Jason:

[15:03] Blockbuster alumni I’m contractually prohibited from talking about Netflix.

Scot:

[15:08] Will be happy to hear they had a little bit of a rough spot too but anyway so.

This was the most dramatic turn of events that I’ve ever seen and I’ve been following a stocks for quite a while and since maybe 08-09 when everyone was kind of like what is going to happen to these companies through this Great Recession so so I would call this kind of like.

Wanted a 14 15 year kind of event that we kind of witness it’s me.

Seven was kind of sitting there wondering what’s going to happen to Amazon and in you know I think a lot of people felt like it was going to be,

pretty bad now you know you and I know that Amazon is largely immune to these problems because

yes they drive a lot of volume through their app but they have the benefit of inside the app closing a transaction and they have first-party cookie kind of they have a lot of first-party data is kind of how to think about that and closed loop

so you know in many ways they’re actually sitting in a really good position in the Commerce world because they do have that data and

and then inside of the app and then they can even sell some of the ads so you could imagine if you had extra dollars the problem with.

If you move dollars from Facebook to Google a lot of times you can’t spend more on Google you can but it’s not super effective because you’ve covered all the Search terms you can’t create more volume so then I think a lot of those dollars probably sloshed on over to Amazon as well

so that was the setup.

[16:34] So one one one just quick wholesale note Amazon lot of these companies report two sets of numbers they just report the absolute and then they do it without the impact of foreign exchange

gyrations and in Wall Street they call that X FX all the numbers we’re going to give you our XFX unless we explicitly stated otherwise and it does swing the numbers a lot because of the interest rates changing you know the

the dollar went from strong to weak and it created a lot of headwinds vs. Tailwinds on these foreign exchange calculations

okay so Revenue came in at 137 point four billion which was in line with Wall Street estimates and it represents 10% overall growth if you take the fourth quarter of

2021 and compare it to the fourth quarter of 2020 now you have a good observation about prime day.

Jason:

[17:28] Yeah so as we’ve talked about before Prime day has moved around a bunch which is problematic for comps so if you remember in 2020 Prime day was in.

Late October so kind of right on the shoulder between Q3 and Q4 and so you know some of the cops are saying now are against the like Prime day augmented sales and this year Prime day was in.

Q early Q3 two years ago it was in late Q2.

Scot:

[17:59] Okay and then one of the other key measures there’s like six ways you can report

earnings for Amazon but will do ebit so earnings before interest and tax and that came in at 3.5 billion and that blew a Wall Street estimates of 2.5 billion so a billion dollar kind of.

Overall win on the profitability of the business so

what what had happened is Wall Street and Amazon Wall Street at Amazon’s guide last quarter to Q3 when they did the results they had put a lot of extra cost in there due to covid and supply chain and all these in labor and it

It’s seems like that did not end up being nearly as expensive as Amazon had initially thought or they were sandbagging we’ll never know so I would call that a revenue meet and a bottom line be

so that was that was a positive and then we’ll go through some more of the details and then the guide is really in a couple other things or what really got,

Wall Street pretty excited so it’s hard to predict so in the after-hours Amazon is up 14% And you know the the analysts are coming out

as we’re recording this very positive on the quarter so I think

I don’t know if it’s going to be a Google level result but it’s certainly not going to be a Facebook level down 26 type result so you know I think Amazon is going to become in the win column

let’s peel the onion little bit and go into why.

Jason:

[19:20] Yeah so start with one that’s not that financially material but Amazon breaks out their sales for physical stores

and they grew 17 percent for the quarter so they were just under 5 billion and

in brick-and-mortar sales and and for Amazon brick-and-mortar sales is largely Whole Foods there’s you know.

A smattering of Amazon book stores and a couple of five-star stores and you know we now have like 30 of these.

These non Whole Foods grocery store so you know one day it will be more material but it today it’s mostly Whole Foods.

[19:56] What’s interesting about 17 percent is physical stores had actually been shrinking for Amazon and.

Part of the the the likely reason for that is the pandemic shifted a lot of people from.

Shopping in a whole food store to having groceries delivered to their home and Amazon has has like somewhat unique accounting practices that that sales shifts from

from Whole Foods and physical store sale to a

in e-commerce sale when when you get those groceries delivered to your house so kind of you know it that artificially made stores look small so I just think it’s interesting because this is a weird time in the history of e-commerce

ordinarily

e-commerce for most retailers as you know over the last decade has grown kind of like 15 to 20 percent a quarter and brick-and-mortar stores grow like 32 Port four percent a quarter and so this q 4

because e-commerce is comping against the monster Q4 from last year and brick-and-mortar was really soft last year and is doing better this year it’s like the first time in our lifetime we’re in many cases.

Brick and mortar is growing faster than then e-commerce and that was actually true for Amazon in North America.

[21:18] So that online sales just for Q4 actually went down for Amazon by one percent and again I would I would attribute that largely to you know

comping against a crazy number that also had prime day in it.

Scot:

[21:33] You want to do the Geo segments you want me to.

Jason:

[21:37] Sure why don’t you do the quarterly ones.

Scot:

[21:43] Okay so North America grew nine percent and so this these are all cordially so this whole section where in is quarterly comparison so we’re comparing Q4 of 21 to Q4 of 20

so North America grew nine percent International was down one percent and that’s kind of what that’s a that’s kind of what netted out to be

this looks at online and offline so that’s what netted into the 10% go through.

On the third party side there’s two line items at Amazon reports we won’t get gmv calculations from analyst for another week or so but when we do we’ll mention those on the show so seller Services which is revenue from largely from.

[22:23] The.

Prime no sorry from FBA is that grew 12 percent to 30 billion and seller units remain stable at 56% so

we use this nomenclature first part of units in third-party so therefore first part of units were 44 percent and third party were 56%.

It’s important to note this is a unit measure not gmv and you know you historically.

The GM V for first party is the Espeon first party is significantly higher than third party because you’ve got all the Amazon owned and.

Branded products like candles and all that good stuff so usually.

Usually the gmv is more flips the other way where it’s kind of maybe 60 first party forty third party we’ll see.

And then this is exciting and I texted you the second I heard this because I called it retailgeek.

For the longest time they have kept the ad business kind of tucked under this exciting category called other where they have a bunch of other things,

does the name other and for the first time they have broken this out as quote unquote ad services are you excited too.

Jason:

[23:35] Yeah yeah that was a big deal I’m mildly annoyed because I want to say in

20 21 of my Jason and Scot show predictions was that they would start breaking out ad revenue and I feel like I didn’t get credit for that prediction and then you know the next year when I gave up on it they of course did it.

Scot:

[23:52] I called him to tell him it was okay to finally finally do that now that the prediction had lapsed.

Jason:

[23:56] Yeah that’s kind of petty of you I’ve been meaning to talk to you about that but yeah so so for the first time they disclosed how much General Revenue they generate in on ads the CFO was asked why they did that and he’s like.

[24:11] It just was becoming more and more material and I was getting tired of saying on all these earnings calls and other which is why largely the ad business so.

For the quarter they they reported ad revenue of nine point seven billion.

Um so for the year they reported 30 1.1 billion in ad revenue and they also showed their growth rate.

Their growth rate decelerated a little bit for that business to 32% so they’ve got a an annualized business is generating Thirty 1 billion and AD Revenue that’s growing at 32%.

To put that in perspective in September emarketer estimated their ad business at like 24 billion so.

Materially bigger than I think some people realized and by far the third biggest digital ad Network.

In North America and so super exciting that there were starting to get more visibility into it as we’ve talked about a lot on the show retail media networks is a big trend.

Um across all retailers but you know Amazon represents about 77 percent of the total retail media Network size at the moment.

[25:34] And I always like to contrast that with the business that analysts will have the most at Amazon which is a WS.

So you know the common narrative is the most profitable sexy business and Amazon is a WS.

And it had a great quarter it grew by 40% which is actually an acceleration of its growth which is.

Pretty remarkable if you if you think about what a big business it was they sold almost 18 billion in Q4 and I want to say they’re annualized.

Aw s business was like 63 billion and they made like 18 billion in net income on that so that’s that’s a.

Super good business that you’re still you know growing it nearly fifty percent on a business that’s spinning off 18 billion dollars a year in cash but.

It also is highly Capital intensive so they have to spend a bunch of money to make that money and so if you compare the

the 60 billion that they make on a WS that they have to buy all this hardware for against the

30 billion that they make on ads that they have almost no cost of goods associated with the ad business is almost certainly more profitable to Amazon than a didn’t even a WS.

Scot:

[26:59] Do you think it was a bit of a flex to break this out kind of after seeing Facebook had such a rough time I don’t think they could have done.

Jason:

[27:07] Yeah I think the timing is not right I think that like this was inevitable like I don’t know what I mean you probably are more familiar with.

Like I think the the Gap reporting requirements are that it’s quote unquote material and it’s like now that we see the number it’s kind of hard to argue it’s not a material number so I assume at some point they they run into SEC problems if they.

Disclose that but I.

Scot:

[27:32] The definition of materiality is 10% in my recollection so and you know I think it could be argued it’s one of those squishy things where you know I don’t think this is ten percent of Revenue is it.

Jason:

[27:45] No

Scot:

[27:46] No but Eva died probably is so then why yeah that’s probably it probably triggered something on the bottom line out imagine.

Jason:

[27:54] Yeah and so one other side note I want to call out on AWS this news actually broke.

Yesterday but then they definitely cooked it into their earnings called today the Amazons been on a nice winning streak with AWS clients.

That are there are moving to the cloud but one that would be most relevant and somewhat surprising to our listeners is yesterday Best Buy announced that they were moving

all of their IT services to AWS and the reason that’s surprising is obviously Amazon and Best Buy are.

Are occasional Frenemies but they’re mostly competitors and you know it’s somewhat surprising that a retailer like Best Buy would

by its infrastructure from a direct competitor like Amazon.

Scot:

[28:40] It is and I think some of the you know I’ve heard that like some of the retailers even ask their vendors that not to use AWS or you know they they.

Jason:

[28:50] Yeah I think that’s a general policy at Walmart for example is that like that you can’t host any solution you’re pitching the Walmart on on AWS.

Scot:

[29:00] Oops okay anything else that you saw that was interesting and adds an AWS.

Jason:

[29:07] No no but that was exciting.

Scot:

[29:10] Yes oh so Wall Street is a what have you done for me lately so the once they once they kind of heard that the revenue and was in line and

the bottom line was beat for the quarter then it’s kind of like well what’s it looking like for next quarter so Amazon’s Guidance the guided revenues for the first quarter to 112 21 17 billion

those in line with Wall Street,

the bottom line was better than Wall Street was expecting a 3.9 percent Gap margin compared to Wall Street at 3.6 so again that was kind of a sigh of relief and then that Revenue range is pretty.

Pretty slow so it’s three to eight percent growth.

So I don’t I don’t know if this is a lapping thing they’re saying or not or maybe their sandbagging here but that felt kind of like pretty slow to me,

but again it’s kind of like how does it match the expectations of the forward guidance not like what is the absolute number so Wall Street seemed to like that and then.

Did you want to do the annual View.

Jason:

[30:11] Yeah so so for the year that top line revenue growth was like twenty one percent.

North America ended up being 18.4 percent for the year I think I mentioned that earlier in international was 22 percent,

those two numbers are getting closer together by the way like you know historically International was much more and growing much faster and there still is a lot more International that’s not as penetrated by Amazon so that’s a little bit interesting.

The North American number 18.4% sounds like a pretty good number until you you realize.

They’ve never been below 20% before so that’s that’s kind of a Debbie Downer and then the US Department of Commerce data says all of retail was up.

By 18 percent normally e-commerce grows faster than brick and mortar so if all the brick-and-mortar retailers in America on average grew 18 percent and then you know the biggest best e-commerce.

Retail in North America only grew 18.4% I would actually call that kind of lackluster.

Scot:

[31:22] Yeah the you know doing that on about a 500 billion dollar number those is a pretty good the Amazons defied the law of large numbers for quite a while.

Jason:

[31:31] Yeah unfortunately they’ve ruined it for themselves like I totally agree like if you if you just started a business and and Drew out this hockey stick everybody would be perfectly satisfied but

based on the the unrealistic expectations that Amazon has habitual eyes Dart 12 it’s a,

slightly tougher so letting for them now.

Scot:

[31:53] One couple of other tidbits that I thought were interesting as someone that hires a lot of folks Amazon reported that for the end of the year they just cross 1.6 million employees

I cannot even wrap my head around that.

What does that that’s like the size of my residential area is all employee in the triangle area where I live is 1.2 million so there’s more people to work at Amazon that live in my entire

area here my 30 mile radius the other thing I thought was interesting and again like.

[32:26] Yeah we’ll get a look at the queues in the case and all that jazz when they file them I guess it’s K is when they for the annual

and that’s the SEC docs and they did report one I’ve been keeping an eye on is fulfillment investment and the cost for fulfillment only grew ten percent year over year in the fourth quarter

and that has been more running at like 40 50 percent and like

like me you probably see a lot of new Amazon Vans out there and a lot of activity going on in the shipping world so it feels like that data point indicated to me that they may be added

bit of a end of a so Amazon goes to these phases where they’ll have kind of a

invest in Harvest kind of cycle so it feels like we’re at the end of a

delivery invest cycle and kind of heading into Harvest when the cost of shipping is kind of caught up to the amount of volume that they’ve surged up to it this latest covid driving everyone to digital

any other tidbits you saw.

Jason:

[33:28] So a couple of small things first of all with regards to that that Capital spending there was an interesting,

segment in the the Web Conference where the CFO kind of drilled into

expectations for future Capital spending and he kind of broke it out and he said hey the biggest chunk of our capex goes to AWS infrastructure that’s still a really fast growing business and that that kind of investment that

piece of Investments probably going to have to continue the second biggest chunk of our investment is fulfillment and he actually broke out

delivery and and.

Warehouses and you know he kind of implied that that both of them had probably gone over the peak investment and that they would probably be able to start slowing those Investments and so I have a feeling.

That that was good news to Amazon or to investors and then he did mention that less than five percent of their total capex goes into things like

new stores so all of these people including me tracking all their new store Concepts

in wondering if there’s some like big large scale deployment looming,

totally possible but they’re certainly not foreshadowing that in there.

In their capex spending at the moment and then the the other.

[34:56] Like potentially big piece of news that I think really was catnip to investors and I suspect will show up in that stock price tomorrow is that they also announced that they are increasing the price that consumers pay for Prime so

I think it was 120 bucks a year 100 119 a year and now it’s going up to 139 a year so they’re adding.

20 dollars to that super valuable super sticky service and I think investors will like that because it shows,

how you know sticky they think they are with with consumers that they’re able to get away with that kind of price hike in that of course will fall straight to the bottom line.

Scot:

[35:42] Yeah Zack and I are you going to cancel your Prime subscription.

Jason:

[35:45] I am not.

Scot:

[35:47] What do you like ten boxes a day someone at Amazon is calculated the point at which that they’ll they can make you leave so that they could get some of their money back.

Jason:

[36:00] Yeah side note on that,

you know I feel like there are all these advantages that Amazon has that we don’t talk about very much and I actually made a short little YouTube video about one of them that we’ve talked about on the show before Amazon key for business so if you’re you’re bored

you can I’ll put a link in the show notes you can watch my little YouTube video about about some of the sneaky advantages Amazon has that make themselves more sticky.

Scot:

[36:25] Yeah

yeah that’s an interesting they’ve tried with Amazon key they tried going in your garage and your car and consumers did not care for those two options but I suspect I haven’t seen your awesome video I suspect you’re talking about where they work with property managers to get access to multi-unit.

Jason:

[36:41] Exactly I’m specifically talking about multi using unit dwellings I’ve actually heard slightly different I’ve heard the car thing was a total dud,

which sounds like what what you heard as well but I’ve heard that the in some Suburban areas that the garage access is actually working pretty well so I.

Scot:

[36:59] Okay we’ll save that for a future episode anything else you want to talk about.

Jason:

[37:07] No I think that’s it for Amazon that was a lot it was an exciting quarter Ruiz.

Scot:

[37:12] Yeah so just to kind of put the kind of

the tale of the tape if you will so the Biggest Loser was Facebook / meta they really got hammered by these changes and they thought they had figured it out and it turns out in the fourth quarter they had not so those those

fluid ad dollars left there left their coffers and went into Google’s apples and Amazon’s so those were the net winners for the quarter so it’s a really interesting

kind of set of events and yeah we will continue to report on it as we learn more as the company’s file they’re more detailed filings.

Jason:

[37:48] Yeah

and and Scott in honor of my coworker who accidentally sent me an email saying that my my presentations are too long and rambling I think we’re gonna try to end this show a little early this week and so if you enjoy the shorter show you have my my coworker to thank and you can certainly send us that that feedback

but if you’re using our show to get your workout in on the at the gym and and suddenly you’re not getting as much cardio as you used to you you have that employee to blame.

Scot:

[38:22] Yeah and this is either way I hope you like the our content and if you’d leave us a five star review on your favorite podcast listening technology that would be amazing thanks everyone.

Jason:

[38:34] And until next time happy commercing!

View Details

EP285 - 22021 Full Year and Holiday Data Deep Dive

The US Dept of Commerce December Advanced Retail Sales Data is out, which gives us a full look at 2021 and the 2021 holiday season. So Episode 285 is a data deepdive into 2021.

If you want to follow along, we've made a deck with all the data available at https://retailgeek.com/2021-commerce-recap

Data Sources
US Retail & E-Com Sales Data: US Dept of Commerce
E-Commerce Estimates: eMarketer
Retail Foot Traffic Data: Placer.ai
Web Traffic Data: Similar Web
Holiday Estimates: Adobe, Salesforce, Mastercard

Episode 285 of the Jason & Scot show was recorded on Thursday Jan 20th, 2022.

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 285 being recorded on Thursday January 20th 2022 that’s a heck of a lot of 2012’s.
I’m your host Jason retailgeek Goldberg and as usual I’m here with your Cohoes Sky Wingo.

Scot:
[0:41] Hey Jason and welcome back Jason Scott chaussures Jason is kind of a shame we neither of us were able to make it in our F but,
one of the things I don’t miss is every year that I’ve gone to in our f for the last three times I’ve went I’ve had trouble getting there or been stuck there so I think
then our F should use this opportunity to move that show out of January and maybe look at something like March or something if they’re going to be in New York.

Jason:
[1:09] Or to the like Bahamas or something.

Scot:
[1:12] Yeah even better yeah let’s make it a destination of it.

Jason:
[1:17] You know you have my vote I’m not sure you have a majority of votes see you if you have mine that would be awesome.

Scot:
[1:24] Yeah just watching and it seemed like some folks went and then they had a lot of cancellations so seemed like it was in kind of one of those weird.
Hybrid states were if you went and then,
person you are going to go see present canceled you sat there in a room with people watching a zoom so that’s number Super satisfying but I do think it seemed like some folks you and I know got together and had some dinners and had fund so hopefully that was that was good for everyone.

Jason:
[1:50] Yeah I had a little bit of foam oh I think you know some people I would have liked to see you know I saw you know social media of them getting together and whatnot and.
It’s just super bad luck I have a feeling if this show was a month later it would be a lot less controversial that traveled to.

Scot:
[2:09] Yeah and what did you want to talk about this week.

Jason:
[2:14] Well you know if we had gone to NRF one of the things that I always like to do it in our f is kind of check in with a lot of our co-workers in the industry and kind of you know get a consensus,
about how the year ended up for everyone and what they thought the big issues were going to be for 20 21.
So since we didn’t get to do that at shop at NRF I thought maybe we could do it on this podcast for our listeners.

Scot:
[2:42] Yeah that sounds good and then I know you always put together a little for your clients kind of the summary deck and I know that’s hard for our podcast listeners so do you have a way to solve that.

Jason:
[2:55] Yeah so what I thought I would do I put together like a 36 slide deck completely full of numbers and what I thought I would do is describe all of the graphs on the podcast.

Scot:
[3:09] Sounds good that sounds good and it’s going to be a we’ll go through it and intricate detail data point by day.

Jason:
[3:14] Yeah because the one complaint I get about the show is that it’s not hard enough to listen to.

Scot:
[3:18] That’s that’s from your mom.

Jason:
[3:22] So that probably isn’t going to work but here so here’s what I did think I do like instead of,
just charging the fortune that we charge clients to go through this presentation I thought I would make a version of the whole deck available to all our listeners so in the event you do want to follow along with the visuals and see the actual data,
we will put a link in the show notes you can hit pause for a second,
you can open up the deck and I will tell you what slides were talking about in case you want to follow along but but Scott keep me honest here we’ll try to make sure we’re talking about in a way that you can kind of just,
just listen along on the podcast and then look at the deck later if that’s the way you prefer to do it.

Scot:
[4:03] Yeah this is a good time if you like receiving awesome decks for your subscription here which is essentially free this is a good time to hit the five star review we always appreciate that and yeah
because we because this is a audio medium we are going to paint pictures with our words and you will see the slides form before your very eyes almost like augmented
virtual reality we’re going to take you to the metaverse on this thing.

Jason:
[4:31] Exactly it’s a meta verse deep dive into a retail in 2021 and let’s jump right into it so.

[4:42] Super quick recap last week the US Department of Commerce publishes published their December
Advanced Data so that gives us the last month of data we need to see the whole year so it’s super exciting for all of us get data Geeks because we now have a complete set of data
the one thing to remember is.
It’s an advanced look and so it doesn’t have the granularity of categories that we would like and one of the categories it doesn’t have is
e-commerce which is highly unfortunate so,
the the Deep dive for the whole year with e-commerce broken out will actually be available in mid-February and that’s also when they published their quarterly.
They’re q4u Commerce data which is a separate report so so we have most of the interesting facts there maybe a couple things that filter in last,
next month but the top line if we add up all retail sales for 2021 we sold just over six point six trillion dollars of stuff last year which is
eighteen percent growth over 20.

[5:53] And it’s 22 percent growth over 2019 and so,
if you do have the deck and you were looking at slide for I show you the last 30 years of growth and the thing that will stand out at you is that this year’s growth.
Is is almost double the average growth we’ve had in any of the last 30 years so unprecedentedly good year.

Scot:
[6:20] This is all retail or not talking e-commerce has.

Jason:
[6:22] Yeah this is this is pure retail will we will double click into e-commerce a little bit later and you know reminder there’s a lot of controversy about what the definition of retail is and so you’ll see millions of different numbers out there and it’s because.
11 data set has automobiles in it and one has doesn’t one has gas in it and one doesn’t you know they’re all these different things I’m using.
The unadulterated numbers from the US Department of Commerce so it does include automobiles it does include gas it does not include restaurants it’s what we call,
in a ICS code 44,000.

Scot:
[7:03] Cool good old code it 44,000.

Jason:
[7:07] If anyone wants to catch me offline and ask for like a different spin I’m happy to talk about how the numbers change when you change your definition but I think that’s too complicated for for the podcast but so before I go any further.
Like is that does that surprise you at all it has is that has that been your perception that these are Monster year that 2020 and 2021 more Monster years for retail because I feel like that’s not necessarily the narrative we’ve been getting in some of the Commerce media.

Scot:
[7:37] Yeah no it feels that is a surprise it makes sense and I’m looking at the slide but it makes sense that we were effectively spring-loaded right because you had the shutdown people really,
you know couldn’t or didn’t buy things from March 20 through and so there’s put up demand but what’s interesting is you really don’t see,
unlike the Great Recession about it no nine you don’t see a retraction before this the splurge and this is way way bigger than that period of time so it is it is surprising.

Jason:
[8:08] Yeah so so,
in aggregate retail did awesome and then on slide 5 I give you this fun way of looking at the data that you and I helped
help kind of evolved together but the idea is that we give you a separate
line chart for 2019 2020 and 2021 and so you can kind of see.
You know how the year stack up against each other and you know.

[8:35] 20:19 was the unaffected by the pandemic than 20/20 happen and of course there was this huge dip in April
when the pandemic first got real for everyone because the NBA cancelled games and it recovered super quick and then you know the rest of 20/20 was actually above 2019 so retail grew.
From 2019 and 2020 even though we were like right in the thick of the pandemic and then in 2021 retail really shot up and the.
The hypothesis here is there are two things that really caused this number one there was a bunch of.
Economic stimulus that was poured into the economy right like there’s a lot of extra money available and consumers were in,
like generally really good Financial shape so there was a lot of potential to spend and then a lot of the things that might have gotten some of that money experiences like travel in restaurants and vacations,
we’re not available in the most consumers so
instead of paying money for a gym you bought a Peloton instead of going to a restaurant you bought groceries and instead of going on vacation you you got new patio furniture right and so you know the combination of,
more money and less things to spend and on ended up being super favorable to retail overall.

Scot:
[9:59] Yeah that makes it so that it’s really a factor of the stimulus is what you’re saying.

Jason:
[10:06] Yeah and we’ll talk about the downside of that if they end of this podcast but so that’s the industry average and I would remind everyone to be cautious.
In thinking about averages because,
very few retailers experience the average right like in general there were big winners and losers based on categories and I’m for the purposes of the podcast we’re not going to talk about category growth or foot traffic.
From 2022 2021 because 2020 was such a weird year because of the pandemic I actually am going to jump ahead in the deck to slide 9 which is where we start talking about,
comparing.
Last year to 2019 so like what the cumulative changes were over the from before the pandemic to you know at the end of the second year of the pandemic so.
Over that two-year growth we grew 22% as I mentioned earlier and so I actually.

[11:09] Put together look at what the average to your growth was every year for the last 30 years and in general the average two-year growth is around 10 to 12 percent so 22% is,
unprecedentedly High.
Two year growth and remember like you know there was in 2008 there was this recession and there was negative growth so you’d think the the year-over-year from that recession would be super high but but this.
2020 and 2021 year is basically the the best years of retail in our lifetime.
And so then I go to slide 10 where I show you how fast each category grew and remember if the industry grew 22%.
You really want to be growing faster than that 22% so the categories that one the grew faster than 22% we’re your new favorite category automobiles.
So they grew at 24 percent which was mildly surprising to me because you,
you know early on you would assume Car Sales slowed down significantly and then of course there have been all these chip shortages that’s made it slightly hard to buy cars,
and yet cars were still one of the bright spots does that surprise you at all or were you totally dialed into that.

Scot:
[12:30] Yeah the counter is the used markets on fire and they’re marking the cars up so there’s kind of like an inflation of car prices in there that I think.
One of the reasons so if there is a car dealers are taking these pretty exorbitant markups on those,
which is kind of short-sighted but that’s what they’re doing and yeah so so it doesn’t surprise me too much when you know
what surprises me is where did it all go so we had this like tsunami you know anything about retail it’s you know it hasn’t been over.
You know like what,
10% for a long time and then you’ve got in the two year ago comparison you get up to maybe like 15% so it’s like a surge year where did it show up like I can’t think.
You know amongst the public companies the Walmarts the targets and that kind of stuff I don’t really see it I don’t see them just like,
blowing up expectations and saying oh my God so much money flooded into our coffers.
I kind of wonder where it went or maybe it’s going to show up and you know in when you when you chart it out it looks like a lot of it came at the end of 21 so maybe we haven’t seen it come out and the public markets but it’s going to be you know I kind of wonder where it went.

Jason:
[13:42] Yeah so I would argue that we are seeing it like in the big companies in the Amazon Walmart Target Kroger and certainly Home Depot and dicks we are seeing it.
And so I think the car one is a harder one to see because the car you know the actual car dealers are so fragmented because they’re all franchisees.

Scot:
[14:05] Carvanha has seen it carvanha.

Jason:
[14:06] The Used Car Guys for sure saw it so let’s come back to that in one second let’s talk about the other two categories that were above the industry average
building materials and garden supplies right so that’s Home Depot and Lowe’s
and you know they’re there to your growth Stacks were like significantly up from previous years and again.
Part of the reason they would be up as people spend a lot more money on their homes when they were traveling last and then and so that category group thirty percent over two years and then Sporting Goods grew 38 percent over two years
so that’s you know dicks and sporting goods and and those folks and they were seeing like
like I want to say the two year growth stack on dicks would be is like 94% or something so.

Scot:
[14:56] Yeah.

Jason:
[14:59] So and then the categories that still like had,
by historic standards great growth but did not grow as fast as the industry average grocery stores so only grew 16 percent I have to say that surprised me a little bit because I would have.
Expected you know with the hit that restaurants took that the grocery would have outperformed the industry average but you know it doesn’t seem like it.
It did and then,
furnishings and furniture and Home Furnishings grew at 21 percent so about the industry average and again because of all the money people spend on their homes I kind of would have expected that to be higher so those two things.
Surprise me a little bit.
And then the the categories that were you know more significantly hurt by the pandemic like gas and clothing,
you know clothing was still up 13% gas was up 15%.
And that’s what hurt looks like right like so you know up 13 percent against the industry average of 22 percent like that’s.
You know kind of the the low end and you know I think if you talk to apparel people during the pandemic they would have said like oh we’re you know we’re experiencing Armageddon if you compare this 13% growth too
you know any of the last five or six years for apparel this would have been a great year.

[16:23] And then the most inexplicable to me of all and I think it just has to do with the mix in this category is Electronics and appliances are only up 6%.
And I I’m totally open if you have a hypothesis cop but like I think everybody bought a lot of extra Home Tech.
So especially the beginning of the pandemic everyone’s buying extra computers for their kids for homeschooling and everybody’s updating their work from home stuff,
and you know over the two-year course of the pandemic you know everybody remodeled their kitchen about new appliances so I’m a little befuddled.
Why that you know that category is literally the bottom of the Barrel in this the US Department of Commerce data and it’s only six percent of growth.

Scot:
[17:13] Yeah let me look at the year.

Jason:
[17:18] I have a so while you’re looking I’ll just I’ll tell you I my.
My unfortunate hypothesis so there’s an enormous flaw in the US Department of Commerce data and that flaw is that they call e-commerce or non stores.
A category.
So you’re either a Peril sale if you sell the clothes through a store or your Anon store sale if you sell the clothes online,
and so if you sell a TV out of Best Buy you’re in electronic sale but if you sell the TV online for curbside pickup.
You’re a.
Non-store sale and so I didn’t mention this earlier but the category that actually grew the most by far during the pandemic is non store sales which are 38% and we,
have any good way to know how that breaks down by category so my hypothesis is the electronics category actually probably
did better but the it over index to sales going online and therefore it gets office gated
in this US Department of Commerce data.

Scot:
[18:32] Yeah and then accentuating this is the supply chain problems hashtag Supply pain where you know a lot of that stuff you would go into the store for especially big appliances where you kind of want to see it and touch it and feel it before you order it,
I know on the order of 10 people that cannot get washers and dryers.
So you know that that was all like this big appliances are in and they’ve been waiting since you know,
Q3 last year to get these things it’s insane so that could have you know so you have this kind of double edged double whammy of a lot of stuff moving
online or non-store from the store in the store or struggling because they can’t get inventory for the shelves and you know every electronics item has a chip.

Jason:
[19:20] Yeah so I do like that I will say it from the data it looks like more of the group The Slowdown was in,
20/20 than 2021 which like kind of argues it like.

Scot:
[19:35] Yeah attribution.

Jason:
[19:37] Yeah so but I don’t I don’t know
and so then so that so far everything we’ve talked about is US Department of Commerce data so I’m also super interested in how many people walked into a store so I asked our friends at Placer AI which is a,
a company that has access to a huge panel of consumers that have software on their phones and it tracks where they go anonymously
and they use that data to forecast.
Retail foot traffic across the country and so I put together a data set so on Slide.

[20:21] 11 of the deck you can see how the 20 21 foot traffic every month compared to 2019 and so for the first half of 2021,
um foot traffic in retail was still down between 10% and 0%,
versus 2019 so fewer people are going to stores in 2021 then we’re going to stores before the pandemic.
And then by July we had our first kind of Positive Growth since the pandemic so July and August we’re kind of up for and six percent over 20 19 respectively,
then we had another slight dip in September and then we had a pretty prominent dip in December of 2021 which was probably the Omicron variant kicking in.

[21:12] But so in aggregate.
There are still fewer people walking in a brick-and-mortar stores in the United States of America in 2021 than walked in a brick-and-mortar stores in 2019.

Scot:
[21:24] There are some it almost like it seems to be correlated an inverse correlation with case count right so in the summer cases were kind of low everything was feeling pretty good and then we had kind of the surge the Omicron surged kind of come back and
here at the very tail end of 21 we saw a really plummet.

Jason:
[21:42] Yeah no for sure and there are lots of people that I have been correlating these statistics to case counts or hospitalizations or.
Or mortality or any of those things in there are strong correlations so you’re certainly right.

[21:56] Um so then I I said all right well let’s double-click on some of the categories that might be interesting and one category that I mainly double clicked on for you was Automotive so for folks that don’t know Automotive is the biggest.
Category of retail spending and which kind of makes sense because it’s the.
The highest ticket item so 1.5 trillion dollars in in car sales in 2021 which is 23 percent of all retail spending so we said 6.6%.
Six point six trillion in retail 1.5 trillion of it was cars and that’s up as we said earlier 24% from 2019 and then I give you kind of the,
the shape of that Demand right and and you know so again,
the best month in the history of car sales was April of 2021 and then it’s been,
tapering off a little bit since then but still up
significantly from 2020 and 2021 is up nominally from from 2019 so a very vibrant year even though per your point you know
it’s actually hard to get vehicles right so a lot of this this.
Increase in sales is an increase in price points and inflation versus unit sold but I think it is a little bit of both.

Scot:
[23:20] Yeah the other changes there’s a pull forward because what dealers have started doing is pre sailing Vehicles so it’s almost like an auction where they’ll say Jason I know you want this IMA Mustang and we got three coming in and August but if you want one of those I’m going to need you to,
pay me to there now I don’t know how that correlates to these numbers but we’re seeing this big pull forward of the consumer
dollars into the auto category because of this pre-sale thing where,
historically it was you would go test-drive negotiate and then buy the car and it was sitting on the lot the inventory model is kind of flipped right now which is interesting.

Jason:
[23:59] Yeah yeah and I know not not related to sales velocity necessarily but another interesting thing is.
The amount of test drives per sale is way down like it used to be like three test drives per sale and now it might be less than one test drive per sale.

Scot:
[24:17] Yeah it’s kind of it’s fun being in the auto category because some in some ways I feel like I’ve seen the movie before right so for example remember when Zappos came out and they disrupted the shoe category by saying free 365 returns,
well then everyone would just buy would say well sometimes I’m an 11 sometimes in 11 half and 10 half I’ll just order all three in return to.
So then everyone had to adapt that new model because consumers flocked to it
and the car industry carvanha has had a seven day return for a vehicle and that’s how they got around the test drive and everyone laughed at him and was like why would you do that that’s ridiculous and then the pandemic it and everyone had to kind of adopt that model so that’s that’s gotten rid of the test drive most dealers now have had to adapt
to that that more customer friendly model and effectively have like a seven day return window.

Jason:
[25:06] Yeah and you know you’ve heard me say this before but I’ve been following the ottoman of
category relatively closely and the grocery category for two big reasons they’re they’re the two biggest pieces of consumer spending
but also before the Pandemic those were the two categories that were released digitally disrupted like a small percentage of cars were sold online a small percentage of groceries sold online and so those two categories were the most disrupted by digital they they got
the most digital fastest as a result of the pandemic so I’ve been super interesting because
per your point a lot of the learnings that we’ve had over the last 20 years in the apparel industry in the consumer electronics Industry and the home industry like are now
you know playing out in an accelerated basis in the automobile industry and in the grocery industry.

Scot:
[25:57] Yeah 11 cool example and I know you know these guys so yeah I tell folks a lot about how Walmart budget and it was kind of like this this analog kind of old-school company building bringing deep digital DNA and we would see a lot of that not emotive category and sure enough
Discount Tire which is a brick-and-mortar tire shop family-owned what are they like 100 years old or something like that and
they just bought Tire Rec which is kind of the you know the online incumbent and they’re merging those two companies together so
it’s funny because everyone thinks I’m kind of a Nostradamus of this stuff because but it’s really just,
the exact same thing we saw happen in e-commerce with other categories as happening in the automotive category.

Jason:
[26:42] Groundhog Day yeah sometimes when I’m impatient I really have to avoid telling clients so I know you need to figure this out for yourself but I know how it is.

Scot:
[26:52] Yeah.

Jason:
[26:54] But so I mentioned the grocery category that’s the next category that I want to talk about briefly so now we’re on slide 14 of the deck,
and groceries the second biggest category of consumer spending it’s fourteen percent of all retail spending so it’s,
901 billion dollars in 2021 and and I mentioned grocery was up pretty significantly up 16 percent but but that you know that is a little less than the industry average
and I give folks that that same kind of three-year year-over-year graph if they want to see it
but then a bonus data breakdown I always like to do for the grocery industry is on slide 16 and this is a,
a line graph with two data points grocery store sales and restaurant sales,
and what’s interesting about that is for like a pretty significant period of time about a 10-year period.
Sales were split almost 50/50 between restaurants and grocery stores so all the the American calories were kind of divided 50/50 between
McDonald’s on Applebee’s and Walmart and Kroger and in the pandemic exactly what you would expect to happen
grocery sales shot up and restaurant sales you know took a nosedive.

[28:13] Over the course of the pandemic they’ve moved back closer and kind of come summer of 2021 they actually came back to where they used to be so they were kind of level again and we were like I wonder if that,
if if that Gap is over but then Omicron appears to have open that Gap backup
so at the moment there is still about a ten billion dollar a month discrepancy between spending on on groceries and spending on restaurant so
potentially bad news for the restaurants.

Scot:
[28:48] Yeah well you wouldn’t know it at my restaurants or so they’re they’re they’re super busy.

Jason:
[28:53] Nice.

Scot:
[28:55] Could be you know we you know it’s interesting traveling around the country a little bit now it’s like living in 50 different.
Countries the way they’re covid policies are so you go to you go to Florida and Texas and everything’s just open and normal and then you go to the north east or the west coast and things are very much shut down,
and here in our kind of a kind of in the middle but we’re still struggling our restaurants part of it could be that they’re just closing all the time so we have several restaurants that just can’t
keep their doors open due to this kind of constant struggle between in
team members employees and supply chain so you’ll you’ll go and they’ll have to close early because they didn’t have anyone to work that shift and then you’ll go and they’ll be like we’re out of
you know it’ll be a salad place in they’ll be out of lettuce you’re like yeah guess may not have needed open but they’ll be in there with nothing to do so so it’s really.
The economy is having a really hard time it’s really kind of sputtering right now across those things which which could fall into restaurants and bars you know this,
looking into this year into 22.
There’s a lot of grocery stores are have bare shelves and I don’t I was going to actually because you’re the grocery guy I don’t know what’s broken in the supply chain there because obviously we don’t rely on China for you know,
a lot of that stuff so it’s not the that specific thing but that seems to have really become discombobulated as well.

Jason:
[30:21] Yeah so yeah for sure there it turns out like there is for a,
a fair segment of the grocery products there is an international component right like so there are weird ingredients
that we do depend a lot on on Imports for right so you know even if the Mondelez cookies are made in the US the sugar for the Mondelez cookies is not and so it
it is possible for the shipping to to have an impact on Oreo availability it just it tends to be delayed because it’s
it’s more the ingredient than the finished goods that that is getting in.

Scot:
[31:01] Catching you know maybe the package.

Jason:
[31:03] The cpg guys even more so right so a lot of the chemicals that get used in cpg products and a lot of the the,
the packaging like blue ink for a while was one of the the the constraining factors and so you know,
Brands did have a hard decision to make do we like change the color of our packaging so we keep stay on the shelf or do we you know try to stay true to our brand and wait for morning.
Which are not decisions you imagine ever have having to make.
Um and then you know grocery is have its groceries a very fragile ecosystem margins are really thin and so.
More so than other categories of retail the wage inflation has a Major Impact in it it actually.
There’s a low-wage workers all the way along that supply chain and so you know a big thing that takes out.
Domestic food is you know there’s a round of covid at the meat processing plant.
And that that can you know be a big Regional hit I walked into a breakfast place last weekend and they were out of eggs,
and I’m like wait a minute I haven’t heard about an egg shortage or like are we having an egg shortage and the guys I know are our manager just screwed up the hole.

[32:27] Yeah but I was I was with you I guess yeah what it’s questionable why you open if you’re a breakfast,
restaurant and you don’t have any eggs or you should at least put a vegan sign up or something I don’t know.
So I always like to talk about a parallel because for a long time apparel is like one of the crown jewels of the retail category and people are super excited about that and you know there was an ERA when those were the best jobs so up,
Peril is much more it’s about five percent of retail sales it was 303 billion despite the fact that we all have been living in sweatpants for the last two years apparel sales were still up 13%,
that definitely was a mostly due to a 2022 2021 recovery 2020 was a really bad year for apparel and it started to come back so apparel is one of the few categories on Slide,
18 where I give you the three-year graph of the the category it’s one of the few categories where the 2020 sales were consistently below the 2019 sales and then 2021 they,
they came back up to the top and you know one interesting fact about a parallel that I give you a data breakdown on 19 is.

[33:41] Apparel has just been getting cheaper over time that in the 1990s apparel was seven percent of retail spending and now it’s about four and a half percent of retail spending and that’s a largely because
good clothes are just less expensive and and you know the same
closet that an American would have had in 1990 Hassel asks in 2022 and so if you’re growing in the apparel industry
you’re you’re growing in a shrinking Market which is you know always a challenge to do.

Scot:
[34:15] The entire Farm it’s kind of shocking to see April 2020 you know touching effectively zero sales and monthly apparel that’s crazy that I feel for those guys that must have been a scary.

Jason:
[34:28] For most of these graphs I change edit the scale to make the graph as high resolution as possible so the bottom of the graph isn’t zero but in a Peril it absolutely is.

Scot:
[34:38] Yeah might as well be easier yeah.

Jason:
[34:40] Um and so,
so that’s enough of the categories I know a lot of listeners on our show were particularly interested in e-commerce I wanted to talk about e-commerce for a minute I mentioned the official.
Breakdown of e-commerce you know we won’t get for December until the middle of February we do get a,
a kind of proxy for e-commerce which is called non store sales it is a it is a bigger bucket and it has more other stuff in it than just e-commerce but if I look at,
the 11 months of internet data and then the the one month of non store sales data.
It’s pretty clear that we’re going to come in around a trillion dollars in e-commerce sales so if the official numbers work out the way I think this will be the first year the e-commerce in the u.s. is over a trillion dollars.
Um that would represent 16 percent of retail sales so 16 doesn’t sound like a huge number,
but again it just depends on what your denominator is that 16 percent is you know overall of retail which includes,
cars which are getting more digital but still aren’t very digital it includes gas which is you know only digital in a couple neighborhoods in San Francisco,
um and so I you know you start pulling out some of those traditionally non-digital categories and you know.

[36:02] That one trillion dollars represents about you know between 20 and 25% of all the categories that that you know people are willing to buy online and so it’s become a very meaningful mix and obviously.
It was the fastest growing because of the pandemic but inside 21 I show you the the.
The three-year breakdown and the thing that’s unique about e-commerce versus some of these other categories.

[36:32] E-commerce head its monster growth in 2020.
So the two-year growth numbers are still amazing but the one year growth numbers from 2021 to 2020 are not so great because we’re comping against.

[36:46] A monster year and it’s been interesting because like Shopify stock is down because their comps aren’t very good right but really there you know.
They’re comping against these monster numbers.
You know lots of retailers are calling me right now and they’re in a panic because they’re not they didn’t hit their goals and their their you know numbers are wrong and I’m like.
I mean they’re you know their numbers are soft and I’m like well but let’s look at what really happened like you had unprecedented growth over the last two years and you’re you know you potentially are.
Thinking about it in the right way so on slide 22 I give you my,
entire story of the world going digital in one slide and it’s a little hard,
hard to follow but basically what I show you is I show you the brick-and-mortar sales every year or every quarter and then on top of that I show you the e-commerce sales so you can see the e-commerce growing you can see kind of,
as a portion of retail what it is and then I show you the rate of growth for for retail and e-commerce and until the pandemic we had a pretty consistent story,
e-commerce was growing at like between 15 and 20% a year and brick-and-mortar was growing at three to four percent a year and that was pretty reliable,
so then the pandemic happens and brick-and-mortar shrinks for a quarter and e-commerce explodes by you know over 40%.

[38:10] And since that time they’ve been coming back and so for the first time in my life time in Q2 of 2021.
Brick-and-mortar actually grew faster than e-commerce for the first time ever.
Largely because of the you know they’re comping against these these you know huge huge March of 2020
and you know I will see you when the data comes out next month but I have a feeling we’re regressing pretty quickly now back to the kind of the
the pre-pandemic rates of growth like we absorbed all this big e-commerce growth for two years and I can you know I kind of think we’re gonna see e-commerce level back down at that 10 to 15 percent growth every quarter and and Retail drop back down to the 45 percent growth of quarter.

Scot:
[39:06] Well I think it’s you know
I think the silver lining for me is and I’m the e-commerce guy here is we had the Surge and then we actually did kind of even better than the surgeon you know you could have painted a story that said this will kind of flip – for your to as it kind of the subsides and then
then we get back to normal so so the rising tide kind of stuck and created a new high and then we have continued to grow from there
how does I know this this agitates you which is why I bring it up but you know this does not support you know that
Theory out there that we pulled forward like five years of e-commerce.

Jason:
[39:43] Yeah no we we didn’t and most of the evidence now is that.
We’re we’re not even way ahead of where we would have been that like like we we got the sales early but that.
The future growth is.
Slightly slower as a result so that like five or 10 years from now you know will see this this blip on the graph but we’ll kind of you know end up at the same
same place we would have end up without the the pandemic is most people’s projections that’s less to true in some of these,
digitally immature categories like grocery or automobiles where we really did probably pull in you know kind of accelerate two to three years into the future.
And so I did on slide 23 I give you the our estimates of the 2021 e-commerce sales for a bunch of retailers because I’m often surprised people.
Don’t necessarily have.

[40:52] The the best perception about how the relative size of all these retailers so these estimates come from emarketer there there gmv us estimate for Amazon is on the high side of all the estimates I.
I look at but they have 20 21 gmv for Amazon and about three hundred seventy six billion.
Walmart’s the second largest e-commerce site by a lot at 60 billion so quite a bit smarter than Amazon.
Until recently eBay would have been the second biggest site and Walmart’s approaching twice as big as eBay now so they have shot past eBay.
To get to 60 billion eBay’s at 38 billion apple is at 37 billion and then like people people forget how big a player apple is alone I saw a funny stat that like.
If the air buds alone the air pods alone were a company like it would be the 10th largest company.

Scot:
[41:50] Yeah that’s crazy.

Jason:
[41:52] And so then you get like a Home Depot is almost 20 billion targets 8 almost 19 billion Best Buys on you know over 16 billion,
Costco who’s the bane of my existence Costco like pays the least attention to digital they you know always talk about how unimportant digital is and how they don’t like it,
and I tell everyone what a horrible mistake that is and then Costco continues to Excel and despite not trying they sell 14 billion dollars a year on line.

[42:24] So then you can see the rest of the the top 15 on that slide on slide 23 if you’re interested but it’s interesting to understand the.
The relative size of some of these companies.
And so then you know one of the things that people always ask about is what did holiday look like particularly so the next section of this deck is,
a double click on on holiday 2021 and so.
I’m defining holiday as November and December sales that somewhat controversial because there’s a lot of different ways to think about it.
If we just look at November and December sales this holiday period was the the largest retail holiday ever.
And it drew about 16.1%,
which is vastly faster growth than any other holiday like the next biggest holiday was 10% so so kind of the same story for the whole year we get in Holiday it was a monster holiday,
um
You know again that depends a little bit on how you Define retail in RF likes to pull gas out of their number so they’re there they would say holiday was 14 percent growth which is still.
A monster number.
So then I went back to our friends and place Rai and said hey what is foot traffic look like every week of holiday.

[43:49] And that to me was kind of interesting so.
You know December foot traffic was down overall I’ll remind you because of Omicron but if we kind of look at the the weekly data for Holiday foot traffic was actually up versus 2019.
Leading into the Thanksgiving weekend and so then the weekend that was way down was Thanksgiving weekend way less people went to stores on Black Friday,
then went to stores in 2019 about six percent less,
and then you know the rest of holiday was slightly above so if it weren’t for the decline in Black Friday traffic I would say foot traffic and Retail was up about 2%,
over 2019 but that Black Friday dip pulled the whole thing down to where we still aren’t back to 2019 levels does that kind of make sense.

[44:44] And so one of the things that is a common narrative about holiday and I’ve even contributed to this narrative is,
man retailers are really trying to pull sales in and holiday starting earlier in October and you know holidays flattening it’s less about these big,
spikes on on Black Friday and Cyber Monday and so now that we have real data I’m like oh well let’s see how,
how that really held up in the first thing to know is.
The early sales in October was kind of a myth like there was not an unusual spike in sales in October and so you know.

[45:20] There was not a huge success in pulling sales into October and so then what I did is I went to similarweb which similar web has a data set of e-commerce site visits and what I like about that is,
we can get much more accurate granular data than we can on like foot traffic or you know foot traffic or lucky to get weekly data but for e-commerce we can get
daily number of sessions or unique visitors or things like that so I said hey let’s take the hundred biggest e-commerce sites in the US and let’s see total visits and let’s compare,
2019 with 2021 and the first thing to remember is.
You know Thanksgiving doesn’t fall on the same day every year and so what I did is I normalize those I said let’s not do November 1st through December 31st,
let’s do the 25 days before Black Friday in the 32 days after Black Friday so that we could kind of.
Match up the the flow and what you’ll see is there was a lot more traffic on e-commerce sites every day of holiday in 2021 than 20 then 20,
except for two days Black Friday and Cyber Monday and Black Friday and Cyber Monday 2021 with still above.
2019 but they were nearly the same and so.
The I guess what this would say is this partially Bears out our hypothesis.

[46:48] E-commerce visits did level out like the traffic did get spread out to the whole 60 days more than ever before but those those two tent poles are still tent poles and they still are by far the busiest days,
so I you know I definitely you know think that the narrative that like those Temple days don’t matter anymore is kind of a misnomer and they you know they got nearly twice as many visits as a normal holiday day.
Did that surprise you at all.

Scot:
[47:20] The surgeon the chart 21 is interesting at the end I think that’s my procrastinator people.

Jason:
[47:28] So so yeah so.

Scot:
[47:29] It’s where I shop.

Jason:
[47:29] It’s God’s talking about is the gap between 2019 and 2020 is pretty consistent but then opens up the most ever has,
um the very end of the holiday and my hypothesis for that is again this is e-commerce it’s Omicron again so I.
There was pent-up demand to go to stores people were going the store store traffic was going up and then store traffic fell off a cliff
the last half of December as people started getting nervous and so I think that you know drove more people to e-commerce again as my least is my hypothesis.

[48:03] And so so that I think is a super interesting data set I definitely am grateful to have access to the similarweb stuff and wow I was diving into their data Isles
one of the cool things there’s we can see traffic on individual website so I said,
well let’s see who the winners and losers are in terms of traffic and the story here is.
The the traffic is disproportionately going to the the big high-performing sites so you know not surprisingly,
Amazon gets the most traffic but they also got the biggest chunk of traffic growth so sometimes you’d say hey the biggest most established players should be the hardest to grow.
Amazon Druids traffic faster than any other top 10 retailer which is pretty impressive,
and then the next biggest grower was Walmart so this is kind of the story of the rich getting richer and you know traffic and sales consolidating on the,
those those very big a sites which is kind of the story you see on slide 29 if you’re following along on the deck.

Scot:
[49:12] The thing that fascinates me about this data is you have like Etsy with the fourth most traffic but then they’re like one of the smaller e-commerce sites right so does that,
yeah it does that mean no well that’s apples and oranges I guess that’s all of retail in the previous comparison.

Jason:
[49:30] No that was at Seas.
These e-commerce sales are about little less than 8 billion in the u.s. versus like Walmart at 60 billion but then Ed C does have like like nearly as much traffic as Walmart right like.
I want to say they did 600 million,
visits over the holiday period versus Walmart did like 1.1 billion so,
so you know despite Walmart being 10 times as large they only had twice as much traffic and I think part of the reason for that is the the.
Kind of thin long tail nature of Ed c means that their overall conversion rate and the amount of you know pay visits you have to do to find what you want is.
Is higher than then it is on Walmart where you’re more likely to go to Walmart with with high purchase intent for a particular item and these days it’s pretty easy to find that item and get out.
Um and that kind of is born out Ebay is still the second large just traffic site even though they’re they’re shrinking and again eBay’s almost half the size of Walmart but eBay is traffic is still higher than Walmart’s.

Scot:
[50:52] Yeah it’s a huge it’s kind of sad in one way but it’s a huge opportunity Bay could get their act together and convert that traffic the way Walmart is they.

Jason:
[51:00] Yeah if I could redo our.
Our predictions episode so you know I talked about in a number of times on this that one of the big trends is retail media networks and you know people selling ads
what this data set uncovers more than anything else is the untapped opportunities Ed C needs to get a retail media Network up as soon as possible because I,
as far as I know they don’t have one.
So they should be monetizing that traffic because that that that that’s a valuable asset they’re not they’re not leaning into yet for all our Etsy listeners so then I will just say in this is you know the Chrome Legend in me,
during holiday we talk a lot about these
estimates from companies right so Adobe you know you know we have on the show and they give us their real time estimates based on on all the customers they see we have sales force on the show every year and they give us real time estimates
and then you know when we talk about that I don’t think we’ve had on the show is Mastercard has this product called spending pulse which is,
kind of an anonymous aggregated view of all the people that buy stuff with MasterCard and.

[52:08] Just just for interest Adobe MasterCard in Salesforce all agree,
um that the e-commerce grew about 10% in in Holiday 9 or 10% and holiday of 2021
and that passes the smell test again we don’t have the e-commerce data for for December yet so I don’t really know but that.
That feels like the right order magnitude so I think you know these guys all credibly predicted,
the shape of holiday e-commerce but the only one of these guys that predicts brick and mortar is Mastercard right Adobe and Salesforce are pure online retailers and
every year I always get weird data from MasterCard and I say this because the whole.
The whole world and especially the media like publish this MasterCard data far and wide and and treat it as fax MasterCard like on December 26th said that,
retail sales were going to be up 8.5% and that meant they were going to be up 10.7% versus 2019.
And so we now know from the US Department of Commerce data that that they were off by 50%.
So just call out to my friends at MasterCard that I’d be curious to understand what’s going on there from my.

Scot:
[53:31] Your category thing.

Jason:
[53:32] Yeah from my seat Well they argue it’s not but from my seat there consistently off on the brick-and-mortar number so I’m I’m curious and so then.

[53:42] Every time I have this conversation with a colleague or a client the especially someone that maybe doesn’t live and breathe e-commerce every day is soon as you start talking about this monster growth number,
what everyone asks is yeah Jason but how much of that is inflation right because the thing we hear about in the media the most.
Is is inflation inflation inflation and so you know it stands to reason if.

[54:09] You know if something grew by 10% and people are paying more you know ten percent more for everything then that explains it and this you know this is an inflation story not a growth in consumer demand story and so I like to put in.
Just a little kind of inflation picture at the end.
The so I give I give folks a graph of the government,
inflation numbers for for for these three years and and what you can see is that like for most of the pandemic inflation.
Kind of stayed in the normal range and then we started this,
this huge climb not until January of 2021 so if you remember like all a lot of this growth were talking about was 2020 growth,
inflation doesn’t explain that growth at all there is significant inflation in all of 2021 and it’s historically High
it’s you know depending on how you want to count it could be a 40-year high and so it finished in December.

[55:14] At seven percent and so if you figure normal inflation,
is a about 11 and a half percent inflation was already high before the pandemic at 2.3 percent.
You know if you say alright it should have been at 2.3 percent and it’s at seven percent then you could.
Say that the kind of back half of 2021 sales that you know.
That three or four percent of it can be explained by inflation but definitely not this 22% were talking about.

[55:48] And I don’t know if you been thinking about her talking about the inflation a lot it’s kind of.
It’s it’s kind of funny because I always like to remind people the long-term picture we’re all paying way less for goods than we ever did before so I kind of pull this.
This 20-year inflation number to remind people that like we’re paying fifty percent for a pair of what we paid 20 years ago we’re paying,
30% last for personal products and beauty products were paying 17 percent last four cars we’re paying 12% less for food all the tangible stuff we buy is getting cheaper because we’re getting better at making,
and where the American family’s budget is going is to Services right so you know the American families having to pay way less for hard goods and food and way more for housing education and Healthcare and that’s the big macro picture,
but then we’ve had like the we talked about a lot of the growth in retail coming from all this economic stimulus,
the the downside of that economic stimulus is.

[56:47] It actually is one of the contributing factors to inflation right like the people have more money to spend,
um they buy more the supply chain wasn’t prepared for that buy more and so we have,
supply chain disruption and so now you have Supply going down and demand going up and what do people do in a rational Market when they they have high demand and low Supply they they charge more,
um and so then you know people say hey everything I buy is more expensive I need to get paid more and we have this unprecedented leverage that workers have right now
because the labor shortage so they’re all negotiating better prices and guess what that means they can afford.
Pay more again and and manufacturers are you know having more costs of labor for making stuff so they’re charging more and what’s been super interesting and all this is,
you know it’s kind of an excuse for manufacturers to charge you more like most of these manufacturers that are raising their prices are also setting record profits so it’s not like.
True that like.
All of this information is manufacturers passing costs on to Consumers it’s a little bit of the the you know opportunity of the moment of you.

Scot:
[58:01] Yep it’s complicated to the inflation a lot of its gas and then to your point a lot of it’s stuff that doesn’t have this inherent
deflationary element to it like healthcare and we’re paying more and more for healthcare education anything that has a service component is shooting way up.
But even even in the short term though like yeah everything at the grocery store is insane right now it’s crazy.

Jason:
[58:27] Yeah and food and gas are historically more volatile so inflation goes up and down more like side note you have to take all these numbers with a grain of salt because the way they measure it is,
they measure the cost of a basket of goods that an average American bought but they built the basket of goods in like 1945.
And so it’s not the right past it’s for today there’s no iPhone in that basket.

Scot:
[58:50] Yeah.

Jason:
[58:52] So yeah so it’s interesting fun it’s fun for me because I’ll actually be on Good Morning America this weekend talking about inflation.
Yeah always fun but yeah I.
I’m with you if you take what’s called core inflation where you pull gas and food out inflation’s like 4.5% so for most of these retail categories,
it’s part of the story but it definitely would be a mistake to Discount all this growth and say oh it’s just.
And that’s my scoop that’s your 36 slide deck that you’re all welcome to grab and use my thanks to all the the data providers that contributed to all of it so I have a,
a bibliography at the end so if you’re interested in starting to track any of this data on your own I tried to make that easy for you.

Scot:
[59:41] Yeah when we do when we post the show will also try to get on our socials because I’ve had some people say they can’t find the show notes and so we’ll make sure that we disseminate this wide and so everyone has it.

Jason:
[59:55] Well Scott not surprisingly we were able to perfectly fill up an hour with this one topic.
So hopefully you found value in this is Scott mentioned the top of the show if you did we sure would appreciate that five-star review,
but thanks everyone for kind of following Along on this like pretty dry difficult data dump episode I hope I hope it was useful please,
give us feedback if you liked it or if it was not the right format.

Scot:
[1:00:23] People of data in retailgeek delivers and until next time.

Jason:
[1:00:28] Happy commercing!

View Details

EP284 - 2022 Annual Predictions h

2021 Predictions Recap

Jason:

Made to Order apparel business > 9 figures Yes
Retailer offers viable health alt insurance option to consumers No
Grocery E-Com > 10% someone deploys(not pilots) MFC Yes
Amazon Shopify Competitor (shipping solution) No
Retail Media > $20B Yes

Bonus – More store closures in 2021 than 2020. No

Jason Total Score: 3 of 5

Scot:

Amazon move to same day prime by opening a huge wave of neighborhood DCs (near DSPs) Yes
Shipping (Shopify) – launch own DSP No
Shopify marketplace No
‘zero friction addiction’ sticks – I’ve seen 30-40% repeated a lot, I think it’s 60-80%. commerce penetration says at 16% or better in 2021. Yes
spac/ipo? Dnvb wave Yes

Bonus: post-covid anti-consumerism/materialism wave No

Scot Total Score: 3 of 5

We have a tie, including the tie-breaker. Here are some relevent links:

eMarketer recap of Retail Media Networks
Bricks Meets Clicks analysis of digital grocery space

2022 Predictions Jason:

NFTs, Web 3, Metaverse, and Ultrafast delivery services are all overhyped and don’t deliver meaningful commerce revenue in 2022.
Shein exceeds $30B in annual sales, disrupting apparel industry
Adoption of BNPL services slows down to less than 15% CAGR in 2022.
Amazon opens more than 100 Amazon Fresh grocery stores
Last Mile evolves Veho, X-Delivery, shipium, or Instacart gets aquired

Scot:

Amazon launches a competitor to Shopify webstore, possibly via a headless solution on AWS
Amazon wins ultra-fast delivery. Gopuff, Gorilla, or Jokr goes out of business in 2022
Metaverse gets lots of buzz but no revenue
Livestream commerce goes mainstream in the US
Fabric gets acquired

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 284 of the Jason & Scot show was recorded on Thursday, January 6th, 2022.

ttp://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show this is episode 284 being recorded on Thursday January sixth
2022 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 she listeners happy New Year Jason and listeners it’s 2022 here we are we made it.

Jason:
[0:49] I know I feel like I’m already winning because the intern type 2021 in the show notes and when I read the intro I caught it in my head I feel like that I’m impressed with myself right now.

Scot:
[1:00] Boom yep and there that was bad timing because there is a performance review coming up so that in turn is going to be in some pretty pretty thin ice here so we’ll see hopefully they make it through.

Jason:
[1:13] Might be another year probation before he gets to start taking a salary.

Scot:
[1:18] Yeah most important question are you watching the book of Boba Fett.

Jason:
[1:24] I am I am we have to be careful not to do any spoilers but.

Scot:
[1:29] Never spoilers never a million spoiler.

Jason:
[1:31] Spoiler free pass.

Scot:
[1:33] I believe he got eaten by that giant thing in the desert oh sorry those spoiler.

Jason:
[1:39] Yeah.
Yeah there are I will let I’m not going to reveal anything but there is sand in the new episodes.

Scot:
[1:49] Yeah yeah he want he like Star Wars you get a lot of sand in some people hate sand but Boba doesn’t seem to mind.

Jason:
[1:57] No I think he’s had to adjust but yeah really well done show been enjoying it felt like there was a end of the year there was kind of a little role in television programming in our household so it’s been exciting too
Taz some of these series come back.

Scot:
[2:13] Let’s jump into it cuz this is sometimes one of our longest episode so we’re going to try to try to not go too crazy long.

Jason:
[2:20] I feel like we just lost half our listenership right there.

Scot:
[2:23] Like I don’t believe that this is gonna be a three-hour I am happy that Joe Rogan is starting to do these like three-hour heh,
episodes it makes me feel better about our one hour winds so this is every the first show of every year is been are many many year,
tradition to go through our past years predictions and then formulate our predictions for the upcoming year,
and that is this show it is the 2021 prediction review 2022 prediction Revelation show feel like we need a sound effect for that,
but.

Jason:
[3:00] I have a sound effect but I feel like I’m going to leave yours in.

Scot:
[3:02] If you can beat that you know over override it there.

[3:10] So the way we do this is we do have to show is kind of doing our predictions and kind of self scoring ourselves in Jason’s it’s kind of,
banging your head against a book typically self-flagellation or whatever it’s called and then and then we are back after the show is hopefully we learn from these predictions we made and we,
cast them forward to see what’s going to happen this year so I feel like Jason we should I think you actually won last year if I remember.

Jason:
[3:41] In a major upset I feel like I had been like over 45 the the previous app that seasons.

Scot:
[3:48] Yeah yeah so you get the dubious honor of getting to rate your 2021 predictions first so why don’t you kick us off.

Jason:
[3:54] Awesome yeah and spoiler alert we do not learn from the previous years.

Scot:
[4:00] Well part of making predictions is you yeah yeah yeah you got to kind of put it out there and that’s risky.

Jason:
[4:07] Sure so I’m always looking forward to this episode I’m super excited about it I get
you know jazzed weeks in advance and then I like dust off last year’s forecast and suddenly I’m a gloomy because I realize I’m not near as clever as I remembered myself
so that’ll just set the tone up front so my first prediction last year was that more
personalized made to order products would be taking off this year and my specific prediction was made to order a parallel with grow to be a nine figure 9 digit,
business in 2021 and so good news bad news that happened so,
if you add up the revenue from Indochina oh and suit supply,
proper cloth and not standard you actually get now about 250 million in Revenue which is,
considerably higher than nine figures.

[5:14] In hindsight it wasn’t that good of a prediction like we are pretty close to nine figures before last year.
And so it wasn’t as stretchy as I had hoped and I had in mind a lot of more.
Well we’re in consumer products pivoting the made to order and I specifically had been watching some some Amazon Pilots around made to order and they didn’t really grow this year at also,
technically I guess it was it happened but I don’t feel very good about my first one.

Scot:
[5:46] Okay yeah well it’s a win just take the W dude.

Jason:
[5:53] Okay all right yeah well I’ll try to be more more strict going forward or just make better predictions so my second one,
there’s been a lot of initiatives around retailers weaning in the healthcare and I propose that at least one retailer would,
launch their own health insurance or offer some alternative solution to health insurance,
and while there were a bunch of investments in health care and Amazon you know in particular has done a lot in the last year I don’t think that really happened so I’m giving that a no.

Scot:
[6:29] Yeah and in fact that was like a huge loss because Amazon Unwound their big partnership that made it seem like they were going to do a lot more in this myth.

Jason:
[6:37] Yeah that there is some Nuance there they they were part of a Consortium and they bailed on the Consortium but then they invested a lot more money and did several acquisitions,
and expanded the scope of their own internal initiatives and it almost look like the the internal stakeholders didn’t like partnering with Goldman Sachs and Berkshire Hathaway but nevertheless.
I’m I’m not taking that that win that that didn’t happen so.

Scot:
[7:09] What attracted such a big L kind of swamps the W from the first one.

Jason:
[7:14] Yeah cleaner it correctly so the next one was interesting I said that e-commerce would
grocery e-commerce penetration with grow above 10% and I said someone will deploy not just pilot these micro fulfillment centers for grocery in both of those things basically happen so
bricks me clicks which is one of the more credible sources out there for tracking grocery penetration has us at about fourteen percent penetration right now.
So we definitely passed that ten percent threshold obviously aided by,
the pandemic and the various waves and then several retailers leaned into mfcs a couple small retailers did deploy them,
across all of their stores so like a chibi for example is aggressively rolling out mfcs
Walmart I want to say spent like 14 billion dollars on on MFC so real money is,
is getting invested in there so I think generally I feel good about my my grocery production number three so so.
Two yeses and a know so far.

Scot:
[8:29] Is this a bricks and clicks thing is that a can mere mortals get that or is that something you get.

Jason:
[8:35] Well there’s a there’s a paid version which is well worth it if you follow the industry but they do publish their monthly forecasts for free on their website at bricks me cliques.com.
It’s pretty interesting so there you know we get.
Grocery sales data from the US Department of Commerce and e-commerce data but we don’t get grocery e-commerce so there’s the grocery e-commerce we only get from a couple of these third-party private.
Data providers and they all do it primarily based on.
Big panels of consumer surveys so that’s what bricks me clicks does but they they have some like pretty interesting data like you can look at what percentage of those grocery e-commerce orders were home delivery versus curbside pickup and stuff like that.

Scot:
[9:26] Very cool there’s a how do they get their data.

Jason:
[9:30] Panel so they’re there.
Yeah they’re serving a bunch of consumers yeah.

Scot:
[9:38] All right I’m going to remember you you did that.

Jason:
[9:42] You make you make use with what is available.
Um and directionally emarketer published some grocery data and they kind of roll together a bunch of people’s forecast there’s another company out there called mercado’s that publish them data and it also aligns,
directionally that there we are over 10%
where they disagree more is where we started before the pandemic so some of them have us starting at like two-and-a-half or three percent some of them have as high as six percent before.
Um over 10 now.
And if you’re super interested in the interest of prolonging the show frequent friend and guest of the show Professor Dan McCarthy they he and his students just published an interesting.
Cohort analysis of,
um how the pandemic impacted digital restaurant sales so closely related to digital grocery right and obviously a lot more people ordered restaurant food for delivery during the pandemic but his interesting question was,
um

[10:49] Was that you know a pandemic Spike and it’s going to go down back down to pre-pandemic levels or is it a permanent shift and what can we suss out and the way they did it is they looked at cohorts that.
They ordering from restaurants for home delivery before the pandemic and how their behavior change versus first time users and what they found is like most of the growth was.
Households that were already using restaurant delivery increase their usage and it appears to be more sticky the smaller cohort of people that ordered from restaurants for the first time during the pandemic,
that behavior did not stick and they’re not continuing to order but still the sales are up higher.
There’s a nice long digression for you that wasn’t one of my forecast.

Scot:
[11:33] Always appreciate the commentary.

Jason:
[11:36] Yeah I’m here for you man so forecast number four was.
I predicted that Amazon’s Shopify competitor would be revealed,
in this is a thing that we had heard about called project Santos but no one really knew what it was I said hey we’re going to find out what it is and I think it’s going to be a shipping solution to compete with,
to fulfill orders for Shopify and take take you know a piece of the Shopify gmv.
And it was in fact revealed so that’s the good news it was not a shipping solution so so project Santos turned out to be,
a point-of-sale system for brick-and-mortar retailers that Amazon is developing,
and has still not released but is purported to be small business POS system that’s going to compete with Shopify and square and some other folks in that space so,
I’m giving that a no.

Scot:
[12:42] All right I agree on the phone.

Jason:
[12:44] Cool cool.
Interesting news and Evolutions there to talk about on one of our subsequent new shows is there some interesting patterns that Shopify and others of,
have filed in that space so we get to my fifth prediction my fifth prediction was that retail media networks were going to take off in 2021 and that they would generate more than 20 billion dollars in ad revenues,
and put things in perspective like the year before we had only seen about 10 billion and AD Revenue so that was a meaningful prediction and that.
Totally happen so according to emarketer we did 24 billion,
in calendar year 2021 in ads that were invested in retail media Networks,
um Amazon is on a run rate right now to do about 30 billion dollars a year and everybody and their brother is launching a retail media Network so the Gap is launching a retail media Network which is.
Interesting most of these,
retail media networks are selling ads to what we would call endemic Advertiser so your Duracell batteries you sell batteries at Walmart you buy an ad from Walmart for Duracell batteries to help more people find them.

[13:57] Gap doesn’t sell other people’s stuff so there are no endemic advertisers on the Gap right and so super interesting that even they are trying to monetize their traffic.
You know you name it they watched a retail media Network this year and just today I want to say Best Buy which already had a retail media Network,
launched a new rebranded retail media Network and they’re now selling ads to non-endemic advertisers as well so so that when I feel like I hit pretty well.

[14:28] So you add that up and that is three corrects and and to to mrs. and folks careful listeners will note we also made a bonus prediction and the case that we tied,
in my.
My bonus prediction was that we would have even more store closures in 2021 than we did in 2020 and I was wildly wrong,
so
caveat here are the data everyone uses when they quote store closures is this core site data and core site is kind of anecdotal data and it’s totally tracking Big Chain,
retailers but based on their data there is like 41 percent fewer store closures in 2021 than 20/20 so so we’ll call that a huge mess,
um I would argue that all the store closures that happen this year were small independent retailers that got wiped out by these big chains,
and we really don’t have a good data source for for those but nevertheless I’ll accept that I lost the bonus round badly.

Scot:
[15:28] Yeah in fact isn’t there a record number of stores opened.

Jason:
[15:33] Yeah so a separate issue from the store closings is hey where there are more openings and there,
there there were so not a record number of openings but the but from that course I data set more store opens opened than closed last year which so we would have had a net increase in stores.
That that’s interesting I wouldn’t encourage retailers to pay too much attention to that because it really matters.
The nature of the closed and open stores I get almost rather follow,
net gains or losses in retail square footage because if you have a bunch of Macy’s stores closed and you have a bunch of Dollar General stores open your closing 100,000 square foot store and opening a 10,000 square foot store.

Scot:
[16:22] Awesome and then you had all right so then if we include your bonus you’re even so three wins and three else.

Jason:
[16:35] Exactly I like to think of it as three wins and two L’s and the bonus only comes up if you can tie me.

Scot:
[16:41] Okay alright let’s see how I did so.

Jason:
[16:46] Yeah I’m excited to hear this.

Scot:
[16:48] Yeah so just to remind everyone this was done a year ago in January of 21 we were merely.
Nine months months depends on when you start depending I guess nine months into two covid.

Jason:
[17:01] That’s a calendar year ago but it was actually four years of Lifetime ago.

Scot:
[17:06] Yeah it feels like it for sure,
all right so my first thing I always like to kick off with an Amazon prediction so my Amazon prediction last year was that we would move to same day Prime by opening a huge wave of neighborhood DC’s.
And they would be near dsps and I got that one right that one,
don’t feels obvious like I don’t feel like I was making too much of a prediction but at the time I remember being worried about it because I think they they were still doing most of the dsps this is where time dilation happens during covid the four-year thing you mentioned.
They’ve just built up an incredible amount of.
They call him I called him neighborhood DC’s they call him delivery stations now I think is the official name where they have built you know just tons of these these interesting new.
Footprints where they house a bunch of these dsps Under One Roof and then they for deploy a lot of that days
things to be delivered into that out of a fulfillment center and then the the dsps just line up and deliver that stuff so it’s been really interesting to watch them build that,
so I would count that one as a win.

Jason:
[18:18] Yeah no I totally agree I’m often surprised by how many people still have this outdated model of Amazon and they imagine the Amazon is primarily doing two day shipping.

Scot:
[18:29] Yeah no it is they have really cranked it up especially I’m out I’m in North Carolina you’re in Chicago and you guys are probably getting stuff you know.

Jason:
[18:38] Yeah we we are we were in early market for same-day delivery and we’re kind of an epicenter for a lot of of their delivery products and the vast majority of stuff I order,
um my I get two offers for wind to have it delivered between 4 and 8 a.m. or between 8 a.m. and 10 a.m. the next day.
So some stuff I get same day I would just tell you there were I was listening to an Amazon earnings call and someone asked them if they were were concerned about all these ultra-fast delivery services that were popping up all these VC funded,
you know 15 minutes to 1 hour delivery services that are mostly sent in one one-block radius in New York and the Amazon CFO was like.
You know those those Services deliver,
an assortment of 4,000 skews to a five-block radius we’re currently delivering about 400,000 skews Same Day to all of America we feel pretty good about our offering what’s the.

Scot:
[19:42] Boom drops the mic walk.
Haha okay sticking to Logistics which is interesting because I was poking around and Logistics a year ago and I
you know in hindsight the perfect prediction would be there’s going to be a supply chain problem but I did not
I did not pick that one sadly instead I said you know Shopify,
so my logic here was kind of looking at the chessboard at that point in time we all know Amazon’s kind of,
turning the guns toward Shopify if your Shopify you know those guns are turning towards you so one of the things you do is try to get into the delivery world.
They have tried but they pretty publicly there was Toby was in,
was it Bloomberg he did kind of a cover story on one of the Business magazines and in there he basically admitted that you know hey were.
Pretty bad at this fulfillment stuff and I think they had a customer say that they’re embarrassing really bad and you know it almost seemed like there are not going to go deeper into fulfillment so I missed on that one but Asterix.
I think they should and I think it’s going to be a pretty big strategic.
Blind spot if you’re an arm the rebels in e-commerce you’re gonna need to help them get the products to consumers in that last mile that’s going to be where the battle is and I feel like it’s a bit of a soft underbelly for them right now.

Jason:
[21:11] Yeah generally agree.
An interesting side note that the CEO of instacart just got named to the Shopify board and I inadvertently started a little bit of
LinkedIn debate about like
how soon it would be before that was a potential conflict of interest and a lot of people chimed in that they thought instacart was a potential acquisition Target of Shopify which might be one way for them to to get into the the Fulfillment business.

Scot:
[21:48] Yeah but even that’s a conflict of interest rent mean proofs proves your point not you know.

Jason:
[21:53] Yeah I mean clearly I’m right but that’s a separate issue.

Scot:
[22:07] You don’t think this will ever happen and everyone else in the world thinks it will so you know,
this one’s tricky I could make some argument that they are doing more on this and then that same article they do start to talk about it being more of a central by it I’m talking about the shop app that they have,
um doing more around that centralizing your your Shopify,
you know whole experience in aggregate including some search functionality they have added some search haven’t looked at lately but I’ve seen to Twitter traffic that they have added some stuff there,
but I’ll all I’ll take the L on this one I but I still think.
That it’s going to be something they do more of down the road probably in a different flavor than a traditional Marketplace but I think it’s an area that they have to explore it is more in their wheelhouse than the Fulfillment sign.

Jason:
[23:02] For sure I certainly agree with that and I would encourage you to double down on that prediction for Fort Wayne tonight but I will say like two things I was clearly wrong on the shop a.

[23:17] Like is getting much broader adoption than I would have expected because I would argue it’s mostly a shipping tracking app.
It has some like Merchants search capabilities it doesn’t really have product search capabilities at least in general release but it’s.
At various times it’s been the most downloaded retail app and it’s bouncing around in the top four so a lot of people are getting that app and so per your point,
you know they have a bunch of merchants they have a bunch of users with this app which is really hard to do this app has some Marketplace of like features and then you know I don’t know you I’m sure you saw but bradstone,
got to go visit Shopify and do an interview with Toby and he in his article he kind of painted a picture that that.
Internal stakeholders at Shopify were wildly divided and didn’t agree about.
If Shopify should do a Marketplace and what it would look like and so that that makes me think.
They’re you know having the same debate we are and Toby himself weighed in that he’s like.
You’re not going to see us compete with our Merchants so if they do a Marketplace as probably going to have to look.
You know considerably different than the kind of marketplace I think some people are thinking about but but it’s an interesting space.

Scot:
[24:41] Yeah,
yeah and then so we’ll see if this comes up again in predictions and then I the super risky thing I did last year was made a covid prediction I’ve learned my lesson there
remember to week two weeks and we’re done anyway we my prediction was we will be shocked how much quote-unquote zero friction addiction sticks I’ve seen 30 to 40% repeated a lot and I think it’s going to be much much higher
and then so I think there is some good data that points to that we haven’t seen a decrease in the growth of you know online
even as we’ve gotten into a post covid World we’re kind of getting back into one with with
all the Quran right now but and to your point there’s a lot of interesting data like like Dan and his group did that show that it’s been pretty sticky.

Jason:
[25:37] Yeah no I think that’s totally fair a lot of people are in correctly predicting that that it’s going to revert but yeah I think I think all the tangible evidence points to it being sticky.

Scot:
[25:52] Okay and then my fifth prediction was given all the heat around these specs and IPOs that we would have
20:21 would be a banner year for digitally native vertical Brands either going pilot getting Acquired and doing IPOs,
I want to made this one I felt like it was going to be much more around these facts but then the specs pivoted and started doing these really weird esoteric things that end up,
not doing very well but where I kind of snuck the win out on this one is we did have three companies that we’ve tracked in our kind of the
oh geez of digital native vertical Brands go public so we had War be Rent the Runway and I’ll Birds now they haven’t done great since they went public but they did get out and they had you know the kind of met their pricing and went public and are still out there
and so so there you go so that was a yes.

Jason:
[26:51] Yeah yeah I will certainly give that one too.

Scot:
[26:54] All right so at this point I am let’s see three yeses and to nose.

Jason:
[27:02] So we’re tied so the bonus comes up what was your bonus.

Scot:
[27:07] My
bonus was that there will be I was much more optimal another covid so I got lucky on the first one I felt like we’re going
we’re going to in 21 we would be post covid and
people would kind of stop buying stuff just generally and really focus on going out and doing things and seeing the world over the holiday I went down to Orlando for three or four days and it felt like,
there’s definitely a segment of the population that that’s out there doing that they all seem to be in Florida right now and maybe some in Texas
but I think if you look at the data there’s nothing to really support
that in fact the we’ve talked on this show about the e-commerce data and Retail data and it all seems quite robust so we have not hit a.n.t. consumer materialism wave that that I predicted.

[28:03] Cough so it turns out that I think we’re effectively tied is that I’m doing the math right on.

Jason:
[28:09] I think you are and and I think all our listeners will agree that a tie is basically a huge win for me.

Scot:
[28:15] Given our past history yes it’s the first time we’ve had a feels like soccer or that we’re in England where that is a possible outcome.

Jason:
[28:23] Exactly I think I think my high school soccer team just just tied your your Premier League team.

Scot:
[28:31] Yep cool so yeah that but you know it fun to do these things because
I would say in a volatile world like we aren’t getting half of these things right I think you would agree with me that we’re pretty awesome you know we there’s other people out there that make predictions and they throw so much junk against the wall they get like
five percent right but and they do big Victory lap so I think if you look at our records pretty good pretty solid.

Jason:
[29:01] Yeah no I agree and I don’t think we sandbag very much either I mean sometimes in hindsight they feel like sandbags but I feel like we stretch ourselves so,
so I will definitely take them.
So how are you going to like pay off that that self-congratulatory pat on the back Scott you’re gonna have to come up with some Whoppers for this year.

[29:32] I don’t I don’t what do you want to do I’m sure we lost all our listeners except for my mom so whichever she prefers.

Scot:
[29:39] I’ll go first so so my predictions this year,
so my Amazon prediction number one and this is for 2022 is I predict Jeff Bezos is going to have a midlife crisis and run around
it was in Miami with hot chicks and other exotic locations and take a lot of selfies for Instagram.

Jason:
[30:05] If you had said in dubious fashion choices than I might give it to you.
Scot I’m not sure but I think as of January 6 that’s already happened.

Scot:
[30:16] Yeah yeah yeah okay you got me that ones are what they call retcon and in the world where it has already happened alright or series prediction is
I’m gonna I’m gonna double down kind of on your prediction I’m going to steal your prediction from last year and say
I guess this isn’t exactly what you predicted but I do feel like,
Amazon is very serious about Shopify in that same article I was talking about where,
Toby was there a next Amazon you know an anonymous sex annum Amazon Source you have to take that with a grain of salt said these guys crushed us they came out of nowhere and destroyed us and where we were blindsided,
that seems.

[31:03] Pretty pretty Amplified but I do think they have their guns trained on them so I’m going to say we’re going to see Amazon come out with a serious competitor this year,
and I think it’s gonna you know,
I imagine it could even be like a web store offering even though they started this and got rid of it I think they’re going to get pretty serious about it and now I could see them come out with a,
you probably won’t have a lot of Headway in the first year but they’re gonna I think they’re gonna go right out these guys the thing that’s hard to predict,
there’s some interesting things they could do it with AWS and headless so I’m going to kind of give myself a little space there that it could be headless versus kind of a more monolithic type SAS kind of an offering but yeah,
so I think they’re going to get pretty serious about.

Jason:
[31:54] Okay yeah yeah I could I like that I can’t I see that and you could imagine bundling like AWS Commerce platform with a bunch of the traditional merchant services from Amazon like fulfillment and payment and stuff like that.

Scot:
[32:08] Another Amazon one is
and you kind of foreshadow this when you’re talking about the Amazon thing there’s there’s hundreds of millions of dollars if not billions going into these do have a name for them fast.

Jason:
[32:23] Yeah well ultra-fast delivery is the.

Scot:
[32:25] Ultra-fast slurry okay these companies so there’s like go puff and there’s one that has like an animal name like.
Gorilla yeah Joker yep
yeah I’ve been I don’t know how DC is letting them do that one but anyway you know so these guys have raised billions of dollars and it’s a hot Market but I think Amazon is kind of going to train their guns on that and I think they’re going to put a real hurting on them,
I think we’ll see I’ll be pretty risky here and say one of them will close their doors one of those so I’ll put it here in the notes so to keep me honest so,
go puff gorilla and or Joker one of those three big ones probably doesn’t make it out of 22.

[33:19] Okay,
so that’s 1/2 so this is my third one I realize I’m actually short protection will have to do one on the flyer the Bezos wanted kind of counted in my head but that was early prediction you know the at the end of
21 we had Facebook changes name to metaverse and since they did that you can’t throw a rock without reading a thousand articles about the maneuvers.
In fact today on Twitter there was a big Walmart video you know kind of showing an metaverse shopping experience mock-up kind of thing that was kind of fun,
the I think there’s going to be I think there should be a lot of hype and 22 I’m actually kinda already burned out on it and a lot of you know what does metaverse shopping look like and there’s going to be lots of excitement and smoke but no fire and no Ray.
So I think it’s going to be the flash in the pan when we look back on 22 so I think it’s going to not a lot of activity there I think it’ll be like,
you know chat Commerce and social commerce and a lot of these things that had a lot of buzz in their era AI Commerce machine learning Commerce all these things that had huge amount of Buzz and then turned out to not really have substance.

[34:37] Okay and then the inverse of that is I think one of the things that there’s been a lot of talk about that
is going to have substance is live streaming of kind of video live video e-commerce integration so I think that one is going to be more mainstream there’s there’s a little.
Amazon has tried this and failed it’s big and Ali Baba I’m I’ll qualify this and say in the u.s. too so I’m not trying to be sneaky here and you know,
there’s not a lot of I’ve seen some startups trying to get traction here but they’re in like supermicro verticals but
that’s how I things get adopted is you kind of build some habits in these small behaviors and then they can go mainstream so I think we’ll look back on 22 when we do our
20:23 show and we will see live streaming has gone mainstream so that is one and then let’s see,
I may have to come back with another.

Jason:
[35:35] Yeah I’ll let you you can make fun of mine and then you I’ll let you cherry pick after hearing my.

Scot:
[35:41] Okay any reaction to my my for so far.

Jason:
[35:44] No I so a I should have come to rehearsal because I feel like we’re gonna get off the right off the bat with some potential overlap but.
I definitely.

[36:00] I think we’re going to see some way Amazon very seriously competes with Shopify I think it’s not going to be the way most most people expect that your your description seems totally plausible is we’re about to see I have a,
an opinion on some of these ultra-fast delivery services and The Meta versed both of which you touched
and then I got to be honest I am nervous about live streaming like I could I definitely am not bearish I could see it going either way
a ton of Commerce happens via live stream in China and we’re starting to get a lot of Commerce.
Video content get consumed in the u.s. what’s not working very well at the moment is the buy now button at the end of those videos and so you kind of have,
indirect livestream commerce’s is already starting to happen in pretty high volume here in the US and a bunch of people are investing in in.
Trying to take it that that last click.
And I have reasonable confidence that it could work so at the very least I know a lot of retailers and a lot of my clients are going to be trying it pretty pretty heavily this year so we shall see.

Scot:
[37:15] I came up with my fifth.

Jason:
[37:17] I knew if I just rambled that I would give you enough room for one.

Scot:
[37:20] Yeah this one is a risky one but you know our friend Faisal started Fabric and I’m going to predict that that company has so much Buzz they’re going to get acquired in
this year so that was risky because they’re super early stage where is it it’ll it’ll it’ll have to be a big number to take them off the table at this point but I think someone’s going to going to,
pay that number.

Jason:
[37:45] Yeah to fun ways that could go I feel like he’s pretty – on Shopify so it would be awesome Shopify acquired them but you could also Imagine AWS acquiring them and and making two of your predictions come true.

Scot:
[37:59] Yeah or or adobe or you know IBM IBM’s kind of on the sidelines lately they’ve got a whole.

Jason:
[38:07] Yeah yeah they kind of got out of the those software platforms I would be I mean but not to say they couldn’t pivot and come back in for sure.

Scot:
[38:14] Yeah yeah and then let’s see I said Adobe I’ve and Salesforce.

Jason:
[38:20] Interesting okay well I’m going to jump into mine and again we did not dedupe these I bundled several of yours and made them more negative,
so my first prediction is what’s not gonna happen and I lumped in a bunch of very trendy things that people are super hyped about and
I said I don’t think any of these are going to be economically meaningful in 2022 so it’s in ft’s which I know,
are near to your heart than mine I I do believe there’s some Niche use cases where in Ft is totally makes sense and I know you play in some of those,
those Niche cases but there are so many people that just think crypto in general and nft is in particular are going to be,
a huge part of Commerce I don’t think they’re going to be very economically meaningful and in 2022 even more so I don’t think web 3 is going to have any impact I’m starting to get a lot of questions about,
how Bigcommerce is going to change because of web three in my answer is it’s not,
I think the metaverse is going to fail pretty miserably as a Commerce,
play and I’m also going to say all of these Venture funded ultra-fast delivery startups are going to fail so that’s not to say that.

[39:36] Amazon,
instacart or even go puff couldn’t win but like all these these Sand Hill Road back startups that are delivering in Manhattan I don’t think any of them are gonna change consumer Behavior enough to really matter economically in,
so that’s my Chrome Legend hey all the cool things that talking has like to talk about aren’t very important one.

Scot:
[40:02] Well I don’t think that overlaps too much no no I I disagree but we’ll see.

Jason:
[40:09] Knox awesome those are the.

Scot:
[40:11] What’s your specific prediction like there will be less in ft’s and 2022 and is in of T volume.

Jason:
[40:19] Yeah yeah.

Scot:
[40:20] Let’s put that one down oh that’s that’s the prediction last in a $50 transacted.

Jason:
[40:26] Well so like I don’t so full disclosure I can throw out a number but like I don’t know of a credible source for tracking in Ft Revenue dollars.

Scot:
[40:40] Yeah there’s some there’s gmv trackers so open sea and is the biggest Market Place than there’s like three or four others.

Jason:
[40:46] Okay I was mostly thinking like the there’s there’s not going to be meaningful revenue from the US Department of Commerce retail sales data that’s enough.

Scot:
[40:57] Wow that’s there it’s going to take them 50 years before they can spell it.

Jason:
[41:02] Well I know they’re not going to report it that’s what I’m saying but I’m just saying like there’s an Amazon Walmart the the top 10 eCommerce sites in the US are not going to have any meaningful revenue from in FTS.
Yeah but nobody’s going to do anything with webbed three in Commerce and nobody’s going to buy anything with a virtual reality headset.
Or from gorillas outside of one block.

Scot:
[41:40] Okay.

Jason:
[41:42] So
I’ll try to get less – now a company that we’ve talked about on the show a couple times that people don’t talk about enough and I’m kind of using them as a surrogate for a whole new trend but is the the.
Ultra fast fashion brand Chien which is a apparel brand the.
The they’re estimated to have sold about 10 to 15 billion dollars worth of Apparel in 2021 and I think they’re going to exceed 30 billion dollars in apparel sales and 2022 which is going to make them.
A top 3 apparel retailer in the US.

[42:24] And I said they’re kind of a surrogate for a trend this is democratized merchandising so this is,
instead of Mickey Drexler deciding what the cool kids should wear in high school instead of easy deciding what the cool kids should wear in high school this is,
algorithms watching what the cool kids post that they are wearing in high school on tick-tock,
and then making it in two weeks and selling it to all the kids that want to be cool,
and so it’s kind of the perfect manifestation of what Amazon called hands off the wheel where they stopped having Merchants pick products and instead kind of use data to,
to drive their catalog and I think she is gonna continue to have great success there and it’s,
it’s disrupting the fashion industry more than a lot of people in the fashion industry realize but I think,
it’s going to become extremely evident in 2022 that it’s disrupting the apparel business.

Scot:
[43:23] And then are you are you putting a specific number on it and if so how much is that over last year.

Jason:
[43:27] Sorry I thought I said it yeah so I think they’re going to sell more than 30 billion dollars of Apparel in 2022.

Scot:
[43:34] What they do in 21.

Jason:
[43:36] The estimates they’re not public but the estimates are between 10 and 15 billion so more than double.

Scot:
[43:42] Okay all right.

Jason:
[43:44] Again not trying to sandbag.
So third one and I guess I’m going back to my my negative Nelly so one of the hottest trends of 2021 and the prediction I have seen the most people do and I fully expected you to do so I’m,
totally bombed is that buy now pay later services are going to continue to explode,
and in 2021 by some estimates they grew 30% in their you know wildly adopted,
it’s the fastest-growing payment type in in e-commerce in 2021 you’re starting to see it expand from just e-commerce to in-store purchases as well,
and it’s moving down Market to you know from from
expensive High consideration items to a lot of lower cost more impulse items so by all accounts the future of payments and credit is buy now pay later in my prediction is
that it slows down and 2222 I’m not saying it’s necessarily going to flop,
but I think you’re going to see only about 15 percent growth over 20.

[44:52] One versus the 30% that they had this year so I think the rate of growth Cuts in half and I think there’s a couple reasons behind that,
I think the bill is going to come due for a lot of these products and a lot of these consumers are not going to be able to pay for the products they purchase,
and I think you’re going to start to see a ton of writedowns and the financial reality of renting money to subprime lenders without like significant collateral is going to kind of start to,
catch up with some of these companies I think the Credit Agencies are going to start to lean into this more and that’s going to take away one of the competitive advantages that they had and I think we might even see some some regulation because like there’s some,
some very financially responsible companies in the buy now pay later ecosystem but there’s also some,
some kind of rebranded payday loan players in that space and so I think there’s just going to be a lot of erosion of trust and and some- stories that will slow down the rate of growth.

Scot:
[45:59] Gaap negative or positive on the next.

Jason:
[46:04] Yeah we’re going positive again I’m yeah I’m alternating I’m and I’m going to throw an Amazon one to you I think Amazon opens more than 100 grocery stores in 2022.
Not whole food so Amazon Fresh doors,
um and that you know again that that would be about three times as many stores as they have ever opened Amazon book stores or five star store so.
It’s not the thousands of stores that some people have talked about but it’s also a much faster pace of brick-and-mortar growth than we’ve ever seen from Amazon.

Scot:
[46:41] Yeah that I will be excited to see this one.

Jason:
[46:46] And you know most of them will be in Chicago so that’ll be fun for me.

Scot:
[46:50] Of the 500 stores they’ll be like 75.

Jason:
[46:54] Yeah exactly I’ll be surrounded,
yeah so I think that’s a super interesting space I’ve talked about it a bunch it was you know the growth of digital commerce was one of my grocery commerce was one of my big ones and I think it’s just the big category of consumer spending that Amazon.
Doesn’t play meaningfully and Whole Foods is very Niche and I just think it’s a moonshot imperative for Amazon to win Grocery and I don’t think you can win digital grocery without having brick-and-mortar grocery as well.

[47:29] So that I think gives me 4 so my last one,
is I think there’s going to be a lot of interesting Activity one of the categories of e-commerce I’m most interested in watching in 2022 is Last Mile,
there’s going to be a lot all kinds of different Evolutions but the specific prediction I’ll make is one of these new,
um I’ll call them FedEx UPS competitors is going to sort of get get acquired or have some meaningful liquidation event and so so there’s a couple of startups that are kind of,
Next Generation parcel delivery services like vejo index delivery ship IAM is a bunch of X Amazon guys and I’m going to say that,
instacart original business model could even slow down and instacart could get acquired,
primarily to be a last mile delivery service by someone so so one of those companies gets acquired,
as part of the buzz around owning your own Last Mile in 2022.

Scot:
[48:38] Yep and does that include so there’s all these like ship Bob Shapiro those kind of guys your that’s not.

Jason:
[48:45] I think there’s going to be a lot of I think they’re an interesting space to in most cases they’re not actually delivering products they’re they’re facilitating delivery of products or tracking delivery of products and so I tried to keep this pure to the,
guys that have access to trucks and are driving products to people’s houses but.
Yeah so no I’m not I won’t call it a win if it’s if those are the only ones that get acquired.

Scot:
[49:13] And then any other bonus prediction so I kind of had to stretch to get my 5 but anything else you want.

Jason:
[49:20] So
so yeah you know I do all my best thinking on dog walks and so I you know I might thinking about all these cool predictions and I came home with like 40 of them and so I struggled to narrow it down to these five
and so then kind of the next class of predictions that just sounded.
Too easy in a way but you know last year digital Commerce kind of slowed down a little bit compared to Brick and Mortar Commerce it was a huge year in brick-and-mortar growth.
Because e-commerce had grown so fast the year before so I think that that.
That Paradox gets inverted again this year so I think we see way faster e-commerce growth than we do brick-and-mortar growth,
I think curbside which was a big thing in 2020 and 2021 becomes even bigger thing in 2022,
I think you’re gonna see a ton of stores redesign their parking lot I noticed H-E-B just opened a new store and as 26 Bays,
for curbside pickup so I think those those are the big things in the you know the big macro story that we’ll see in 2022.
I recognize that less controversial than my official five predictions.

Scot:
[50:34] Yeah okay cool I think that’s a good set of 10 predictions there any anything else you want to just let people marinate on that for little bit.

Jason:
[50:42] No I if folks strongly agree or disagree I’d love to hear about it on social media and if you have different predictions,
throw them our way on Twitter Facebook and we’ll be happy to debate them on our next show.

Scot:
[50:59] Yeah yeah maybe we could introduce some listener predictions as part of this going forward that would be kind of fun it also reminds me we need to we haven’t done a deep dive in a while and maybe you know we touched on in ft’s web 3 meta those are
pretty good topics for deep Dives maybe even buy now pay later so usually we hit a new slow down in the e-commerce world,
kind of in that March April May time frame after we get the q1 results so maybe we’ll throw some deep Dives in there so that,
if those topics are interesting we’re happy to kind of go deep on those I guess looking back the live streaming when I don’t think we’ve done a deep dive on that either so those are all areas where between the two of us we have a pretty good bit of domain knowledge that we could
make sure that is out there and available if you want to go deeper on one of those topics so let us know think about your preferences on 20-22 content around that type of a topic as well.

Jason:
[51:56] Yeah I will look forward to all of that.
And of course if you did find this show fun at all or you learned anything the best way you could reward us as jump on iTunes and leave us that 2022 five-star review all those reviews you wrote in 2021 don’t count anymore
so you need to get back on iTunes and leave us up fresh review and feel free to make fun of Scott in the review that’s always appreciated.

Scot:
[52:22] Or Jason’s title.

Jason:
[52:24] One of my many titles.

Scot:
[52:25] All right thanks everybody.

Jason:
[52:29] And until next time happy commercing.

View Details

EP283 - Year End Review

It’s our final show of 2021!

We recap the US Dept of Commerce November Advanced Retail Sales Data.

We do a deep dive into the retail industries growth from 2019 through November 2021. In those 23 months, the retail industry grew 22%, historically fast growth. There were clear winners and losers. If you want to follow along on with all the data, here is a visual recap of retail growth 2020-2021. (PDF Download).

We also highlight the six most important trends of 2021.

Amazon fulfillment capacity growth (Amazon and Walmart become shipping companies)
Social Media becomes the discovery channel for e-commerce (led by live-streaming)
Ultrafast delivery services
Amazon invents and starts to scale a grocery store (Amazon Fresh) with just walk out technology
Retail Media Networks explode, led by Amazon’s $30B in ad sales. Retailers now compete with social media networks for eyeballs
Apparel has shifted from designer led to consumer led, as evidenced by the meteoric rise of Shein

We’re so very grateful to our audience, both for the time you have shared with us, and for generous opinions, feedback, and knowledge that many of you have shared. We wish you all the very best holidays and New Years, and look forward to seeing you in 2022!

Episode 283 of the Jason & Scot show was recorded on Tuesday, December 21st, 2021

http://jasonandscot.com

Transcript Jason:
[0:23] Welcome to the Jason and Scot show
this is episode 283 being recorded on Tuesday sept December twenty first twenty Twenty-One 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 show listeners Jason how are the holidays treating you so far.

Jason:
[0:46] They are treating me really well it’s been super interesting what’s going on in our industry and getting ready to take the family to California to see my mom and brother.

Scot:
[0:59] Very fun California versus Chicago seems like a smart smart choice this time.

Jason:
[1:04] Yes early and my relationship with my wife we agreed that we would visit her Michigan in-laws and Thanksgiving and my California relatives in December seems weather prudent if nothing else.

Scot:
[1:16] Yeah smart I like your
like you’re negotiating strategies so we are recording this here live on December 21st so we are in the very last tail end of holiday 21
and Jason you had some some interesting data that you had parse through that I thought we could start with it’s going to be largely kind of the November data but it’s kind of the best data we have,
until we get into January and see how the holiday played out and then we’ll do a quick
checkpoint on what you’re hearing from clients and then I think both of us wanted to kind of share our big stories for retail and e-commerce for 2021
so why don’t you kick us off with some data.

Jason:
[1:57] That sounds amazing so yeah so the data we are talking about is the US Department of Commerce data we get a an update every month so you know last week we got the,
the update that includes November and in general November sales were up
sixteen percent from November of twenty twenty so I always coach people that we should look at year-over-year not month over month so pretty healthy growth in 2021 from 2020
if you look at year-to-date so January through November
we are up about 18% from 2020 and if you look at e-commerce we were up about 12 percent from November of 2020 so I you know I always
put this data out on social media and I got a ton of,
interesting responses this year on that data everyone’s like
hey Jason why are you comparing to November of 2020 like we’re in the middle of the pandemic everything was all topsy-turvy like it’s like comparing,
pandemic 2021 numbers to pain demick 2020 numbers isn’t very helpful to me because everything is so confusing.

[3:13] And so I kind of took that to heart like you know it is the best kind of comparison we have about how we’re doing but I said oh you know the more interesting comparison is maybe we take.
One step back and we compare the.
The the last two years of data to two years ago so we kind of compare how much growth we’ve had during the pandemic with what girls look like before the pandemic
and I hadn’t hadn’t really done that in a while and what I found was interesting and in a few cases it surprise me.

Scot:
[3:46] I feel like we should create a new word for this I’ll work on it in the vein of a ship again yeah that’s just boring I don’t know.

Jason:
[3:54] Yeah yeah de or.
Yeah every CEO in America has learned to say you’re over two years ago by the way and for it’s super funny for non-gaap metrics in the and in the 10-qs they.
Like it’s they kept they completely cherry-pick like if the number is good they take versus last year and if it’s bad they take versus two years ago.

Scot:
[4:18] Yeah yeah that’s the nice thing you need everything every number needs to be up into the right.

Jason:
[4:23] My takeaway there is you CEOs are oily.

Scot:
[4:25] We know we’re strategic.

Jason:
[4:29] Got it potato potahto.

Scot:
[4:31] Cool what did this year over your year over year over last year review.

Jason:
[4:37] Yeah so if we say hey from how much has retailgeek grown in 2020 and 2021 as a two-year stack it has grown 22 percent,
so you know people talk about like all the struggles and challenges we had during the pandemic but if I see
if I got in a time machine and no pandemic just told every retail CEO how would you feel about growing 22% over the next two years,
the vast majority of CEOs would have jumped at that and then if you said and our life is going to be totally disrupted by this pandemic.

[5:14] I think every retail CEO in America would have said I’d be thrilled to get through the next two years with 22 percent growth so that was
interesting and then I said I wonder how that compares historically so I got in the hot tub time machine and I pulled all the data from 1990 through today and I restated
every year as its growth versus the previous two years to kind of come up with this standard metric to compare against the 22 percent
and 22% is unprecedentedly high it’s by far the biggest two-year growth we’ve had since 1990 there’s only a few years that
that just tickled 15% so I can 2000 we hit 15 percent and in 1994 we hit 15% but like,
most of the.
The this last decade we were kind of tickling in the kind of six to eight percent growth so 22 percent growth.
On average for the whole retail industry is a huge win and unprecedentedly more growth than we would traditionally get does that surprise you at all.

Scot:
[6:26] It doesn’t sort of make sure I understand it’s all retail so it’s offline and online in Aggregate and then you can’t just divide it by 2 right because there’s compounding in there so it’s not really two years of 11 it’s probably like I don’t know 12 in an 8 or something.

Jason:
[6:41] Yes so you are correct now and.
That 20 yes and all of this data it does include compounding the the compounding is an interesting point which will come up in a another piece of data in
in just a minute but yeah so this is all like literally looking at the.
Aggregate sales for 2019 and the aggregate sales for 2021 and saying how much bigger was 2021 than 2019.

Scot:
[7:08] Yeah did you run a kegger so in MBA school they would say well you can actually unpack the compounding by look at the compounded annual growth rate.

Jason:
[7:17] Yes yes I am familiar with the math I did not.

Scot:
[7:21] Okay it was two years it’s not going to be that substantial yeah repeat.

Jason:
[7:24] No that’s the yeah it’s right typically like with like a five-year Horizon it makes a lot more sense but yeah it would have been interesting but it just I had to your data so I was just trying to come up with an Apples to Apples.

Scot:
[7:36] Not feels feels like a wind.

Jason:
[7:38] Yeah so then I said alright well that’s interesting on average retail is a huge win.

[7:44] Very obviously there are winners and losers so I said alright well let’s look at all the categories that the US Department of Commerce gives us.
Based on that 2-year stack and there were you know and who was at the industry average who wildly outperformed the industry average and who underperformed the industry average and
there are some things that made total sense to me and we’re not surprising and then there were some pretty big surprises in there so,
the the category that out of the US Department of Commerce data that grew the fastest was,
non store sales which is kind of our e-commerce proxy right and it grew 39 percent so almost twice as fast its total retail that’s pretty intuitive you know again you’re hearing a lot of.
E-commerce growth is slowing.
Wagon November as more people went back to stores you know compared to this like you know pandemic impacted 20/20 but when you look at onto your stack,
e-commerce is still the fastest growing part of retail at group 39% from 2019
and that certainly didn’t surprise me the next two categories sporting goods and building materials,
also really didn’t surprise me because we kind of talked about them being,
the big pandemic winners that like you know people then go to the gym so they bought stuff from Dick’s Sporting Goods people didn’t go on vacation so they built a new patio with materials from Home Depot and so kind of all the that Services Revenue.

[9:14] Shifted into retail and that gave sporting goods and building materials a big a big kiss.
Motor Vehicles which at one point people were saying like oh my God that’s going to be a horrible category in the pandemic Motor Vehicles actually outperformed the industry average so they grew at 24 percent versus 22 percent for total retail.
And then here’s where we start getting surprises.
Slightly below the industry average was furniture and Home Furnishing so that grew at 21 percent versus the industry average of 22 and if you just asked me to bet I would have said in the same way that building materials and Home Improvement stores.
Got extra spending from the pandemic I would have expected furniture stores to get extra spending from the pandemic as well and so it surprised me that they were only at the industry average and the only my only hypothesis is.
Did they have more disruptions from supply chain like why.
Was it just harder for them to scale up to make more sofas to meet the increased demand and so they,
they grew healthy but they didn’t grow as healthy as they might have because they they couldn’t double their us Workforce to build more couches.

Scot:
[10:23] The feels right the furniture industry has been here in North Carolina that’s our primary one and they’re just destroyed by the supply chain they can’t there was a series of events that couldn’t get phone because of the fire and awesome remember that that seems like a year ago but it actually wasn’t
go to the summer and then
with this quote-unquote Supply pain they haven’t been able to get the other inputs like anything fabric while that stuff made in China and shipped over here and sitting on a boat somewhere.

Jason:
[10:50] Yeah and I feel like it’s a double whammy for them because it’s harder than ever to make stuff but there’s actually they could sell more than ever before if they could make it so it’s like,
it almost feels worse than knowing there’s demand that you can’t meet.

Scot:
[11:01] Yeah it’s painful.

Jason:
[11:03] Yeah so then general merchandise grew at 16 percent versus of retail 22 percent
and then the one that surprised me most that I talk about a lot is grocery grew at 16 percent versus the industry average of 22 percent and I would have said man a ton of spending shifted from restaurants to grocery stores they were another pandemic winner
and so I’ll be honest I don’t have a perfect hypothesis for why.
Again sixteen percent is Healthy Growth and by historical standards it’s better than any two-year period since 1990 so I don’t want to say oh
you know they had a rough time they had a good time but surprising that they were below the industry average to me a little bit.
You have any great Insight that I didn’t think of on why that would be.

Scot:
[11:52] I don’t maybe it’s like a mix thing underneath the hood like the e-commerce grew so much doesn’t it like well I’ll be in this category are rules so if.

Jason:
[12:02] Imperfect yes so you are right like one of the wrinkles in all of this is.
The way the US Department of Commerce treats e-commerce as another category which is unfortunate right because
you know when someone shifts from buying a exercise bike in a Dick Sporting Good to buying a dick exercise bike from Dick’s Sporting Goods.com.
The sale leaves the sporting good category in enters the non-store category and so that’s.
That’s not really Apples to Apples and then of course this is all done with surveys that are in perfectly filled out by human beings and so how different retailers respond to that survey is also inconsistent so you got it.
This data is super helpful directionally but you definitely don’t want to get too wrapped around the axle of the minutiae of the data because it’s just an imperfect methodology.

[12:52] And so then the the categories they did the worst,
do make sense with one outlier for a couple hours for me so gasoline only grew at 14%,
you know again make sense to me that they you know underperformed when people aren’t commuting to work surprising 14%
sales are still pretty good growth clothing is near the bottom at 12% growth so again clothing over the last two years did not shrink they still grew at 12% which might have been their average rate of growth I should do that waiters pulled just
the category growth over the last 30 years.
But compared all these other categories obviously closing was was poor and the Very lowest category is restaurants and bars which still grew six percent so that all makes sense but then there were two
two categories in the cellar that I would have expected to do better health and personal care grew at 11%
and Electronics and Appliances grew at seven percent so those are both pretty far under the industry average and you know those are two categories.
They had some complication they had pros and cons you know within that category but by and large I guess I was surprised to see them so well.

Scot:
[14:06] Yet Health and Beauty one because Aaron was zooming like the makeup sales shot way up so it’s got to be a you know it was e-commerce.

Jason:
[14:15] Lipstick sales actually went way down because of the Mask but mascara and skincare went way up it’s so funny bye.
Um so,
then I just did one other sanity check so you know people like a couple people a couple of Industry analysts even like responded to my data and said yeah just don’t believe the numbers and I’m like
just some understanding you you’re saying you don’t believe the US Department of Commerce numbers not like I didn’t make any of these numbers upright bike.

[14:45] And and the US Department of Commerce data is imperfect I would argue it’s.
The best we have access to and it’s it’s a bunch of you know PhD in statistics that have you know the force of law to you know to enforce compliance with their survey so I
it’s better than any other survey out there for whatever that’s worth but so I thought how can I do a chance sanity check on this data and I’m like oh
all the public retailers are required to report their growth every quarter
so we could try to create a year over two year growth
for all of these public retailers and compare it to the industry data and some of these public retailers are in a particular category so you can you know pretty safely assume all their sales are in that category so you could kind of use that as a sanity check
so I pulled I don’t know I guess it’s about 25
companies and I converted their quarterly growth into a two-year stack
and here I will confess I took a shortcut and if there’s any mathematicians that want to help me solve this problem I will toy do it these.
Draws numbers are not compounded growth so the problem is we don’t have annual growth rates from the Retailer’s we have quarterly growth rate so basically you have to.
Aggregate for quarters of growth and then.

[16:11] Calculate it over two years and so I took a lazy shortcut and I just added their.
20 growth to their 2021 growth so we have basically seven quarters of growth for most of these retailers and it’s it’s
what they call a two-year stack which means growth from 2019 plus 2020 and while the math is not right there by the way right because of.
Like the compounding problem of your 2020 growth include your you know growth over 2019.
This is how most retailers reported in their earnings so when they talk about to your growth
for these non-gaap measures where they try to put themselves in the best light and they report their two year growth they’re almost never talking about a compounded number like if you read the footnote.
They’re they’re adding the growth from those two years so this is how they’re doing the math in most cases
for whatever that’s worth but so that’s way more precursor than we need the retailer that grew the public retailer the grew the most over the last two years total shocker to me I would not have expected in a million years is Burlington Coat Factory.
That Drew 85% and to put that in perspective,
they sell apparel which did not do very well in the pandemic and they turned off their website their e-commerce site the month before the pandemic.
So they didn’t sell any a long line.

Scot:
[17:34] They’re not really opening a lot of stores either.

Jason:
[17:36] No I mean they may have opened a couple stores over the whole two years but like this is mostly comp sales growth so it actually kind of,
factors out new store.

Scot:
[17:46] Okay so it’s cops okay.

Jason:
[17:47] Yeah this is these numbers that ye are based on currency adjusted comp
sales just in the u.s. wherever possible
so so Burlington’s a total outliner congratulations to them surprising to me Amazon is was the second fastest grower and all public retail at 61 percent over two years which.
Doesn’t surprise me that super impressive but you’d expect to see them near the top of this list then you see Dick’s Sporting Goods at 57 percent and again,
like from from the industry data Sporting Goods was the second fastest growing category behind e-commerce so Amazon as a proxy for e-commerce and dicks is approximately for sporting goods
makes total sense but then things start getting interesting the next fastest grower was Ulta
which is personal care at 36 percent so they grew much better than did the.
The personal care category now they’re less than half the personal care category the slightly bigger version of them would be Sephora but Sephora is actually owned.
Buy a house of Brands and so it’s harder to get their data.

[19:01] Bed Bath & Beyond group 35% which is impressive Target group 34 percent,
Home Depot which again was in one of these these outperforming categories grew 33% was group 28% by comparison Best Buy grew 29% in this it doesn’t surprise me the best bike route 29 percent but this is.
Makes that the fact that Electronics was one of the slowest growing categories at 7% make even less percent make even less sense I guess it’s it’s hard to imagine how.
Electronics only grew seven percent over the last two years when you know everyone bought all this extra equipment for homeschooling and home entertainment and then with Best Buy growing 29 percent it’s even harder to imagine.

Scot:
[19:53] Yeah maybe in a perfect world you could then split like something like that into store non-store store / e-commerce and maybe that would tell the story.

Jason:
[20:00] Yeah yeah again that’s like one of the few the,
my few answers to to a number of these anomalies and then I know this is like all these numbers in a podcast sock but like then you start getting into like Abercrombie & Fitch 28% Costco 26 percent,
Cole’s Nordstrom’s Walmart grew at 21% which again for you know a huge company,
the fortune one company to grow at the industry average is pretty good Nike grew at 20%.
T.j. Maxx at 15% and the the bottom three.
A surprise into not surprises so the second worse and third two words were Dollar Tree in Dollar General at 10% growth which is kind of surprising.
You know consumers were kind of flush with cash with all the extra economic stimulus they weren’t really slowing down their spending and so like
you know maybe it wasn’t a great season for the value shoppers but a lot of the news was about how these dollar stores were opening tons of stores and we’re really thriving so interesting that they both only Drew.
10% and then the the worst performing public company on this was Macy’s which grew six percent over the two years not totally surprising.

Scot:
[21:18] Isn’t that the one that Prophet G said was going to crush.

Jason:
[21:24] Be there be there the future of retailers Macy’s not Amazon yeah this chart unfortunately yeah contradicts that prediction so we’ll have to wait and see are you Scott Galloway fans you just hang on hang on to your stick to your guns.

Scot:
[21:38] Good luck with that.

Jason:
[21:41] Yeah so that’s my the rabbit hole that the stupid November numbers took me down so as you can imagine none of my clients got any deliverables in November.

Scot:
[21:52] When people tell you they don’t believe the data what are they reacting to.

Jason:
[21:57] I think there’s a couple categories there are people that are like hey it’s the the month-over-month is interesting but like.
Who cares right because these are all anomalous months and that’s why I went for this two-year stack and and so.
My point was I think like when people are saying hey I don’t I don’t believe the data I actually don’t think they meant they don’t believe that this is the data that the US Department of Commerce reported I think they’re both saying in some cases,
I don’t think the US Department of Commerce can count very well and what they mostly hang their hat on is is the non store sales not being right and that’s fair right like when someone at Best Buy fills out a survey
the US Department of Commerce would like them to put their e-commerce sales in one box and their store sales in another box.

[22:47] And do they do that I don’t know right and does every retailer do that.
Properly and consistently I can tell you that the person assigned to fill out the surveys is generally not the most senior accountant at the it’s usually not the CFO.
Um so so that is imperfect and then what I think they’re saying more is.
Maybe don’t make all your future plans based on like this snapshot of the world because you know we are looking at a
unique set of circumstances that resulted in this data right so if you mistakenly thought my takeaway was
retail is better than ever and you know everybody should double down because you know retailers is the most thriving industry in the world 22 percent growth is amazing and it’s going to continue forever.

[23:36] Yeah no that’s not what I’m saying I’m just saying that like it’s interesting there were positive and negative impacts on all these businesses as a result of the pandemic but on the aggregate.
The impact was disproportionately positive and I don’t think that that is sustainable right like I you know I think we will hope to drop down to the regular the sort of pre-pandemic growth levels and potentially.
We pulled some growth forward and we might even see some more lean years because we you know absorb so much growth this time.

Scot:
[24:10] This a long way of you saying you now agree with the the Goldman Sachs chart that showed five years of acceleration.

Jason:
[24:15] No no I think that still is pretty clear and they were primarily talking about e-commerce which definitely didn’t happen.

Scot:
[24:23] Checking.

Jason:
[24:25] So that’s my my deep dive into data and if there’s
there can’t be anything more fun than listening to a podcast about a bunch of dudes being a bunch of numbers so I will I’ll do two things I’ll try to put some of this data in the show notes but what I’ll do is I’ll put a link in the show notes to download some charts with this data in it.

Scot:
[24:46] Very cool I actually like you spewing data so maybe I’m just an audience of one.

Jason:
[24:53] You may be in a liar.

Scot:
[24:56] So what are you seeing so that kind of gets us through November what are you seeing here in December I poked around on the usual spots for the Adobe and the sales force and a couple others
and it’s really weird they’ve been kind of quiet since since kind of the Cyber week what what are you hearing from your clients.

Jason:
[25:17] Yeah so I don’t know like there’s not good data that’s already reporting December sales for holiday but so anecdotally talking to a bunch of clients and talking to some of these companies that do have internal data.
December is looking like a good month right and so the.
My kind of aggregate estimate is holiday for 2021 is going to end up being about.
Nine percent bigger than holiday 2020 and again you say well as nine percent good or bad by historical standards it’s pretty darn good
most most years we get about a holiday grows less than the rest of the year because there’s so much extra volume in it so most years we get about five percent growth in holiday in 2019 we got four percent
growth 9% is a big number and last year was a pretty big growth year and so.
Um you know also around nine percent so nine percent on top of 9% is a.
Pretty big deal I have seen some estimates that think it’ll grow even more than nine percent this year to put that in perspective the last time before last year there grew nine percent would have been like 1999
so so not only do we have great growth over two years we do have great holiday growth one huge caveat.

[26:43] The trend up until about a week ago was,
that more people were returning to the store store traffic was going up we were seeing kind of pre-pandemic shopping behaviors and e-commerce was still a big deal bigger than ever before but the rate of growth was swelling because,
there was so much pent-up demand and go to stores lots of people were planning on getting together with their family like there was a funny Walmart stat about you know how much bigger the turkeys were that got sold this year than last year because people were,
we’re entertaining a lot more so,
unfortunately in kind of real-time chats with most of my clients in the last week
we have seen foot traffic to stores dramatically curtail and it feels like.
We’re very quickly getting a lot of negative Media news around and I say media but I guess it’s based on the data about
Omicron and the hypothesis is there either,
Omicron has people scared and so they’re not going to stores or a second hypothesis is everyone desperately wants to have their family gathering so they’re being extra cautious leading up to Christmas but in either case,
we’re seeing this last-minute pivot to e-commerce and that has some impacts like the shipping companies that actually been doing.

[28:04] Much better job this year than last year on keeping up with ship again in but if suddenly everyone you know runs towards e-commerce these last two weeks that could really put.

[28:15] Shipping in Jeopardy in a in a really vulnerable time when they have a lot of Labor challenges so yeah I don’t know it’s kind of a Debbie Downer bit of news in this whole thing.

Scot:
[28:26] Yeah yeah I’m a crime that has a it’s going to put next year kind of up into a question mark of what happens is and then.
The thing that’s really frustrating trying to operate a business during this time frame is the bookmarks of good and bad are so wide that.
Dirty you have no idea but you drive a truck through and right there 180 degrees so you read one new source it’s like oh it’s super mild and it’s almost going to act like its own vaccine then you see another source and it’s like we’re all gonna die.
Somewhere hopefully we’re somewhere in the middle there.

Jason:
[28:58] Amen Ya Know It’s Tricky yeah and kind of evaluating all these data sources that’s like the new the new societal challenge right.

Scot:
[29:09] It really is.

Jason:
[29:12] So I’m wondering so that’s that’s kind of my holiday snapshot some good news and some bad news in there I wanted to take a couple minutes
on this podcast because I think this is going to be our last show of the year to kind of zoom out from the minutiae and just kind of think about the year in totality and kind of,
don’t know you know highlight what we think are the big things that happened in our industry this year that might impact us going forward how do you feel about that.

Scot:
[29:39] Let’s do it you want to go first.

Jason:
[29:41] I mostly wanted you to go first because I thought I would surprise you and make you get bet answers while I thought about it.

Scot:
[29:48] Okay I’ll go first so so I’m going to try to limit it to three because we.
Yeah we could go on for for a long time here so I think the highlights of this year for me,
it would be a Jason and Scot show if we didn’t think a little bit about Amazon the.
Build out of Amazon’s shipping infrastructure and I feel like we say this every year but it’s accelerating and there’s some really good data we want to have a guest on that’s publishing some data on this just Amazon has built more capacity in the last
two years than they had in the last 10 so they’ve used the pandemic as a you know
the response to it and they’ve gotten kind of cover I guess you could say is to really.
10x down on fulfillment infrastructure where where you get the most feeling of that is that the last mile which is this DS p– program that they’ve just really scaled up massively.
This touches my my day job because it’s Biffy we’d service a lot of these folks and they’re just they’re everywhere and,
you know it used to be they would kind of work out a fulfillment systems then they built these fulfillment centers now they’ve got these see the last word of station what are they call them.

[31:02] Delivery stations that have a whole new nomenclature where they now are have these forward-deployed areas where the dsps are almost housed and Aggregates you’ll go to these places and it’s pretty well that I’ve seen several of them now
and they’ll be like 20 dsps operating out of there these little micro businesses and you know just.

[31:22] Prime Vans as far as I can see.
Where is the stat that I think is kind of the most interesting is the Amazon did disclose that they plan to ship more than
then FedEx this year and then I think they said in the next couple of years they’ll exceed the USPS as far as package delivery it doesn’t surprise me just given the scale that they are throwing at this thing.
For example you can’t buy a van today because the Amazon is just pretty ordered all the vans so it’s pretty fascinating the scale they’ve done there.
The thing that in our will do our annual predictions but I’ve been annually predicting that they would compete more directly with FedEx and UPS by offering just package delivery to anybody I just feels like we’re a lot closer to that but I say that every year so we’ll see,
the other surprise for me
is the explosion of this 15-minute grocery delivery world the most people have probably their first experience this or the first company heard was go puff and it wasn’t really a 15-minute thing it was just kind of faster it was almost
hours then you had instacart really scale up and then what’s happened is the service level on these things it’s got lower to the point where they’re all trying to get you something in 15 minutes.
It’s a smaller number of skus than you would get with like Amazon’s 300 million skus available so it’s typically going to be.

[32:43] You know you probably have a cool word for it but it’s like snacks and
oh my gosh I’m out of a soda I need or ice cream things that you kind of have an urgent hankering for and are willing to pay to scratch that itch a little bit more.
On the shipping and handling fees and those kinds of things these are kinds of things when I talk to people they’re like yeah that little
the economics will never work in the be no one will ever use it and then everyone’s always surprised because you can never underestimate the convenience or any consumer that when you give them the choice to do something with convenience they will,
they will do it and they will order things you would never have thought about.
I remember when Amazon rolled out Prime now they were shocked that the toilet paper and personal products were such a high considered item and it’s just you know.
People people don’t plan ahead and they run out of stuff and they want it right then and there willing to pay extra for it so that one’s pretty interesting and you track this probably even better I do Amazon’s going after this one and then there’s like,
10 startups in there that are have all raised,
billions of dollars go puff just announcer one and a half billion dollar extension of their last round by layering on some debt so there’s one called like gorillas or gorillas and.

[33:55] Tons of these things out there but Amazon scaling it up too so it’s gonna be interesting to see if any of these guys can make Headway against Amazon or Famas on will just crush them.

[34:05] And then the last one is live-streaming this one sputtering in the US,
every data point outside the US indicates it’s a thing and I do think this one’s going to translate from I’ve seen it
I’ve seen data that shows that as a has expanded out of China and that’s kind of where maybe a year ago we were talking about it largely on Alibaba platform.
But now I think it’s there’s European startups I’m starting to see some categories in the US where this is interesting
I followed the collectible category and there’s a couple of the hot companies are they do these live streams where they will do.
Unboxings so they will they will buy a pack of cards from like the 80s and then they will open them live and and see what’s in there and and you know,
it’s kind of riveting if you’re if you’re into that and you’re like I wonder you know there’s a one in 100 chance that this has a Michael Jordan rookie card or something and they pull that the column poles that can be fascinating so there’s a lot of.
Kind of very specific category activity going there that I think I think a lot of us thought okay Amazon’s and do this Amazon is tried and it’s been
pretty terrible but I think it’s going to come from these really niche of Articles at first and they’re going to figure it out and then you’ll see it get more more momentum up into the broader retailers so those are those are my three.

Jason:
[35:27] Wow those are three good ones I feel like you stole my three I’m just kidding
um no but I totally agree with all those I do think like we’ve actually seen Amazon launch some.
Selling of shipping services and I’ve seen Stan said they’re going to deliver 90% of their own packages this holiday so like I think that definitely is a thing even Walmart is now,
selling shipping services to other people including Home Depot so that’s totally interesting Trend hundred percent agree on the live streaming
like I kind of call it the D bundling of shopping and you know we have all these e-commerce sites that are good at buying things but we’re not very good at product Discovery and it seems like social and video or where a lot of the,
the new product discoveries coming from and then that that ultra-fast delivery for filling orders to give you all the words you are asking about the that that’s a huge thing and if you think about you know how much retailers are struggling with with
grocery profitability like it’s a double whammy that wow they’re trying to figure out how to solve for profitability the consumers moving to this even
you know inherently less profitable order so it’s going to be that that’s going to be an interesting disruption of the industry so if I were to add 3 to that.
I do think just the whole pandemic.

[36:41] Acceleration of great digital grocery like is when I talk about a lot and I still think that that is a huge thing like all those predictions about how much the pandemic was accelerating e-commerce for probably wrong but grocery delivery
Ecommerce probably did get accelerated five years and to me
maybe you know what will ultimately end up being one of the most important things that happened during the pandemic is Amazon invented a new grocery store right this Amazon Fresh concept
and it’s starting to scale there’s more than 30 of them now they have just walk out technology in them which
I would have bet against them having this quickly and there are there are lots of investigative journalists that have found.
Some interesting real estate footprints that would imply that it’s going to scale their that there’s a business plan footing out here that had like 300 of these in the UK which is a small island
um I think we could look back five years from now and see Amazon is a very meaningful brick-and-mortar grocer and and I think
20:21 is the year it it happened without us totally
acknowledging it so I think Jay W groceries an interesting Evolution one that I end up talking about a lot with my clients also driven by Amazon is retail media networks right so you know Amazon,
is that a run right now of about 30 billion dollars in ads it’s probably the most profitable business Amazon has I think this this.

[38:08] Battle for eyeballs between retailers and traditional digital platforms is super interesting and I think you know you set the layer who is.
One of the the.
The key guys at Amazon media like we had him on the show when he moved to Fresh Direct and he’s now running Walmart Connect Four
for Walmart so you’re seeing the Retailer’s hire these like credible media sales people and I think that’s a.

[38:37] A going forward a significant part of every retailers plan is how to be their own media Network how to get eyeballs and how to monetize those eyeballs and that’s a new new skill for a retailer so I think that’s a big deal and then
the last one I’m gonna throw out,
is one that I am surprised doesn’t get talked about more but it’s the apparel retailer she in and I think they are super interesting they’ve had phenomenal success they’re probably globally the largest apparel
reseller on the planet right now and their their annual revenues are more than than H&M and Zara combined so so remarkable.

[39:18] Story of fast acceleration but the bigger story here is,
to me Sheehan is very representative of the democratization of apparel that like for the longest time
we expected Mickey Drexler or Versace or
Yeezy to tell us like what was cool to wear and then we waited until we can buy those clothes and we bought them
and I just I think that model is totally dead now I think the apparel that sells best the stuff that she and sells the stuff that target cells the stuff that
Stitch fix cells is frankly based on customer data it’s watching customers finding out what they like and then making it really fast and so
Sheehan isn’t isn’t fashion driven by a stylist It’s Fashion driven by Tick-Tock right and an Instagram and I think that’s a,
a lot of apparel companies haven’t gotten the memo yet that the consumer is now squarely in charge of these fashion trends.

Scot:
[40:18] Yeah saw an article about these guys were this this one lady she did this Argyle Sweater outfit and.
It was on Instagram it got some viral love they took that and it created a hole
the outfit they had copied it or I guess fast fashion and I don’t know how the how the IP Works in this world but they had replicated it and they I think they even used her picture which I think was with articles about that she didn’t really you know,
realize that that effectively shows open sourcing this thing to the world and then it became a top seller for them like in 60 days it was insane how fast that they identified the trend and get the.
The product out there it was like you know NASCAR fashion or something.

Jason:
[41:03] Yeah it’s crazy if you think about like the fashion traditionally worked like.
Dudes would show up in Paris at the Fashion Show and show these cool Styles and then everyone would steal those Styles and send them an effector he’s and two years later those fact those Fashions would be available at Neiman Marcus.
Two years later and in so the genius of Gap was that they got those Fashions to the mall,
18 months later instead of two years later and the the disruption of H&M and Zara was that they got them to the mall six months later instead of 18 months later right.
She and sees that woman in the crop-top Argyle Sweater
and they have they have that fashion available in a week and here’s what super interesting they don’t make a million of them and hope they sell which is what all those other retailers had to do,
they make 12 of them and if those 12 sell in 8 seconds versus 20 seconds then they make thousands of them.
Right and so it’s really data-driven real-time a/b testing on apparel trans at a speed that that these kind of traditional apparel Brands can’t even imagine.

Scot:
[42:13] That’s because they have the factory right there that they’re able to do that or like to have some.

Jason:
[42:17] Yeah and they.
In Shane’s case they don’t own the factories they have a net like that it’s a gig worker economy for factories right like so in the same way that boober recruits a bunch of Uber drivers she and recruits a bunch of factories that they then go to and say hey we’ve got some
some ideas for some new models and find one of those factories that accepts the order and makes the
the stuff and so in sometimes there’s our Factory driven ideas sometimes there she and driven ideas but but yeah that’s that’s the model and you know there is a
Dark Side to this I got you know a lot of its there’s a lot of questions about the labor standards and practices at a bunch of these factories and of course there’s.
You know a lot of the stuff that gets bought on Shion is super cheap and gets worn once and so it’s a ecological disaster I would argue the industry it’s disrupting is also.
Kind of a you know it has a lot of dark sides and and is not very sustainable so I like I’m not sure she and improves on on any of those problems but from a pure consumer demand standpoint,
I don’t think we’re ever going back to you know these like anointed tastemakers that like decide what we’re all going to wear for the next year.

Scot:
[43:32] Yet clearly clearly that model is sailed having.

Jason:
[43:36] Indeed well listen Scott I know we both have to run but that is probably a great place to wrap up our final show of
20:21 I need to take some downtime not to see my family or anything like that but
in early January we always like to record the forecasts show and hit
traditionally you crush me and so I feel like I need to spend a lot more time thinking about my forecast before the forecast show comes up.

Scot:
[44:07] Yeah challenge accepted I will also be thinking about this in a background processes I’m enjoying the holiday I think this is a good time to thank our listeners you know we’ve
you know we’ve seen our listenership grow pretty steadily over the years and we really appreciate everyone giving us time to
your day to talk about the topics we talk about and we get a lot of great feedback and really engaged set of listeners and we really appreciate you listening
and if you want to share your appreciation one of the ways you can do that is through a five star rating so fire up your favorite
podcast listening technology and if you would leave us a five starters we that would be the perfect holiday gift for us.

Jason:
[44:47] Yeah that’s exact five stars is exactly my size to Scott.

Scot:
[44:50] How about that.

Jason:
[44:53] Awesome well most of can’t appreciate enough the listeners for spending this time with us every week this is a lot of fun for us to do and I learned so much from
the the chats I have with folks after they listen to the podcast so I’m that is one of the things I’m super grateful for.

Scot:
[45:10] Everyone have a great holiday Jason you how enjoy your trip to California.

Jason:
[45:14] Thank you you have a wonderful holiday as well and until next time happy commercing!

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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

http://jasonandscot.com

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!

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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

http://jasonandscot.com

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 pets.com.
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 pets.com and smoke you know pets.com 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 e.com chewy.com 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 pets.com 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 pets.com 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 chewy.com to Google Glasses pets.com.

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 Socks.com 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 pets.com 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 pets.com 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!

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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.

http://jasonandscot.com

Get Funded!: The Startup Entrepreneur’s Guide to Seriously Successful Fundraising

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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.

http://jasonandscot.com

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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.

http://jasonandscot.com

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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.

http://jasonandscot.com

Episode 277 of the Jason & Scot show was recorded on Sunday October 3rd, 2021.

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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.

http://jasonandscot.com

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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 (forbes.com)

Episode 274 of the Jason & Scot show was recorded on Wednesday September 1st, 2021.

http://jasonandscot.com

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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.

http://jasonandscot.com

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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.

http://jasonandscot.com

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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.

http://jasonandscot.com

Scot:
[53:16] Thanks everyone for joining us and…

Jason:
[53:19] Until next time happy Commercing.

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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.

http://jasonandscot.com

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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.

http://jasonandscot.com

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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.

http://jasonandscot.com

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

Matt Newberg (@thenewb) is the founder of HNGRY (hngry.tv). 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.

http://jasonandscot.com

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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 Jet.com and Walmart. Marc can be reached at sayhello@minoanexperience.com

Episode 266 of the Jason & Scot show was recorded on Thursday June 11, 2021.

http://jasonandscot.com

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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.

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EP264 - Retail Earnings, E-Commerce Quarterly Data

US Dept of Commerce Data April Sales – Flat vs. March 2021, up 41% vs. April 2020 (severely Covid impacted month). Many categories were wildly up, most notably Apparel which was up 727% vs the same month last year.

Q1 E-Commerce – Up 7.7% vs Q4 2020, up 39.1% vs Q1 2020.

Retail Q1 Earnings * Walmart – US E-Commerce up 37% YoY, same-store sales saw up 6% YoY * Target – US E-Commerce up 50% YoY, same-store sales saw up 18% YoY * Macys – US E-Commerce up 34% YoY, same-store sales saw up 62.5% YoY * TJ Max – Same-store sales up 16% YoY (E-Commerce not disclosed) * Lowes – US E-Commerce up 36,5% YoY, same-store sales saw up 11.3% YoY * Home Depot – Same-store sales were up 29.9% YoY, they did not disclose e-commerce for the first time (which is usually a warning sign).

Episode 264 of the Jason & Scot show was recorded on Wednesday May 19, 2021.

http://jasonandscot.com

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EP263 - Amazon Unbound Author Brad Stone

In 2014 Brad Stone wrote the seminal biography of Amazon, "The Everything Store." In it, he discovered Jeff Bezos birth father, and even earned a negative review on Amazon, from Amazon's co-founder Mckinsey Scott (then McKinsy Bezos). Brad is also a Senior Executive Editor with Bloomberg News, and can be found at his personal website brad-stone.com.

This year Brad followed it up with Amazon Unbound, which released on May 11, 2021. Chronicling the dramatic growth of Amazon and Jeff. Bezos (now the richest person in the world).

In this episode we interview Brad to find out all about the Amazon Unbound.

Episode 263 of the Jason & Scot show was recorded on Wednesday May 13, 2021.

Disclosure: Links are affiliate links

http://jasonandscot.com

Amazon Unbound: Jeff Bezos and the Invention of a Global Empire

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EP262 - Amazon Q1 Earnings

It's Q1 earning season. We recap Amazon, EBay, and Shopify Q1 earnings reports. We also lightly touch on Google and Facebook earnings and cover some other Amazon news.

http://jasonandscot.com

Episode 262 of the Jason & Scot show was recorded on Thursday April 30, 2021.

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EP261 - Benedict Evans

Benedict Evans (@BenedictEvans) has been a VC, an operator, consultant and an investment banker. His VC career includes a five year stint as partner at Andreessen Horowitz. He know lives in London, where he publishes an excellent weekly newsletter “What mattered in tech this week?“, a podcast “Another Podcast“, and some epic annual presentations, such as this years “The Great Unbundling.” You can find all things Benedict Evans at his website. He’s one of the most thoughtful people in the commerce industry, so we tried to cover a lot a ground in this broad ranging conversation.

http://jasonandscot.com

Episode 261 of the Jason & Scot show was recorded live on Wednesday April 21, 2021.

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EP260 - March Retail Sales Data, Amazon Shareholder Letter

March Retail Sales March retail sales data from the US Department of Commerce is out.

March retail sales were $556,935B, up 26.9% from March of 2020. Year to date retail sales are $1,589,538B up 16.4% from Jan-Mar of 2020. Non-store sales were $93,111B, up 16.7% from March of 2020.

Bezos Shareholder Letter Jeff Bezos published his final annual shareholder letter as CEO of Amazon. As always it’s a must read. Don’t forget to re-read the original 1997 one as well.

200 million Prime members globally
1.9 million 3P sellers
100M smart devices connected to Alexa

Episode 260 of the Jason & Scot show was recorded live on Thursday April 15, 2021.

http://jasonandscot.com

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EP259- Listener Questions

News Amazon is building Micro Fulfillment Centers to deliver fast-moving grocery & convenience SKUs in under 45mins. Locations include Seattle, DC, Baltimore, Dallas, Nashville, Detroit, Chicago, San Diego, Phoenix launching this year.

Listener Questions * Ted: will headless commerce take off in 2021? why/why not? * RetailRazor: Amazon has been getting hit w/an endless series of media articles about their private label development at the expense of other merchants on the platform. But #retailers have been doing this since, well, forever. Ex. – Dept Stores private label apparel. Why is Amazon different? * Wanda Cadigan: We’re seeing a big increase in visual media use cases for e-com. It’s the new digital proxy for in-store experience. Curious on your thoughts around shoppable video trends and adoption esp. in Americas. * Darin Archer: When will we have a major paradigm shift from the online store? Category pages and PDP’s seem dated in the era of TikTok. Instagram shopping and all those other things are like pop-up shops. When will retailers make a big step change in the experience? * Brendan Witcher: When will the Jason And Scot Show T-shirts finally be made available and can I have mine signed before you send it? You guys rock! Thanks for helping to keep balance in the (retail) Force. * Kevin Cronin: Thoughts on e-com conversion tracking and how it has +/- impacted companies/industry. * BinhWinn: What do you think is keeping Amazon from entering the promising African market? * Kelly Goetsch: Looking forward to the episode! I’m seeing all the CX-related vendors (Salesforce, SAP, Bloomreach, Acquia, etc) building or buying CDPs in the past ~12 months. I get the value of CDPs but why were all of these acquisitions done so rapidly? Is this related to 3rd party cookies? * tec_wiz: We have seen a significant “stimi” bounce on Amazon, do both of you feel the reopening exuberance will keep the sales acceleration going and if so for how long? Interested to see if you two are in the Jamie Dimon camp? * Trevor Sumner: There will be a multi-billion media shift to in-store. Who controls the brand spend? Will it be media folks? Will shopper marketing and trade dollars increase? How will brand orgs need to transform to take advantage of the digitized store? * Scott Silverman: What do you think will be the most surprising post-pandemic consumer behaviors that e-commerce retailers should prepare for?

Episode 259 of the Jason & Scot show was recorded live on Thursday April 8, 2021.

http://jasonandscot.com

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EP258 - Retailer Owned Brands and Other News

CPG’s and other traditional houses of brands, have not had a lot of recent success launching new brands. Challenger brands get a lot of buzz, but they are struggling to scale. Meanwhile, retailers are quietly launching new “owned brands” every year that sell over $1B.

In this episode we cover the latest owned brand news from Amazon, Target, and Bed Bath & Beyond.

Episode 258 of the Jason & Scot show was recorded live on Monday March 29, 2021.

http://jasonandscot.com

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EP257 - Cookies, IDFA, and Commerce Deep Dive

Changes in mobile tracking (IDFA), and browser tracking (third party cookies) are likely to disrupt digital commerce. Here is everything you need to know.

Background Privacy Law Changes * California Consumer Privacy Act of 2020 (CPRA) * California Consumer Privacy Act of 2018 (CCPA) * EU General Data Protection Regulation (GDPR)

Third Party Cookies * Safari (19% share) 3P cookies blocked as of March 2020 * Firefox (4% share) 3P blocked as of Sept 2019 * Chrome (64% share) will block 3P January 2022

Mobile Tracking (Digital License Plates for Mobile Users) * Apple Identifier for Advertisers (IDFA) – Goes from Opt Out to Opt In Q1 2021 * Google Play Services ID for Android (GPS ADID) – Still Opt Out

Use Cases that are impacted by IDFA/3P changes * Audience Activation and Retargeting * Frequency Capping and Suppression * Media Attribution * Audience Insights and Segmentation * Personalization

Alternative Solutions * 1P Walled Gardens (Facebook, Google, Amazon) * Real ID Systems (Trade Desk, Liveramp, Epsilon) * Clean Rooms * Cohorts – Google Privacy Sandbox: FloC (Federated Learning of Cohorts)

Impacted Businesses * Google – Biggest winner, built a business based on relaxed privacy standards, now pulling the ladder up behind them * Apple – See Google, but with a smaller share of browser market * Facebook – Lose ground to Google/Apple but gain on everyone else * Amazon – Winner. Forcing more ad dollars to Amazon walled garden * Shopify – Loser. Forcing Facebook to capture more commerce instead of referring to Shopify sites. * Publishers – Loser. Harder to make ad model work * Other Retailers – Loser for customer acquisition, slight benefit for retail media networks

Conclusion Advertising rates go down which depreciates ad based business models (content sites and games). More businesses pivot from ad based to paywalls. Greater focus on Customer Lifetime Value (via subscription and platform approaches), more cleanrooms. Much harder for new businesses to challenge incumbent walled gardens.

Episode 257 of the Jason & Scot show was recorded live on Wednesday March 17, 2021.

http://jasonandscot.com

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EP256 - Colin Bryar former Amazon Chief of Staff and author of Working Backwards

Happy episode 256, our penultimate 8-bit episode! (we’re going to have to migrate to 16-bit for next week).

Colin Bryar is author of “Working Backwards: Insights, Stories, and Secrets from Inside Amazon” (affiliate link). This is the definitive book about the unique processes, programs, and culture implemented at Amazon which have enabled its remarkable track record of speed and innovation. Colin had a 12 year career at Amazon and served as Jeff Bezos technical advisor (chief of staff) shadowing Jeff in all meetings for a year. His co-author, Bill Carr ran Amazon Prime Video and sat on Amazon’s S-Team. These two had a front row seat to many of the most seminal moments in Amazon’s history.

If you work with Amazon, need to compete against them, or just want to duplicate their success in another field, you owe it to yourself to listen to the episode and then read Colins book.

Episode 256 of the Jason & Scot show was recorded live on Wednesday February 24, 2021.

http://jasonandscot.com

Working Backwards: Insights, Stories, and Secrets from Inside Amazon

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Announcement: Live Clubhouse Chat: Shopify vs Amazon

Wednesday night March 3rd, 9:30pm ET we'll have a live chat on Clubhouse discussing the epic battle between Amazon and Shopify. http://joinclubhouse.com/event/M4knLWBy

http://jasonandscot.com

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EP255 - Instacart Chief Revenue Officer Seth Dallaire

Seth Dallaire is the Chief Revenue Officer at Instacart. In this interview, we cover his experience at Amazon, the challenges of operating Instacart’s 4-sided marketplace, key trends in the digital grocery space, and Instacarts evolution as a retail media network.

Episode 255 of the Jason & Scot show was recorded live on Wednesday, February 10th, 2021.

http://jasonandscot.com

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Episode 254 is a breakdown of Walmart and Shopify Q4 2020 earnings reports, a recap of 2020 sales data from the US Dept Commerce, and Amazon News.

2020 Sales Data US Dept of Commerce released it’s retail data for December, which gives us a full picture of 2020, as well as the Q4 e-commerce data.

Retail sales in 2020 were $5.6T, representing 27% of the U.S. GDP
Retail as a whole experienced healthy growth of 3.4% versus 3.5% in 2019
E-commerce grew 32% to $792B in sales, vs 15% growth in 2019
E-commerce was 14% of all retail sales (vs 11% in 2019)
Jason wrote a detailed recap of 2020 in Forbes:
2020: Not Quite Retail Apocalypse, But Great For E-Commerce

Walmart Earnings * US Q4 comp sales grew 8.6% eCommerce sales grew 69% * FY revenue was $559.2 billion, comp sales increased 8.6%, E-Commerce sales grew 79%

Shopify Earnings * Fourth-Quarter Revenue Grows 94% on GMV Growth of 99% * Full-Year 2020 Revenue Grows 86% on GMV Growth of 96% * FY Subscription Solutions revenue grew 41% to $908.8 million, * FY Merchant Solutions revenue grew 116% to $2B * Shopify Expands Its Checkout System to Facebook and Instagram

Amazon news: * Amazon acquires Seltz, a Shopify competitor

Episode 254 of the Jason & Scot show was recorded live on Thursday, February 19th, 2021.

https://retailgeek.com

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EP253 - Amazon Q4 2020 Earnings

Amazon Earnings * Amazon reported in Q4 2020 earnings on Tuesday Feb 2. * Jeff Bezos is stepping down as CEO and moving into an executive chairman role. Read his letter to employees here. * We deep dive into the Q4 and full year 2020 results. * Sales, profit, and free cash flow were all above expectations. US product sales had a robust 44% YoY increase. 3P continues to grow as a share of sales (now 55% of sales mix). AWS continued to grow. * Other income (which is largely ad sales) was up 66% representing $21.477B of revenue in 2020, well above expectations.

In other news: * Walmart is accelerating it’s automated picking for store fulfillment. * Uber has purchased Drizly for $1.1B. We spoke with the VP of Partnerships at Drizly on Episode 163.

Episode 253 of the Jason & Scot show was recorded live on Tuesday, February 2nd, 2021.

http://jasonandscot.com

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EP252 - Amazon FBA Roll-ups w Chris Bell CEO of Perch

[NOTE: The audio quality of this episode is not up to our usual standards due to some internet challenges. But we felt the content was valuable enough to publish the episode anyway.]

A number of firms are acquiring, or some would say rolling up, brands that primarily distribute their products on Amazon using Fulfillment by Amazon. By some accounts, these firms have cumulatively raised over $1B in capitol, and are rapidly acquiring brands.

This week we explore this trend, with the founder of one of these firms, Chris Bell, CEO of Perch. Chris sees Perch as a next generation CPG conglomerate leveraging the Amazon marketplace. While traditional CPGs may review their pricing quarterly, and set marketing strategies annual, Perch adjusts pricing strategy hourly, and advertising strategies daily.

“Amazon marketplace is 2x any CPG and growing faster.”

CHRIS BELL, CEO OF PERCH

In this interview we cover:

Overall trend, and how Chris sees the marketplace
Perch criteria for acquisitions
Synergies for brands in the roll-up model
Off Amazon strategy
Potential risks of this model, including from Amazon
What the potential future of this market looks like

If you’re interested in selling your FBA business to Perch, you can reach them at info@perchhq.com.

Episode 252 of the Jason & Scot show was recorded live on Wednesday, January 27th, 2021.

http://jasonandscot.com

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EP251 - 2021 Annual Predictions

2020 Recap – Predictions made on episode 204

2020 Predictions Recap Scot

Shopify wilts a bit – new competition comes out with different angles (marketcap stays static) – No
Fedex does something drastic – buy eBay? Merge with Alibaba? No (but shoprunner for 0.5)
The year of returns – “happy returns” – a startup raises $100M+ in space. No (but 0.5 for year of returns)
Mallageddon continues At least another 8k stores Yes 8721 stores +1
Google gets aggressive in ecommerce Yes +1 (Bill Ready, etc…)

Score 3/5

Jason

Walmart – growth slows due to completion of grocery build out. Marc Lore leaves Walmart. No on growth, yes on Marc Lore (0.5)
Amazon – Opens affordable grocery concept. Digital grocery wars heat up. Yes
Owned brands continue to grow. 5% of retail in 2019, could be 8-10% in 2020 (as measured by IRI, for CPG private label). Yes
Installment Payments heat up – At least one company is acquired (Affirm, Afterpay, Klarna, QuadPay, Sizzle) Yes (IPO’s)
Digital in-store heats up, QR codes make a comeback Yes

Score 4.5/5

2021 Predictions Jason:

Made to Order apparel business > 9 figures
Retailer offers viable health alt insurance option to consumers
Grocery E-Com > 10% someone deploys(not pilots) MFC
Amazon Shopify Competitor (shipping solution)
Retail Media > $20B

Bonus – More store closures in 2021 than 2020.

Scot:

Amazon move to same day prime by opening a huge wave of neighborhood DCs (near DSPs)
Shipping (Shopify) – launch own DSP
Shopify marketplace
‘zero friction addiction’ sticks – I’ve seen 30-40% repeated a lot, I think it’s 60-80%. commerce penetration says at 16% or better in 2021.
spac/ipo? Dnvb wave

Bonus: post-covid anti-consumerism/materialism wave

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Episode 251 of the Jason & Scot show was recorded on Thursday, January 21st, 2021.

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EP250- Holiday 2020 Recap

This week we recap the commerce results for Holiday 2020 (including the data sources you can use to get a read for yourself), give an update on #shipageddon, and cover some industry news.

| 2019 | 2020 | YoY %Ch | | Stores | $864.69 | $822.79 | -4.8% | | Online | $140.28 | $190.47 | 35.8% | | Total | $1004.97 | $1013.26 | 0.8% |

Nov-Dec Sales estimates from e-marketer $B

November Retail Sales Aren’t As Ominous As You Think Jason's article in Forbes, recaping the results we've seen through November.
Consumer Trends 2021 report - Dan Frommer's recap of 2020 consumer trends (highly recommended).
MasterCard Spending Pulse

Shipageddon Recap:

Episode 250 of the Jason & Scot show was recorded live on Thursday, January 7th, 2021.

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EP249 - Holiday shipping data from ShipBob

Casey Armstrong (@CaseyA) is CMO at ShipBob, a third party logistics provider that offers e-commerce fulfillment for thousands of brands. They are able to see the carrier shipping performance for all those clients and provide aggregate data that gives us insight into holiday shipping performance, also known as #shipageddon.

Shipageddon Repository
ShipBob Carrier Dashboard
ShipBob 404 Page w/ Star Wars reference

Episode 249 of the Jason & Scot show was recorded live on Monday, December 7th, 2020.

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EP248 - Cyber 5 with Salesforce's Rob Garf

Rob Garf (@retailrobgarf) the VP of Strategy and Insights, Retail and Consumer goods at Salesforce. Rob also earned a 10/10 from @ratemyskyperoom which makes me extremely jealous.

Cyber Week online sales unfolded in the pattern we expected after the first three quarters of the year. Digital sales surged an unprecedented 71% in Q2 globally and significantly grew 55% in Q3 globally. We forecast 30% growth for the entire holiday season, November 1 – December 26. For the largest two digital days of the season, specifically, Black Friday came in right on target with 30% growth and Cyber Monday grew at a lower rate of 18% year-over-year (YoY) globally.

Salesforce Holiday Portal
Blog Post for Cyber Five
LinkedIn Livestream from Rob and Jason discussing Cyber Five.

We cover key trends, including changes to holiday behavior due to Covid-19, winners and losers, mobile trends, promotion trends, and omni-channel tactics.

Episode 248 of the Jason & Scot show was recorded live on Tuesday, December 1st, 2020.

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EP247 - Cyber 5 with Adobe

Vivek Pandya is the Senior Digital Insights Manager at Adobe.

Data from Adobe, which uses Adobe Analytics to analyze one trillion visits and 100 million SKUs from 80 of the 100 largest retailers in the U.S., found that consumers spent a whopping $34.4 billion during this year’s Cyber Week, which represents a 20.7 percent year-over-year (YoY) increase. Unsurprisingly, Thanksgiving, Black Friday and Cyber Monday represented the bulk of total spend over the five-day period.

Adobe Holiday Portal

Blog Post for Cyber Five

We cover key trends, including changes to holiday behavior due to Covid-19, winners and losers, mobile trends, promotion trends, and omni-channel tactics.

Episode 247 of the Jason & Scot show was recorded live on Tuesday, December 1st, 2020.

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EP246 - Q3 Results

The US Census Bureau published its retail monthly data and quarterly e-commerce data this week. We also saw earnings reports from Target, Walmart, Lowes, Home Depot, Walgreens, and Kohls.

We also discuss Amazon’s entry into pharmacy.

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Episode 246 of the Jason & Scot show was recorded live on Thursday, November 20th 2020.

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EP245 - Shipageddon DeepDive

On October 3rd, we published episode 238 and coined the term “Shipageddon.” We were talking about the likely e-commerce peak we expected from the holiday, on top of the e-commerce peak we were already seeing do to Covid-19, and we felt like retailers were likely to run into shipping capacity issues. The term (and concept) have gained a lot of traction, being featured print in the NY Times Brace for Holiday ‘Shipageddon’ Forbes, Bloomberg, and on the Today Show, NBC News, and many others.

In the subsequent 45 days, it’s become clear that we will have a last-mile capacity problem, with all major carriers implementing quotas, turning away new clients, and retailers struggling to entice earlier orders from consumers. Worse, we’re also seeing a lack of freight capacity to restock retailers with limited inventory, and a strong resurgence of Covid-19 threatens to generate even more e-commerce demand.

In this episode, we do a deep dive into the curate state of Shipageddon, the likely impact on holiday shopping, and best practices for brands and retailers to minimize the effect.

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Episode 245 of the Jason & Scot show was recorded live on Thursday, Nobember 12th 2020.

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EP244 - Upfront Ventures Greg Bettinelli

Greg Bettinelli (@gregbettinelli) is a partner at Upfront Ventures. Greg was previously the CMO for LA-based HauteLook, a leading online flash-sale retailer (acquired by Nordstrom). Upfronts portfolio includes ThredUp, Parachute Home, Adore Me, Skylar, Verishop Goat, Happy Returns, Invia Robotics, ChowNow, Verishop and in transportation Fair, Bird, and SureSale.

We discuss DNVBs, Marketplaces, Shipageddon, and much more.

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Episode 244 of the Jason & Scot show was recorded live on Thursday, October 28th 2020.

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EP243 - Amazon Q3 2020 Earnings Recap

In this episode, we break down Amazon’s Q3 2020 earnings (PDF) results.

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Episode 243 of the Jason & Scot show was recorded live on Thursday, October 29th 2020.

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EP242 - Salsify Co-Founder and CMO Rob Gonzalez

Rob Gonzales is the Co-Founder and CMO of Salsify an e-commerce enablement SaaS company that has raised over $250m and focuses on helping brands sell online. Rob is also co-founder of the Digital Shelf Institute.

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Episode 242 of the Jason & Scot show was recorded live on Wednesday, October 21st 2020.

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EP241 - Holiday Preview with eMarketer's Andrew Lipsman

Andrew Lipsman (@alipsman) is the Principal Analyst for retail and e-commerce for eMarketer. In this episode, Andrew gives listeners an advanced preview of eMarketer’s holiday forecast, and we do a deep dive into all the factors that will play into this holiday season. This holiday season may have more uncertainty for brands and retailers than any other holiday season in our lifetime, so it’s well worth the listen.

This is an exclusive preview of one of the most anticipated holiday forecasts in the industry.

Key Topics: * Vectors that influence holiday forecasts * The forecast * Shipageddon * Can retailers pull holiday in early? * How will the cyber-5 play out * Returnageddon * Category winners and losers * Retail winners and losers * How to follow the season

eMarketer Holiday 2020 Forecast * Total retail +0.9% to $1.013 trillion * Ecommerce +35.8% growth to $190B (+ $50B in ecommerce sales vs. last year) * Brick-and-mortar -4.7% to $823B

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Episode 241 of the Jason & Scot show was recorded live on Tuesday, October 21, 2020.

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EP240 - Amazon Prime Day Recap

Episode 240 is a recap of Amazon Prime Day 2020, and a review of the US Census Advanced Monthly Retail Sales data for September.

Amazon Prime Day * Amazon Press Release * ChannelAdvisor Prime Day * Salesforce Prime Day Blog * Two Thirds of Sales During Prime Day Were by Amazon 1P – marketplace Pulse * Cool PrimeDay Review of 50 e-commerce sites by Forrester research analyst Nicole Murgia

Advanced Retail Sales Data for September US Census Advanced Monthly Retail Sales for September

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Episode 240 of the Jason & Scot show was recorded live on Friday, October 16th, 2020.

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EP239 - Retail Sales Data with US Census Bureau

Paul Bucchioni is Branch Chief and Scott Scheleur is a Supervisory Survey Statistician, both with the Retail Indicator Branch, Economic Indicators Division of the U.S. Census Bureau. In this interview, Paul and Scott walk us through the real sales data products that the US Census publishes and gives us advance about how to interpret the data.

US Census Retail Data Site
Twitter Account: @uscensusbureau
St. Louis Federal Reserve Tool (FRED)
Google Public Dataset Tool

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Episode 239 of the Jason & Scot show was recorded live on Wednesday, October 7th, 2020.

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EP238- Holiday Shipageddon

This holiday season will be a mixed bag for retailers. Health concerns are likely to drive many more consumers online, but can retailers and shippers, who are already experiencing Cyber-Monday levels of e-commerce handle the increased volume?

Scott Silverman (@scottsilverman) of CommerceNext and Ken Cassar (@kcassar) of CassarCo join us to discuss the holiday season, including a CommerceNext survey of 1,000+ consumers, and 60+ digital retail executives to understand how aware they may be of shipping delays, trade-offs they'd be willing to make in order to get free shipping, etc.

Jason wrote a related article "Holiday 2020: A Mixed Bag For Retailers" in Forbes this week
The twitter thread that kicked off this discussion
Lowes locker announcement that Scot mentioned
Deloitte Holiday Forecast
Salesforce Holiday Forecast

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Episode 238 of the Jason & Scot show was recorded live on Thursday, October 1st, 2020.

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EP237 - Always Day One author Alex Kantrowitz

Alex Kantrowitzer (@Kantrowitz) is the author of “Always Day One: How the Tech Titans Plan to Stay on Top Forever.” He is an on-air contributor at CNBC and host of the Big Technology podcast.

In this broad-ranging interview, we discuss the unique management styles at Apple, Google, and Facebook, as well as doing a deep dive into what makes the Amazon culture unique.

Disclosure: links to Amazon are affiliate links.

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Episode 237 of the Jason & Scot show was recorded live on Thursday, September 24th, 2020.

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Always Day One: How the Tech Titans Plan to Stay on Top Forever

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EP236 - DNVBs w/ Nate Poulin

Episode 236 is an interview with Nate Poulin aka @digitallynativ about Digitally Native Verticle Brands (DNVBs)..

Upcoming Events 1. Digital Day North America Jason & Scot Keynote September 23 8:40-9:25am CT 2. Channel Advisor Connect – Jason & Scot October 7th 3. Texas A&M Retail Summit Jason October 9th 9:50am CT 4. ShopTalk Meetup – Jason October 20-22
Measuring Ecommerce Success Against Fast-Changing Benchmarks.

Topics Nate Poulin (@digitalnativ) cut his teeth with DNVBs including Bonobos and Outdoor Voices and is currently the Chief Merchant for Monica + Andy. In this episode, we discuss a range of topics around the current state and future of digitally native brands.

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Episode 236 of the Jason & Scot show was recorded live on Monday, September 14th, 2020.

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EP235 - Amazon Grocery, Walmart+, Holiday Preview

This episode covers the latest Amazon Grocery news, the launch of Walmart+, and our first look at holiday 2020.

Upcoming Events 1. CommerceLive – Jason September 15, Noon ET.
Panel: Retailer Search Strategies — What’s Working and What’s Worth It? 2. Publicis Livestream – Jason & Scot – Thursday, September 17 11:00AM ET
Covid, Holiday 2020, and 2021 3. Digital Day North America Jason & Scot Keynote September 23 8:40-9:25am CT 4. Channel Advisor Connect – Jason & Scot October 7th 5. Texas A&M Retail Summit Jason October 9th 9:50am CT 6. ShopTalk Meetup – Jason October 20-22
Measuring Ecommerce Success Against Fast-Changing Benchmarks.

Topics 1. Amazon Grocery

Amazon Fresh – 40K “Non-Whole Foods” grocery concept. Dash Carts (Scan & Go). Microfullfilment? Woodland Hills open, two more free-standing coming to LA, one freestanding coming to Chicago, and a shop in shop with Kohls in LA.
Amazon Go Grocery – 10K store with just-walk-out technology. A second location opens in Redmond. One coming to Washington DC.
Wholefoods Digital Only – Darkstore opens in Brooklyn.
JCP acquired from bankruptcy by Simon Property Group (NYSE: SPG) and Brookfield Property Partners.
Walmart+ launch (and drone test)
Holiday Preview

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Episode 235 of the Jason & Scot show was recorded live on Thursday, September 10th, 2020.

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EP234 - Listener Questions Live

Episode 234 is a live show featuring live audience questions. Jason & Scot get to interact with listeners live.

Topics * Jason wrote an article in Forbes, "It’s Time For E-Commerce Marketplace Reform", Scot found it controversial! * California’s proposed AB 3262, related to product liabilities for marketplaces. * Amazon's stance on hybrid sellers (both selling wholesale to Amazon, and direct on the marketplace) * SEO in the Covid era * What's the next big thing? * How are retailers addressing digital impulse? * Why do retailers have separate systems for e-commerce and POS?

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Episode 234 of the Jason & Scot show was recorded live on Thursday, August 27th, 2020.

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oin 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.

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EP234 Preview - Listener Question Show Coming Soon

Hi Listeners. We'll be recording a live listener questions podcast on Wednesday August 26th at 7pm PT / 10pm ET.

Send questions in advance to Facebook Or @scotwingo on twitter Zoom details to join the live call: Join from a PC, Mac, iPad, iPhone or Android device: Please click this URL to join.

https://us02web.zoom.us/j/85358703161?pwd=dWdreWdyckR6S1dQcE5nR3JlVWVCQT09 Passcode: 262640

Description: Jason & Scot Show - Listener Questions Or join by phone:

Dial(for higher quality, dial a number based on your current location): US: +1 312 626 6799 or +1 646 558 8656 or +1 301 715 8592 or +1 346 248 7799 or +1 669 900 9128 or +1 253 215 8782 Webinar ID: 853 5870 3161 Passcode: 262640

International numbers available: https://us02web.zoom.us/u/keF1JYoTnM

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EP233 - Q2 2020 Retail Earnings and News

US Census Data * US Census Retail Data website * Quarterly Retail E-Commerce Sales 2nd Quarter 2020 (PDF) * St. Louis Federal Reserve Tool (FRED) * Google Public Dataset Tool

Retail Earnings Updates * Walmart Comp sales up 9.3% E-commerce up 97%. Transactions down 14%, basket up 27% * Target SSS up 10.9%, E-Commerce up 195%. 75% e-commerce fulfilled from stores. * Home Depot SSS up 25%, e-commerce up 100% (60% BOPIS) * Lowes US Comp sales up 35.1%, E-commerce up 135% * Kohls – net sales decrease (22.9%) * TJX – Net sales came in at $6.67b v $9.78 billion YoY ($214M Loss)

2020 Q2 E-Commerce Scoreboard * Target 195% (same day 300%) * Etsy 147% * Lowes 135% * HomeDepot 100% * Walmart 97% * Shopify 97% * E-commerce overall (US census): 44.5% * Amazon: 41% overall, 44% US, 3PM grew 53% * eBay 26%

Other News * Simon (SPARC) buys Brooks Brothers, (Aéropostale, Forever 21, Lucky Brand) * JCP suitors – Amazon and Simon * Shipping sur-charges

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Episode 233 of the Jason & Scot show was recorded live on Wednesday, August 19th, 2020.

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EP232 - rue21 CEO John Fleming

John Fleming is the the interim CEO of rue21. John was formerly the global e-commerce CEO for Uniqlo, Chief Merchant at Walmart, and CEO of Walmart.com. He has also served as a board member at Bed Bath & Beyond and Untuckit.

rue21 is an American specialty retailer of women’s casual apparel and accessories with 670 stores that primarily designs and fabricates its’ own products.

In this broad ranging interview, we discuss the challenges and opportunities presented by Covid, Amazon, the direct to consumer model, and the future of retail.

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Episode 232 of the Jason & Scot show was recorded live on Thursday, August 13th, 2020.

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EP231 - The Forever Transaction author Robbie Kellman Baxter

Robbie Kellman Baxter (@robbiebax) is the best selling author of “The Forever Transaction” and “The Membership Economy.” She has become a well known subject mater expert on subscription and loyalty programs.

In this broad ranging interview, we discuss well known subscription based brands including Dollar Shave Club, Blue Apron, Stichfix, BirchBox, and Netflix. We also cover issues including subscription fatigue, cancelation friction, and Rundles.

You can find out more about Robbie’s consulting work and her podcast at her website.

Disclosure: links to Amazon are affiliate links.

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Episode 231 of the Jason & Scot show was recorded live on Thursday, July 30st, 2020.

The Forever Transaction: How to Build a Subscription Model So Compelling, Your Customers Will Never Want to Leave

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EP230 - Amazon Q2 2020 Earnings

Amazon Q2 2020 Earnings * Amazon Q2 2020 Earnings Presentation * Statement by Jeff Bezos to the U.S. House Committee on the Judiciary * Revenue at $88.9B vs expectation of $80.7b, a 41% year over year growth. * Earnings of $10.30 per share vs expectation of $1.90, a 51% year over year growth.

Other Earnings Updates * Shopify revenue up 97% to $714M (GMV now exceeds eBay) * eBay revenue up 18% to $2.87B

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Episode 230 of the Jason & Scot show was recorded live on Thursday, July 31st, 2020.

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EP229 - NRF NXT, Google Commerce, Big Commerce S1

Jason recent events: * NRF NXT Tuesday, July 21 11:45am–12:30pm EDT “Future of Platforms” * Forbes Article “Retail’s Great Pivot: How The Pandemic Has Changed Stores’ Criteria For Success From Traffic To Efficiency“

Jason Upcoming Events * CommerceNext July 29th 4:10 pm EE “Lesson Learned and Thoughts for the Future”

Industry News * NRF NXT was this week, a digital commerce show from the National Retail Federation (the successor to the Shop.org tradeshow). You can still register for free, and watch all the sessions on demand. * Google has eliminated commissions for it’s “Buy on Google” feature on google shopping, as well as offering PayPal and Shopify payments. * Goldman Sachs equity research published: “Global Internet eCommerce’s steepening curve: Raising global forecasts & identifying new winners” July 20,2020. Scot breaks it down. * eMarketer publishes “US ECOMMERCE BY CATEGORY 2020” July 22, 2020. Jason breaks it down. * Big Commerce files it’s S-1. (Keep an eye on RetailRoadshow for their roadshow video).

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Episode 229 of the Jason & Scot show was recorded live on Thursday, July 24th, 2020.

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EP228 - Bonus Edition: Verizon Panel - The 5G Future of Retail Post-COVID

Scot and Jason hosted a live panel for Verizon, entitled: “The 5G Future of Retail Post-COVID: Challenges and Opportunities.”

The panel featured three guests:

Christian Guirnalda (@OpenInnovatioNJ), Director, 5G Labs and Innovation Centers, Verizon
Michele M. Dupré Group Vice President – Vertical Markets/Canada Verizon Enterprise Solutions
Rob Dravenstott, Chief Technology Officer, Cooler Screens

We covered a variety of topics related to 5Gs potential impact on retail.

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Episode 228 of the Jason & Scot show was recorded live on Wednesday, July 8th, 2020.

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EP227 - Amazon Dash Cart and Other News

Jason recent events: * Publicis LinkedIn Livestream: Trends & Insights Live “The New Reality of Retail” * RetailTouchpoints: Retail Strategy 2.0: Separating Urgent From Important * Brick and Mortar Reborn * Rob Gonzalez, Peter Crosby, and the Digital Shelf Institute/Salsify “Creative Commerce in the time of covid”

Jason Upcoming Events * NRF NXT Tuesday, July 21 11:45am–12:30pm EDT “Future of Platforms” * CommerceNext July 29th 4:10 pm EE “Lesson Learned and Thoughts for the Future”

The Great Debate Are we in a long-lasting, deep recession, or is at an artificial recession will quickly bounce back from? What should retailers and brands be planning for. Jason and Scot has it out. Who will be right?

Amazon News * Amazon Dash Cart * Echo Frames are frames are shipping * Q4 restrictions on 3pl warehouses * Prime day in October * Employee Health Clinics * Amazon becomes worlds largest advertiser spending $11B a year * Earning results next week

Other News * US Census Bureau Data for June is out.
US Real Retail sales were up 5.8% in June, (down from 17.7% in May) but representing a 2nd month of retail recovery. Total retail sales back above Feb levels. (Numbers adj for inflation and including auto). E-commerce up 23% YoY. * Nike leaves Google Shopping * Google shopping fast shipping tags * Nike RISE new store concept in Guangzhou, China * Walmart and Amazon healthcare battle * Walmart+ coming soon? * Is digital grocery profitable?

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Episode 227 of the Jason & Scot show was recorded live on Friday, July 17th, 2020.

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Blue Cape Ventures founder Hendrik Laubscher

Hendrik Laubscherger (@henlaub) is the CEO and Founder at Blue Cape Ventures. He is a subject matter expert in global marketplaces and cross-border trade. He publishes a very valuable weekly newsletter which you can subscribe to here.

In this broad ranging interview, we discuss global marketplaces, the latest events at Amazon, comparison shopping engines, direct to consumer, cross border trade, venture capital, and the future of commerce.

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Episode 226 of the Jason & Scot show was recorded live on Friday, July 9th, 2020.

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EP225 - Jonah Berger author of The Catalyst

Dr. Jonah Berger (@j1berger) is a marketing professor at Wharton, and author of New York Times bestsellers Contagious and Invisible Influence. His latest book, The Catalyst: How to Change Anyone’s Mind (affiliate link), introduces a revolutionary approach to change. Successful change isn’t about pushing harder or exerting more energy. It’s about removing barriers. Overcoming resistance by reducing friction and lowering the hurdles to action. Discover the five hidden factors that impede change, and how by mitigating them, you can change anything.

In this broad ranging interview, we discuss the major themes from The Catalyst, including the five barriers to taking action, and strategies to overcome those barriers. Listeners will learn not only how to persuade customers and prospects, but also how to be a catalyst for organizational change within our companies.

Jonah’s personal website.

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Episode 225 of the Jason & Scot show was recorded live on Friday, June 26, 2020.

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The Catalyst: How to Change Anyone's Mind

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EP224 - Cohort Analysis and CLV with Daniel McCarthy

Daniel McCarthy (@d_mccar) is an Assistant Professor of Marketing at Emory University – Goizueta Business School, he’s one of the industries top thought leaders in the field of customer lifetime value (CLV). In this episode we discuss how CLV and customer cohort analysis can be be used operationally within e-commerce companies, as well as how customer data can be used to calculate a companies true enterprise value, customer-based corporate valuation (CBCV).

Dan co-founded a predictive analytics company, Zodiac, which was later acquired by Nike. He’d made news several times by applying his CBCV to popular public companies using their public disclosures.

Listen to this episode just to hear Scot say “Goizueta.”

Dan’s personal website
Theta Equity Partners – Dan’s current firm, focused on CBCV
McCarthy, Daniel; Fader, Peter (2018). “Customer-Based Corporate Valuation for Publicly Traded Non-Contractual Firms”. Journal of Marketing Research, 55(5), 617-635. Link (download)
McCarthy, Daniel; Fader, Peter; Hardie, Bruce (2017). “Valuing Subscription-Based Businesses Using Publicly Disclosed Customer Data”. Journal of Marketing, 81(1), 17-35. Link (download).
McCarthy, Daniel; Fader, Peter (2020). “How to Value a Company by Analyzing Its Customers”. Harvard Business Review, 98 (1), 51-55. Link

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Episode 224 of the Jason & Scot show was recorded live on Thursday, June 25th, 2020.

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EP223 - Covid-19 Deep Dive

 Episode 223 is deep dive into the retail impact of Covid-19 pandemic over the next 18-24 months.

COVID-19 TIME MACHINE Covid-19 is a time machine, propelling commerce five years into the future.

New Behaviors:
- Shift to Digital
- Brand Agnostic
- Pantry Stocking
- Nesting
- Health & Safety
Recession
Changing Retail Landscape
How Will it End

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Episode 223 of the Jason & Scot show was recorded live on Thursday, June 18th, 2020.

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EP222 - RBC Mark Mahaney on Amazon

Episode 222 is an interview with Mark Mahaney, Managing Director at Royal Bank of Canada (RBC). RBC is Canada’s biggest bank, and one of the largest in the world based on market capitalization. Mark is one of the top internet analysts in the world, being ranked #1 by Institutional Investor Magazine numerous times. His research on the e-commerce space are all must reads.

In this interview, we discuss his new research note on Amazon, raising their price target to a Street-high $3,300 based on the impact of Covid-19 on it's business. In this broad ranging interview, we discuss Covid-19, Amazon's retail business, it's ad business, amazon web services, logistics, as well as competitors, Shopify, eBay, Etsy, and Chewy.

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EP221 - E-Commerce Logistics Crunch

Episode 221 covers recent news including logistics moves from UPS, FedEx, and Amazon.

Past Events * Jason NRF Interview * Leaders of Change Interview

Upcoming Events * NRF Global Trends from the Reopening of Stores June 8th, 11am ET.
Hear from retail industry leaders Jason Goldberg, chief commerce officer of Publicis, and Sucharita Kodali, VP and principal analyst at Forrester, on what retailers are seeing as their global stores reopen post-COVID-19

Amazon News * Amazon adds 12 new planes (now has 80 on it’s way to 200). * Prime day moved to September, Summer Sales June 22nd. * Amazon Grocery Store coming to Chicago * Lowes- Same store sales up 11.2%, e-commerce up 80%

Other News * Gucci – Personalized Video Shopper * UPS/FedEx – Surcharges * Kylie Jenner – Inflated revenue ($177 million last year) * Instacart Media Network * Target Instagram Checkout * Shopify Marketcap $90B, IBM $114B * Lickable Screen – Norimaki Synthesizer

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Episode 221 of the Jason & Scot show was recorded live on Wednesday, June 3rd, 2020.

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EP220 - Retail Earnings News

Episode 220 covers a variety of retail earnings reports and news.

Retail Earnings * Walmart – Same store sales up 10%, e-commerce up 74% * Target – Same store sales up 10.8%, e-commerce up 141% (curbside up 278%) * Home Depot- Same store sales up 7.1%, e-commerce up 79% * Lowes- Same store sales up 11.2%, e-commerce up 80%

Race to $1.5T Market Cap (as of 5/20/2020)

| Apple Inc. | $1,383,649,809,668 | | Microsoft Corporation | $1,407,941,498,171 | | Amazon.com, Inc. | $1,245,912,492,214 |

Other News * Amazon News – JCP and AMC rumors * Facebook – New e-commerce option * Fritolay Direct to Consumer Launch

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Episode 220 of the Jason & Scot show was recorded live on Wednesday, May 20th, 2020.

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EP219- Live Listener Questions

Episode 219 is a live show featuring live audience questions. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube.

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Episode 219 of the Jason & Scot show was recorded live on Wednesday, May 7th, 2020.

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EP218 - Amazon Q1 2020 Earnings and Covid News

Episode 218 covers some Covid-19 related e-commerce news, and provides an analysis of Amazon’s Q1 2020 Earnings.

Announcement Next weeks show will be a live listener question show. Join our Zoom webinar on May 6th at 9pm ET, and you can watch us make a show, and ask your own questions.

https://us02web.zoom.us/j/89837125650?pwd=QTM2QWZKRDlSNFFIU0xnRmZ2VWowQT09
Password: 877145
Webinar ID: 898 3712 5650
International numbers available: https://us02web.zoom.us/u/kuutcaEJm

News * Shopify becoming a marketplace? * Google shopping is now free * Covid impact + 630,000 retail businesses have been closed since mid-March (about 61% of sf sq) + Forrester 16% E-Com -> 25% in april (70% digital influence) + 3% digital grocery -> 10% digital Grocery + Goldman Sachs: Retail Chain down 20.9% + ShopperTrack: Traffic down 48% + Bankruptcies – JCREW, Neiman, JCP, Tuesday Morning, Lord & Taylor + Gordon Brothers 25,000 stores and 100,000 restaurants could end up closing permanently this year + UBS 100,000 retailers close by 2025 (15% -> 25% e-com penetration) + Everyone making PPE + Happy Story: Pets (“adopt a pet” surged about 335% in volume)

Simon Properties Opening Plans

Amazon Q1 2020 Earnings * Earnings Release (PDF) * Presentation

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Episode 218 of the Jason & Scot show was recorded live on Thursday, April 30th, 2020.

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EP217 - OfferUp CEO Nick Huzar

Episode 217 is an interview with Nick Huzar (@nickhuzar), the Founder and CEO of OfferUp (@OfferUp). OfferUp is the largest mobile marketplace in the U.S, facilitating consumer to consumer sales of second-hand goods.

In this interview, we discuss OfferUp’s recent fund raise, the acquisition of LetGo, and the state of C2C Marketplaces during Covid-19.

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Episode 217 of the Jason & Scot show was recorded live on Thursday, April 23rd, 2020.

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Transcript Jason:
[0:24] Welcome to the Jason and Scott show this is episode 217 being recorded on Thursday April 23rd 2020 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 show listeners we are still recording during this fun pandemic shelter at home period and
because we normally when we’re not she’ll bring it home have day jobs record the podcast late late at night it really restricts people that are crazy enough to come on the podcast so we’re using this opportunity to go through what I would call our Marketplace bucket list.
So today on the podcast we have another bucket list guess this is pretty exciting.
One of the biggest Trends in US market places that’s kind of under the radar and if you go to like a lot of trade shows and stuff
but it is if you look at traffic data you realize there’s a really big movement here,
is what I would call a new family a new innovation around smartphone app based consumer to consumer or some people say person-to-person marketplaces.
So today on the show we are really excited to have the CEO of what I believed to be the largest one of these these new kind of mobile market places we,
the CEO of offer up Nick who’s are welcome to the show Nick.

Nick:
[1:43] Thanks for having me it’s great to be here.

Scot:
[1:45] Do you prefer person-to-person consumer-to-consumer or do you use some other lingo.

Nick:
[1:50] I think it’s I think it’s all the same that the the main idea is you know leveraging this technology that’s in all of our pockets to kind of reimagine local Commerce as we know it.

Jason:
[2:05] Awesome and Nick we may be the only ones in the planet that have a Marketplace bucket list but we’re we’re.

Nick:
[2:14] Everyone needs one.

Jason:
[2:15] Yeah everyone should have one but I feel like we’re the only ones that are cool enough to actually have one so thanks for helping us check one one off but before we jump into OfferUp in marketplaces
we always like to give listeners a little bit of color about your background so can you tell us what you’re doing and how you came to OfferUp.

Nick:
[2:35] Yeah happy to so I’ve always been in the I’d say the Internet space pretty much since I graduated college.

[2:42] Kind of dating myself now but I used to I remember coming out of school I had to explain to people on companies why they needed a database connected to their website so that’s kind of gives you an idea of when I graduated college.
But I’ve always been fascinated by I think the the endless possibilities with the internet so in some way shape or form of.
I’ve been in at various startups you know throughout most of my career I did some briefs tents at T-Mobile.
Spend a little bit of time at Microsoft you know I’ve done a few different companies my previous company too,
OfferUp was called connects most people have no idea who the heck we were I’m not surprised but we started.

[3:26] Connects pre Friendster and so sometimes I’ll server after remind people what the heck was Friendster or Friendster came before my space and my space came before Facebook so we were very early I think I’d like to say I learned a lot of a.
Mistakes kind of how to build a company and a startup.
And you know ultimately I had no plans on doing another startup there a lot of work but I had a daughter on the way and I was so excited I went into this room full of stuff.
That I had in my house and I was going to turn it into her nursery and that became the spark,
and that ultimately turned into OfferUp and you know for me would you know I had I didn’t jump on it right away I mean clearly you know I think there’s a long as a graveyard of companies that have tried to.

[4:15] Compete locally but.
I think what what what drew me to this opportunity was this device that is now in all of our pockets but back when we started off her up you know very few people had smartphones in fact there was no Android phone.
So you know what I what I could imagine at the time was like look I just wanted to make these.
I just wanted to clear out this room like quickly and there was no easy way to do that so,
again looking at this device that had was now in my pocket I just kept wondering to myself can we is it time to reimagine what local can be.
You know through these devices so that’s what ultimately you know created this spark for me to want to you know pursue this this this opportunity.

Jason:
[5:07] That that’s awesome and it’s it’s probably a coincidence I feel like I probably shouldn’t even lump the two of you together but
there’s a prolific track record of entrepreneurs coming from T-Mobile and being very successful at raising funds and I know this because,
the the guy I’m thinking of has the same name as me Jason Goldberg fab.com so.
That may not be good news for you but you’re following in his footsteps.

Scot:
[5:37] So what year did you found OfferUp is this like 2010.

Nick:
[5:43] I lose track of time and to be honest I thought like.

Jason:
[5:46] We’re all doing that now.

Nick:
[5:47] I’ve years ago I think 90 now yeah.

Scot:
[5:50] Okay so yeah right when the iPhone one came out so I was good timing
talk us through the funding history I looked up on crunchbase and they were very specific they said you’ve raised 381 million that was funny they couldn’t round up anyway congrats on that that’s that’s always you know,
fundraising isn’t the best measure of success but it is one so congrats on all the fundraising walk us through kind of the funding history there.

Nick:
[6:17] Yeah well I mean you know going back again to that that moment in my doorway in a room I wanted to clear out I think like like any entrepreneur
you have this big aha moment and then reality hits that you have to actually go build it and that’s when it gets hard and so.
You know again just you know why and I like to remind a lot of people that it people kind of tend to put us in this bucket of oh it’s mobile classifieds and I think.
That’s a fine public perception today but
that’s not to be clear not at all what I set out to build what we set out to build was you know to become the largest local Marketplace period
and that’s you know we what I saw as an opportunity was just unlocking local value and what I mean by that is you know 25% of.
Us households with the two-car garage it can’t park in the garage you know our homes are 30% larger than the 50s but we’re having less kids and so,
just so much stuff stuck in in our homes if you look at storage you know 10% of our population our at storage units but even beyond that and especially now
what about local retail what is what is in these stores like you can never you can’t visualize those things today and I think
the opportunity that I saw was you know again how do you.
Unlock all this value and my belief was it’s locked up because there’s a lot of friction in that experience and so.

[7:43] Anyhow that’s my long way of saying it took us a while to raise funds like the first year we only had a hundred thousand dollars raised,
and we just you know luckily I can code and design and my co-founder could you know set up AWS and set up the back end so between the two of us we pay ourselves literally nothing.
And just coded for basically a year straight.
Um and then year to we had to figure out how to get scale and I’ll spare all the details because I could go on for hours and all the failed experiments that we tried but that was very hard I was a very very hard time so ultimately.

Scot:
[8:23] Scale from a technology standpoint or scale from a user buyer-seller son.

Nick:
[8:27] Yeah buyers and sellers and so you know I used to show up to people who pretend you attend to your.
You posted your couch and OfferUp I used to show up and I’d buy it from you,
because we had very few post back then and I wouldn’t tell you that I worked at OfferUp I just wanted you to believe it worked and then I’d bring it back ultimately we had a small office I’d stick it in her office so you can imagine Five Guys coating it a few desks but just junk everywhere that’s what it looked like for a while,
you know it’s one of those fake it till you make it moments but it took us almost two years before we raised our series A,
and I think that was you know I think it was it was very hard I think a lot of people thought we were just trying to replicate,
and what had been done on the desktop you know I think,
you know we are all so early that was another lesson like you know we started really early and so there was no Android phones for a while and so I think that was another.

[9:24] You know I think it was one of those things where we just had to see smartphone adoption take off and then clearly we had to prove to investors that
we actually could get the flywheel to move in a Marketplace we could get buyers to potap by and sellers to post and just continue to get that final to work and so you know and when we raised our series a we were only in Seattle it was very very intentional
there was a handful of competitors at the time and I think they were probably really smart folks but,
on the technical side that I don’t think they were met you know really measuring and thinking about what is success and success is like its liquidity that’s everything and so,
we stayed in one ZIP code until we got that flywheel to Mu conversely we had competitors that were then launching,
they launched an app and so you can use it anywhere in the country and I you know I thought that was disastrous I thought that you know they were not going to.
Have success on liquidity so I didn’t worry too much about them so.
You know where as we raise more Capital over the years a lot of the focus has been early in the early days we just launching
new markets you know we stayed in Seattle for a year you’re so and then register a and with that Capital we wanted to prove that,
we could then roll into numerous other.

Scot:
[10:38] Yeah so you’re very knowledgeable out Marketplace is to just grind this out yourself or did you know how did you learn so much about marketplaces.

Nick:
[10:47] Yeah I have I have zero history in marketplaces that and so I actually think.

Scot:
[10:51] Scar tissue.

Nick:
[10:54] Benefit you know I remember hearing a podcast once with Reid Hoffman talking about.
Why PayPal was such a success and he said like look I didn’t come from banking like I didn’t know any better I just and I think that was the same.
The way I looked at this like I literally I can’t think of any time where we ever pulled up any desktop websites and marketplaces,
as an example of how to design OfferUp,
it was all just what what was the experience we wanted to create and let’s just design what that is a good example would be,
you know if you open up OfferUp today it’s going to show you items nearby you with some personalization.
And just like this infinite list of pictures when we launched nobody was doing that I mean this was pretty Instagram right so
it was a it was kind of a novel idea at the time and you know we wanted to kind of simulate this treasure hunt right we wanted to have this I just want to visualize
what’s in my neighbor’s garage or what’s in a business down the street so you know I think we’ve taken a lot of just approaches completely different and.
And back to your question I think that’s it’s probably just because we didn’t know any different.

Scot:
[12:11] Um so I noticed on the crunchbase list there you had some of the some of the late-stage guys some of the mutual funds that have kind of gone early that’s interesting and then I saw Max election so he’s a co-founder of a firm and then also part of the PayPal Mafia has that has he been a good
good addition to the team.

Nick:
[12:29] Oh yeah Max I’ve known Max just you know over the years and he’s always been very generous with his time and thoughts and.
Clearly very knowledgeable about payments and you know.
So I leaned on him periodically just to kind of pick his brain on what’s happening in the world and how he thinks about.
Your transactions and payments overall.

Jason:
[12:56] That is terrific Nick for listeners then might not be totally familiar with OfferUp can you kind of walk us through the basic buying and selling flow and kind of what pieces you you help facilitate.

Nick:
[13:11] Yeah for sure so I think on the buyers you know as I mentioned just briefly a moment ago our our view has been,
you know we want to you know we want to build the simplest largest and most,
trusted local Marketplace and that’s that shows up a lot in the product so you know when you open up the product think of it like walking into a retail store.
And we wanted to make it a very visual you know visual experience and luckily over the years one of our our.
Our beliefs was the cameras would constantly get better and we could you know really show these beautiful pictures you know it within OfferUp and that that has been true and so
you know that’s the first thing I think you notice is a buyer that it is a very different experience than going to a lot of traditional say desktop.
Marketplaces and that’s very intentional we wanted it to be kind of the treasure hunt we wanted it to,
be some elements of serendipity where you maybe are looking for a car and you end up buying a pair of shoes that that happens quite a bit you know on OfferUp,
and so you know our our average buyer you know is on OfferUp like three times a day they engage in OfferUp more like they engage in social media than they do in the traditional.

[14:32] Commerce and so yeah so if you’re a buyer and say for example you’re looking for,
I don’t know what’s popular right now like a lot of things are like like fitness equipment is on fire right now and think a lot of people are stuck at home and they can’t go to the gym,
let’s so let’s say you’re looking for some weights you scroll through you find something there by you then can then you can then read the profile about the cellar like how many radians do they have how far away do they live
do you have trusted connection through friends to that Cellar and you can read through just some overall profile information to make sure
that there’s somebody that you trust and her wanting to do business with and then the process of engaging on you know say those weights is actually very straightforward you can
if it is a shipping item you can just hit a button and have it shipped to you if it’s a local item you can just send them a message and say hey can we meet up tomorrow and,
you know the whole idea from the buyer standpoint was to make it you know a really simple experience but also back to this trust element having a profile and understanding who you’re interacting with,
not giving out your phone number like you know I think in a lot of traditional local market places you have to get your phone number to close the transaction,
um you know OfferUp is really Commerce wrapped around chat so you can communicate all the way to the point of cell without having to give it out personal information.

[16:00] And then on the seller side it’s literally as easy as taking and sharing a photo so like this chair that I’m sitting on right now if I wanted to sell this on OfferUp I would just pop my phone I would take a picture I would give it.
You know a price and maybe a short description and hit post and and less than 30 seconds my chair is now available for the local community to discover and we tend to find that,
people get engagement extremely quickly you know we’ve heard people that you know taking pictures and within a minute you know they get a whole bunch of Engagement.
And you know itself things very quickly so you know like I said that’s that’s a big focus of the product and will continue to be which will be removing,
friction and in the experience and so I think we’re far better today than I think the desktop players just because we’re leveraging.
The power and the smartphone but I still think there’s plenty of plenty of ways we can reduce friction for buyers and sellers.

Jason:
[17:03] Awesome so so your to set the marketplace buyers sellers can list items buyers can find items they negotiate amongst themselves on pricing,
do you offer an option to facilitate the transaction or do you get into the payment element at all.

Nick:
[17:25] We do if you enable your item for shipping so when you post an item as a seller there’s a toggle on there to enable shipping or only do local
that is a very fast growing part of our business we launched that in 2018 especially right now with,
with the people stuck at home it’s growing very very fast so you know and that case we take a small percentage,
of the transaction to be able to facilitate payments between buyers and sellers.

Jason:
[17:55] Gotcha and by the way you made me super nostalgic in the beginning when you said imagine walking into a store because that
we haven’t been able to do that in a few months and it’s like you know it seems trite now I know it was like a much bigger bet in 2010 when you jumped on it but like the the Insight that,
The Experience on the mobile phone would be dramatically different and lower friction than than the traditional desktop one is kind of big and I feel like.
Your.
Optimism around the camera I like it keeps paying dividends because I know the new Apple phones that have lidar enem I could imagine you’re gonna be able to get the dimensions of that that desk or chair that you’re selling.
Now or in the in the near future up those kinds of devices.

Nick:
[18:46] Oh yeah I like I said I think there’s.
We will continue its I always say that we’re kind of Reinventing herself every year so we’re going back and we’re going yep we can make this process better we have let’s save some time here so they’re just so much more we can continue to layer on the marketplace that we have but
back to the point.
You know it’s just these devices continue to get more and more powerful and we can leverage that to make it a better better experience for our customers.

Scot:
[19:17] Wrinkle so you guys recently announced with your last round that you’re acquiring one of your competitors called let go tell us about that and how that’s going and why you’re doing it and.
It’s always imagine you’re in the midst of integration that’s always fun.

Nick:
[19:36] Yeah so I mean you know I think the there’s a huge opportunity in the US and I think any time you’re going after a large Market you’re going to have competitors so as I mentioned even when we started we had a handful of competitors,
but I think we were the first to really start to get meaningful scale in a pretty big way.
We tried to stay as quiet as we could for as long as you could we delay doing press for a number of years we just kind of.
Hung out in our office which is in the swamp in Bellevue Washington and didn’t really tell a lot of people what we’re doing but ultimately,
you know we saw that go enter the US and.
You know I think what became interesting over the years was just kind of how we approached you know the market we’ve gone very
deep into many of the top 30 dmas and the country,
as you know as OfferUp we have markets like Phoenix and La where over 17 18 percent of the adult population in those markets is using OfferUp every single month.

[20:41] Um and with let go they you know they are as I said have more of a presence and other parts of the country and then so I think that right there made it.
Pretty intriguing to explore working with them more as we think about how do we how do we grow in other parts of the country even more how do we kind of drive a local adoption where we’re already strong.
So we thought there were quite a few synergies and not a ton of overlap I think people tend to gravitate.
To the market places where they have the most success I don’t think most users are going to use you know a whole bunch of these I think they’re just really going to focus on the ones that,
is producing the best value for them so you know I think that right there was you know as we spent more time with them it became more intriguing that there was a good you know Synergy in our in our businesses.
And then on top of that you know as we wanted to come together we just have a lot of you know I think,
product development ahead of us and things we wanted to build so you know raising capital on top of that was was intriguing it as well and so we’re feel fortunate that their investors invested and,
you know we have I think some of the best investors on the planet and OfferUp and they also participated it in this financing to.

Scot:
[22:06] Are you going to there’s one strategy and mobile apps to have kind of two apps out there because it’s almost like more virtual shelf space are you guys going to have kind of two apps a little bit of different flavor are you going to consolidate them into one.

Nick:
[22:19] Yeah well we think there’s a lot of opportunity ultimately in having one experience but we are definitely going to,
tread lightly and into as we explore integration with them the best way to do it so we don’t want we really want to make sure that,
you know we’re taking care of the let-go users and taking care of the OfferUp users as best we can but we’re,
I guess the point is we’re not going to just flick a switch we’re going to spend quite a bit of time and making sure we’re being thoughtful about how we how we come together.

Jason:
[22:51] Yeah the mobile app stuff is always very tricky because obviously like it’s super hard to get customers to download an app and be and particularly its even way harder to get them to be a regular user of that app and so.
Fragmenting your audience amongst multiple apps you know comes with some baggage but first God’s Point like it also potentially.
Boost your visibility in that App Store.
A random side no just because it’s so sad it’s funny but one of my big clients is Walmart and they’ve had this.
This multi-year debate about if they should have two apps general merchandise and grocery or one and I’ve always strongly felt they should have won,
a few months ago they finally agreed to do that and then a month before they merge the two apps covid-19 pandemic hits and the way it 10x is downloads of their grocery out.

Nick:
[23:46] Yeah you can’t you can’t predict that.

Jason:
[23:49] No no so I briefly thought I finally won that argument and then the the community the world spoke.
But I do I noticed that you like to increase the level of difficulty you were just having a kid and you decided to throw in a start-up and like you decided to do a big round of funding and a merger in the middle of a pandemic so.
Props to you for that.
Um the you know to set of marketplaces are super interesting from a marketing standpoint like there’s a lot of debate one big debate is do you expand geographically or not and it sounds like you guys made a.
Intentional decision to get a concentration in some Geo’s before you expanded but the other big question is.
Can you know can you really lean into marketing to one side or the other right so are you no do you try to in hand.
Entice Sellers and then that will like pull in the buyers or do you and try to you know do you try to get buyers and that’ll pull in the sellers like has there been a.
A strategy that’s been particularly effective for you or how do you think about that.

Nick:
[24:58] Yeah so you know in the early days if I was to say what was one of the harder periods and.
It’s going OfferUp it was definitely getting the flywheel to move and I’ve heard a lot you know a number of people say building marketplaces are really hard and then they’re also really hard.
To kind of break down and you know I know that pain because not only did we figure that in Seattle but.
Every time we entered a new market essentially we were creating a brand new Marketplace so you know what
I used to know what we used to spend a bunch of time on was looking at kind of the overall metrics that really mattered and I used to always say hey we need to get neighborhood sick we need to create the zombie apocalypse
like how do we get you know how do we get you know how do we get the flywheel to move where the seller post something then the buyers there and the buyer has an amazing experience and then they tell their friends and family and it just kind of keeps going and going and going and you know,
what what are those attributes of those markets that are really material and what we found early on was.
Population density definitely matters to a certain degree.

[26:04] You know whether matters like do you really want to move a couch and in Chicago,
in the dead of winter we actually you know we’re thinking about that and then we said no like nobody wants to do that and,
and so luckily we found markets that that we thought you know just had the right attributes and we really over invested in those markets and Allah is a great example I mean I always had massive Market a lot of people have cars they can move Goods around
the weather’s nice most of the year it’s very viral most of OfferUp s’ growth is we spend dollars on marketing but to be clear most of it is word of mouth and I think that’s it goes back to the obsession over the product and,
created a really simple experience between buyers and sellers and and because of that you know most people I run into ask them how they heard about OfferUp and it’s usually friend friend or a family member.
So

[27:02] Yeah those were I think some of the harder learnings in the beginning you know today where I you know I really give kudos to my marketing team like a lot of the work they do I mean we do all of our marketing in-house a hundred percent,
um you know and that team.
All kind of works together external marketing internal Communications and we’re constantly call them day Traders they’re constantly
um you know looking at markets differently and sometimes they’ll try to drive more Supply and Target sellers more sometimes they’ll pull back but they are constantly iterating all throughout the country
sometimes at a national level but many times on a local level to kind of make sure that,
supply and demand balances is where it needs to be.

Jason:
[27:50] Awesome and then we talked earlier about like when they check that that available for shipping option that you potentially can facilitate payments,
I forgot to ask.
Right is that exclusively through I could traditional credit card processor or do you guys offer like I imagine consumers could do this outside of you but do you guys facilitate any kind of digital wallet like a PayPal or something along those lines.

Nick:
[28:18] We don’t today but again this is a big growth area for us and I think there’s a lot of opportunity.
To make a much better payment experience in the US.
Especially now if anyone’s gone shopping recently who the heck wants to carry cash around anymore who wants to touch these POS systems at now like the one at the store down the street from me has like a piece of Saran Wrap over it,
and then it and then it right next to it it has a bunch of hand sanitizer so an egg.

Jason:
[28:54] Was already unappetizing now it could kill you.

Nick:
[28:57] Yeah now I can kill you right and so.
If you look to the rest of the world I feel like we are so far behind in the US and you know I’ve had people ask me well why is that and my response is usually you’re asking the wrong question to be asking who what company.
You know is going to be the one that helps to drive this and and I think you know because of our local presence and how many millions of monthly meetups we have and.
You know we have more kind of merchants Now using OfferUp you know I think there’s a big area there in the US but I get I get more and more frustrated.
Week after week of trying to figure out you know another new POS system I could go in there well if I put the chip in all y’all do the chip and then you hit this button why did I gotta do this and I’m.
I just want to pull your hair out every time it’s not a great experience and it needs to needs to evolve.

Jason:
[29:49] Yeah I actually have an Instagram feed that is exclusively pictures of handwritten notes on POS terminals explaining how to use them.

Nick:
[29:58] I gotta I gotta I gotta follow you then because I hear hear.

Jason:
[30:00] It’s Saturday it’s not hard to find.

Nick:
[30:03] Yeah.

Jason:
[30:04] Now how to find material and yeah it’s funny because it’s like people forget but PayPal and the US and Ali pay in China they you know their original purpose was not necessary to digitize cash it was,
to you know create a more robust trust system for peer-to-peer transactions and so I could certainly see that playing out.

Nick:
[30:28] That’s and that’s a big part 2 I mean that is that is a big part is really,
bringing trust into local transactions you know and and online you know it’s,
it’s already there anyway if you’re shipping things it’s already you know that’s that path has been proven again and again so this is definitely an area where we’re pioneering and there’s still a lot to figure out but something I’m definitely passionate about.

Jason:
[30:53] Nice and then unfortunately is like it’s things start opening up from the pandemic we’re likely going to be in a.
Some flavor of recession and you know a lot of consumers could be tighter on credit so you know I could even imagine things like like the installment model and things having a.
Having a role but in addition to that the other thing that would.
Maybe fit at some point is do you guys think about ever helping to facilitate that shipping when that’s an option.

Nick:
[31:25] Yeah so so today we as I mentioned we introduced this in 2018 we have payments and
we’re presently enabling shipping for items under 20 pounds and under $500 so you know part of that was simply just to kind of get the foundation and get the Kinks figured out and there’s been a lot of work,
as you can imagine when we first launched that but over overtime like I envisioned that anything on OfferUp should be,
deliverable in some way shape or form so I think there’s a lot of work to figure out how to do that the right way,
so that will continue to explore different ways to do that.

Scot:
[32:09] So if you’re if you’re not in the payment flow then unlike a traditional Marketplace like an Amazon or Ebay then presumably you’re not taking at a crate
so explain to us what is the business model where are people paying the list or our walk us through kind of the different areas where you make money.

Nick:
[32:31] Yeah so there’s there’s two different I’d say kind of buckets for monetization today at OfferUp and the first one is promotions and the second one is paying so
you know when it comes to Promotions our Focus there simply to help sellers to be more successful.
So you know we have first party ads for example where you know you could come in as a seller and you know you can pay it increase your visibility on the platform
just helps you sell things quicker there’s also a reoccurring subscription model there where you could say okay
myself quite a bit you know I’m going to I’m going to pay a monthly fee and I’m just going to keep rotates a five items into that into the feed
and we and we help to that seller to sell those items faster,
we also have a Autos business where you know this this was
I’d say a vertical that just blew up on us that we had we had wasn’t like we were Geniuses I swear there was probably just a convention
one year and I think Vegas and I think somebody must have stood up and said hey I’m selling a lot of cars on OfferUp and all said and this vertical just beginning.

[33:46] Huge for us across the country and so in the last few years you started to spend more time
thinking about how we can help auto dealers to be more successful so that is another promotional tool where we integrate with their their dealer management system so they don’t always have to use the app you know if a car goes on the lot the magically goes on OfferUp.
We also give them advertising analytics they get a special badge on their profile there’s a handful of things we do to make sure that
this they stand out and so we have thousands and thousands of paying car dealers and that’s growing very rapidly,
and then on the payment side it’s you know today mostly shipping as I mentioned.
And that’s that’s why we’re taking a small percentage of transactions there.

Scot:
[34:36] I’ve also seen some ads like a big Star Wars fan I see game stock advertisers bunch of cool stuff in the Star Wars category is that is that if you guys built your own ad Network or is that pulled from like another ad network of some kind.

Nick:
[34:49] Yeah so we incorporated you know the third-party ads that you see in there are a number of years ago primarily because it was easy one and two it actually.
Helped buyers and it was one of those where I was saying we’re never going to put ads in there it’s going to ruin the feed.
But I found actually the opposite was true where buyers were finding that hey maybe if I couldn’t find that kids bike down the street that I wanted but maybe I could see one you know,
from a you know some local retail store and have it shipped to me or go go buy it.
The other thing that it did was also enabled people to do some pricing comparison right so they maybe they see that brand new bike and they see one very summer,
in the feed and they realize they’re getting a really good deal on that so we do do some third party advertising which you can kind of see through out the feet as well.

Scot:
[35:47] Yeah I think you guys do a great job at it there’s a price and it’s very clearly an ad where it’s not like you know someone named other marketplaces where you’re kind of like you know
Max why is this showing up and you’re targeting is really good to other ones you’re kind of like why am I seeing this random iPhone accessory when I’m over here looking for couches.
So so that’s super helpful you mentioned earlier a bunch of kpis to get the liquidity going give a give lister’s any metrics you can share and you know I don’t want you to
get it any uncomfortable space but anything you can give us about the scale of the business to help them understand I think that would be interesting.

Nick:
[36:26] Sure yeah so I think the you know what I would say you know going back to.
Be buying things from people in the beginning liquidity and my mind is everything you know the switching cost to join to try any marketplaces,
is not not that high so we wanted to make sure that we were we were the best Marketplace we could be for local buying and selling so,
you know what I could say around that is you know on a monthly basis we have billions of dollars in GMB,
from transactions happening on OfferUp and so it’s great to see that we’re providing that value and success for buyers and sellers.
You could also probably glean this from the App Store but you know the OfferUp app is now but installed over 90 million times we’re only focused on the US.
So we’ve been a top I’d say we’ve been a top-10 shopping app for many years now so I’m pretty proud of that considering.
You know we’re up there with giants you know multi billion dollar publicly-traded companies so it’s pretty happy to see that.
You know people have been telling others about OfferUp at such a high rate that it’s kind of.
You catapulted us to the top and we’ve been there for for such a long time.

[37:45] And I think I think the other thing again but I’d share is kind of what I said before is we have markets a lot of our special you know top markets where you know we’re close to 20% of the entire
adult population using Opera every month and I think that’s only going to get better as we continue to improve on the product experience and drive more,
you know adoption there.

[38:09] Let’s try to think again maybe something worth sharing with listeners around just what’s happening you know with the marketplace today and so,
you know if anything you know I really feel for.

[38:22] You know a lot of people and what they’re going through out there right now I think a lot of businesses are hurting not just for additional but also tech companies and.
Fortunately for us it’s the opposite like we are we have been growing so quick over the last number of,
months and the categories are really changed like I think part of the challenge is people can’t you know they can’t go to the store down the street so how are they going to get certain Goods,
and so our shipping business or seeing a lot more people shipping things electronic specially videogames I think video games are very you know trying to keep the kids busy.
You know locally we’re seeing a lot of what I call kind of porch pickups where people said hey let’s stay stay stay safe as socially distance but hey I’ll just leave the you know just leave the dresser out on the.

[39:17] On the on the on the patio or the door and just leave my knee or the matter.
Ring the doorbell and show me that you’re leaving the money there so I think there’s,
you know I think people are behaving differently but we’re definitely seeing a shift in categories where like I said like Fitness is way up household goods Electronics tools,
things around the yard so not I don’t think surprising for most people but definitely seeing it’s been great to see how OfferUp during this time is able to really you know help help people and how those categories have changed.

Scot:
[39:57] Sprinkle the so we saw such an advisor when I say we is interesting we saw the
the stimulus checks hit like starting on the 15th and it’s we saw this kind of overall lift this is all public from webinar we saw this overall lift and then like this really interesting kind of taking off into another gear around then,
did you guys see anything around that stimulus check time.

Nick:
[40:23] Yeah so the you know this is an interesting time of year for OfferUp heart of it is usually spring cleaning,
and that’s definitely happening quite a bit but we’ve also noticed
around stimulus and and tax time it definitely a lift you know you can you can tell when people are getting their taxes or tax refunds and stimulus check so by the day as you can see like this huge,
step up and overall engagement.

Jason:
[40:55] Yeah like on the flip side of that are you finding any extra challenge like you know a lot of your goods were we’re sort of handed off person a person and I imagine there’s extra trepidation about.
Social distancing and stuff like that are you having to take extra steps to make people comfortable with with person-to-person transactions right now.

Nick:
[41:19] So we you know we spent a lot of time just kind of thinking about this and we have a Blog where we posted kind of our overall points of view and guidance on that I think the challenge clearly is it say,
it’s a local city by City,
decision and it’s still shocking to me that there’s still a number of cities that haven’t really quarantined so you know I don’t think it’s our call to be specific.
On exactly what you should and shouldn’t do but we did have some overall high-level guidelines and encourage people to pay attention to what you know your city and officials are saying locally and try to adhere to those.
But I think it’s a definitely a kind of a,
get a thread the needle lightly because we want to be able to help people but we want people to be safe and especially when stores and resources are close like where can they get things right now and so,
I think in one level we’re providing a service to help people but we want them to be safe and adapt.

[42:26] You know we’ve seen auto dealers for example selling cars right now and you’re kind of like well how is that working and what you’ve seen them do.
You know the post an item on OfferUp and they’ll communicate around it and then they’ll jump on the phone with the the buyer and they’ll do title and they do all the paperwork and financing.
And they just bring the card I just bring the car to the buyers house and they just wave at him out the window here’s your car congrats and I’ll leave the key right here for you and.
So this you know you’re seeing people you know adapt during a time like this to figure out how to how to make it work.

Jason:
[43:05] Yeah that’s fascinating and you mention Auto which is a an interesting category to me like you you don’t necessarily think of that as a.
Peer-to-peer ton of play but it really is right like is that a category you guys entered intentionally or was that a pleasant surprise or how is that played out.

Nick:
[43:27] Yeah so as I mentioned a little bit earlier it was it was a pleasant surprise I would love to say we were Geniuses and really figured something out there but,
um I think it’s again back to,
trading this this very easy to use local experience I think a lot of dealers started jumping on our platform because it was so easy to list cars and attract a lot of buyers,
and so we just move clearly benefit benefited from that so you know I think I definitely think today we’re probably one of the top places in the country,
to buy a car I mean we sell.
Millions of millions of millions of cars on offer up every year and so you know it’s definitely a big vertical for us that will continue to invest in.

Jason:
[44:15] That that’s awesome the like another one that I’m just somewhat curious about so I try to follow the Platforms in China pretty closely and obviously you don’t taobao is,
is a huge consumer to Consumer platform there and one thing I’ve noticed over the last like four or five years is.
They have dramatically pivoted from being super product-centric like being a catalog of product to being very content set direct so they’re like really leaning into the microblogs and the short video and all those sorts of things,
like I haven’t seen that as much by anyone in the u.s. like do you think that could work in the US or do you think there’s just a different sensibility or.

Nick:
[44:58] And just to elaborate on what you’re saying are you are you talking about where people are showing off products and are these short videos.

Jason:
[45:07] Yeah yeah it gets it’s like a seller would you know now is likely to have their own page on you know I like think of it like a microsite on taobao and they’re they’re doing like HSN Style,
you know what a little 60-second product demo videos to sell their goods.

Nick:
[45:26] Yeah I mean I think that’s definitely interesting you know I think that’s something that we could continue to explore and play with overtime,
you know I think there is a time and place for that
especially if you’re a power sellers selling you know a lot of items and you want to build some Affinity around what you’re doing you know today at least you know the majority of OfferUp is really kind of overall,
you know peer-to-peer so.
I wouldn’t say your I could see your average seller doing that and depth but I could definitely see I think more powerseller spending the time to do that and then again like I said before these,
phones keep getting better right the quality is getting better all around and so I think it’s just a more engaging experience versus what,
you know what it may have been in the past.

Scot:
[46:18] That’s a good let’s let’s explore that so you obviously spend everyday kind of marinating and the e-commerce juice of marketplaces and transactions or anything where do you think things are going to go in the next three to five years or we’re going to have like.
AR VR or do you think it’s just going to be better kind of experiences along the lines of what we’re having here.

Nick:
[46:39] Well I mean I definitely think there’s a big there’s a big movement happening it’s already been happening but
I think because of covid it’s probably going to move quite a bit faster and that is just the overall again unlocking of local value in my mind you know
85% of Commerce,
it’s still not online today it’s local and I think for everyone that’s in Tech we’ve kind of scratch our heads and like Oh I thought we all used you know the big e-commerce players that are out there and,
um I think they will continue to evolve and probably grow and chip away at that number,
but I think there’s just a lot of Locked Up value all around us and you know part of our vision is how do we create the best experience and help.
You know sellers to bring those those things online so I think that that moment is going to happen,
at an accelerated Pace especially right now you know I think there’s a lot of struggling businesses that,
you know soon as covid hit and their physical store closed then the answer was like well now what do I do and so,
you know if they can bring product online we can help to facilitate those those transactions in the pretty meaningful way so.

[47:59] My vision for OfferUp has always been I just I just want you to open up the app and for almost anything you need locally we have it and we’re able to help you facilitate that in the easiest possible way that we can do that,
so you know again it’s great to see
that we already have you know huge percentage of the population using the product and buying and selling things you you know billions of dollars worth of goods every month but I still think we’re in the first inning I think there’s just a lot more we can do,
you know for our customers.

Jason:
[48:30] Cool nigga you know one thing that we haven’t talked about yet is,
our friends at Facebook like they obviously have this Marketplace platform is that a direct competitor is that like how do you think about Facebook Marketplace and is that getting any traction.

Nick:
[48:46] Yeah I mean to be clear Facebook has had some type of Commerce even before we started OfferUp I mean you know I think,
Facebook has definitely been,
you know a large Network and there’s there’s a zillion different things you can do on there including Commerce so you definitely have to take them seriously you know as a competitor.
You know I think the other thing that I think gives me you know some level of comfort is just how many different things they have to focus on as a company like it seems like.
For every competitor that comes out they immediately have a solution or they’re trying to create their own there so I think they have many different things they’re trying to do and we have one and we’re going to go very deep and do that thing.
The best that we possibly can and obsess over that but you know definitely a competitor and as I mentioned.
Anytime you’re going after a large Market you’re going to attract competitors so.
Yep they’re the out there and definitely definitely spending time on Commerce for sure.

Jason:
[49:55] Yeah it’s usually a bad sign if no one else on the planet ever wants to go after the same Market you see.

Nick:
[50:00] Yeah your idea is probably not a good one.

Jason:
[50:02] And Nick that’s actually going to be a great place to wrap it up because we’ve used up our allotted time but if listeners have any comments or questions
we encourage you to continue the conversation with us on Twitter or on our Facebook page and I really want to thank you for
taking time out from this crazy pandemic to talk with us about marketplaces.

Nick:
[50:26] Thanks for having me it was good to finally talk to someone else because I’ve been hunkered down in my Den now for seven weeks so thanks for getting me out of the office mentally.

Scot:
[50:39] So we really appreciate it and then if folks want to follow any of your thought leadership or anything do you are you a Twitter or you still on prinster you mentioned that was that earlier.

Nick:
[50:51] Yeah you can find me on Twitter at Nick huzar.

Jason:
[50:56] Awesome and we’ll put that in the show notes so everyone be safe and well out there and until next time happy commercing.

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EP216 - Marketplace Pulse founder Juozas Kaziukenas

Episode 216 is an interview with Juozas Kaziukenas aka “Joe” (@juokaz), the Founder and CEO of Marketplace Pulse (@marketplacepulse).

In this interview, we discuss the state of North American marketplaces, their trajectories, and current impacts of Covid-19.

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 216 of the Jason & Scot show was recorded live on Thursday, April 17th, 2020.

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EP215 - What to read during a pandemic

This episode is a list of suggested resources to read for those looking to do some professional development in the commerce space. (all book links are amazon affiliate links)

The episode also features an interview with Rishad Tobaccowala (@Rishad) Rishad’s is the author of “Restoring the Soul of Business: Staying Human in the Age of Data” published by Harper Collins. Additional writings can be found on the Re-Inventing blog. The interview starts at 15:50 of the podcast. Rishad also has an amazing photography feed on Instagram @RishadT.

Another book mentioned on this list is Remarkable Retail: How to Win & Keep Customers in the Age of Digital Disruption – Stephen Dennis. Stephen is hosting a virtual book launch party (including @retailgeek and some e-commerce celebrities) on Tues April 14 at 4:15pm ET, that will include myself and some commerce guest stars. Pre-register here.

Here are some always updated resources:

A complete list of recommended books for commerce Pros (including a superset of the list provided here, is always available here: Recommended Books.
A list of 250 commerce influencers to follow on twitter. That list includes 50 commerce journalists.
A list of recommended commerce podcasts.
A list of recommended commerce websites and newsletters.
Finally, when the pandemic is over, here is a list of commerce events.

Here are all the specific resources mentioned on todays show: Personal Development * How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life – Scott Adams * Win Bigly: Persuasion in a World Where Facts Don’t Matter – Scott Adams * Loserthink: How Untrained Brains Are Ruining America – Scott Adams * The Catalyst: How to Change Anyone’s Mind – Jonah Berger * Restoring the Soul of Business: Staying Human in the Age of Data, Rishad Tobaccowala

Startup / Entrepreneurship * Good to Great: Why Some Companies Make the Leap and Others Don’t – Jim Collins * Turning the Flywheel: A Monograph to Accompany Good to Great – Jim Collins * The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail – Jim Collins * Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers – Geoffrey A. Moore * Zero to One: Notes on Startups, or How to Build the Future – Peter Thiel * Hard Thing About Hard Things – Ben Horowitz * What You Do Is Who You Are: How to Create Your Business Culture – Ben Horowitz * The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses – Eric Ries * The Checklist Manifesto: How to Get Things Right – Atul Gawande * Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader – John Rossman (John was a guest on Episode 181) * Extreme Ownership: How U.S. Navy SEALs Lead and Win – Jocko Willink * Future Is Faster Than You Think – Peter Diamandis

E-Commerce / Retail / Case Studies * Sam Walton: Made in America: My Story – Sam Walton * I Love Capitalism!: An American Story – Ken Langone * The Perfect Store: Inside eBay – Adam Cohen * In The Plex: How Google Thinks, Works, and Shapes Our Lives – Steven Levy * The Facebook Effect: The Inside Story of the Company That Is Connecting the World – David Kirkpatrick * The Everything Store: Jeff Bezos and the Age of Amazon – Brad Stone * Reengineering Retail: The Future of Selling in a Post-Digital World – * Doug Stephens * Remarkable Retail: How to Win & Keep Customers in the Age of Digital Disruption – Stephen Dennis * Billion Dollar Brand Club: How Dollar Shave Club, Warby Parker, and Other Disruptors Are Remaking What We Buy – Lawrence Ingrassia (Larry was on Episode 207)

Movies * Glengarry Glenross * Boiler Room * The social network * Girlboss – Based on Nasty Gal founder Sophia Amoruso’s autobiography #Girlboss * Office Space * Startup.com

TV shows * Undercover Boss * Shark Tank * The Profit * SiliconValley * Halt & Catch Fire * Mr Selfridge * Succession * Mr Robot * Black Mirror

Non Conventional * S1s – Casper, Chewy (Retail Roadshow) * Shareholder Letters (Amazon, Berkshire Hathaway) * Company conference calls – (Amazon/eBay/Shopify/Etsy/Alibaba) * Investor Relations

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 215 of the Jason & Scot show was recorded live on Wednesday, April 8th, 2020.

http://jasonandscot.com

The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

The Facebook Effect: The Inside Story of the Company That Is Connecting the World

Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader

Reengineering Retail: The Future of Selling in a Post-Digital World

Remarkable Retail: How to Win & Keep Customers in the Age of Digital Disruption

Zero to One: Notes on Startups, or How to Build the Future

Loserthink: How Untrained Brains Are Ruining America

Billion Dollar Brand Club: How Dollar Shave Club, Warby Parker, and Other Disruptors Are Remaking What We Buy

The Everything Store: Jeff Bezos and the Age of Amazon

The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers

The Checklist Manifesto: How to Get Things Right

The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change)

Extreme Ownership: How U.S. Navy SEALs Lead and Win

Win Bigly: Persuasion in a World Where Facts Don't Matter

Crossing the Chasm, 3rd Edition: Marketing and Selling Disruptive Products to Mainstream Customers

Good to Great: Why Some Companies Make the Leap and Others Don't

Turning the Flywheel: A Monograph to Accompany Good to Great

Restoring the Soul of Business: Staying Human in the Age of Data

In the Plex: How Google Thinks, Works, and Shapes Our Lives

What You Do Is Who You Are: How to Create Your Business Culture

How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life

The Future Is Faster Than You Think: How Converging Technologies Are Transforming Business, Industries, and Our Lives (Exponential Technology Series)

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EP214 - Stifel Managing Director Scott Devitt on Covid-19

Episode 214 is an interview with Scott Devitt, Managing Director of Internet Equity Research at Stifel, in which we discuss the potential economic impacts of Covid-19.

In this interview, we discuss the travel, hospitality, and e-commerce industries, with a deep dive into some of the factors that will impact Amazon.

To receive Scotts research and analysis, send an email to him devitts@stifel.com and ask to be added to his distribution list.

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 214 of the Jason & Scot show was recorded live on Thursday, April 2nd, 2020.

http://jasonandscot.com

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EP213 - Deloitte's Kasey Lobaugh Recessions and the Future of Retail

Episode 213 is an interview with Kasey Lobaugh, Principal and Chief Retail Innovation Officer for Deloitte. This time we discuss a report Deloitte published last year "Boom, gloom, or doom? What the next recession might mean for consumer companies" which is suddenly very relevant to retailers facing the Covid-19 epidemic.

Kasey also gives a sneak preview of new report exploring the history of predictions around "The Future of Retail". Look for announcement about that research on Kasey's twitter feed @klobaugh

http://jasonandscot.com

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EP212- Jason & Scot Show Live Listener Questions About Covid-19 Impact On Commerce

Episode 212 is a live show featuring audience questions about Covid-19 and it's potential long term impact on retail. Jason & Scot get to interact with listeners live. It's also a rare chance to watch the podcast, as the episode was recorded with video, watch it on YouTube.

Subscribe to the audio version of the podcast at: http://jasonandscot.com. (or wherever you listen to podcasts)

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EP211 - ThirdLove Co-Founder David Spector

David Spector is the Co-Founder of ThirdLove, a digitally native direct to consumer women's intimates brand. Dave founded the company with his wife Heidi Zak.

In this interview with Dave, we discuss the origin of the company, their data driven approach to designing products, the challenges with scaling a DTC company, and the potential role of omni-channel. We also discuss their public feud with Victoria Secret.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 211 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Wednesday, February 26th, 2020.

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EP210 - Amazon Grocery and News

Episode 210 is a recap of the weeks news, including eTailWest recap, Amazon Go Grocery, Walmart new programs, impact of Coronavirus, and retailer earnings reports.

eTail West recap

Amazon

Amazon Go Grocery
Amazon Grocery Micro Fulfillment
Amazon Basics Bedding Pop-Up
Jason's Forbes article on digital grocery: The Race To Reinvent Grocery: How Amazon, Walmart And More Are Trying To Conquer The Space

Coronavirus

US malls ‘will be hit hard’ if coronavirus worsens, study finds

Walmart

Walmart+
Walmart Fulfillment Service (WFS)
Merchandising Reorg

Other

Saks - CEO Helena Foulkes to step down
Nordstrom - Erik Nordstrom named sole CEO
L Brands - Sells Victoria Secret, Les Wexler steps down

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 210 of the Jason & Scot show was recorded on Wednesday, March 4th, 2020.

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EP209 - Moosejaw CEO Eoin Comerford

Eoin Comerford is the CEO of MooseJaw. An omni-channel outdoor retailer, acquired by Walmart in 2017.

In this interview with Eoin we discuss Moosejaw's unique positioning as "The most fun outdoor retailer on the planet" and some of the innovative marketing campaigns Moosejaw has developed. We also explore their omni-channel strategy, rewards program, owned products, and some of the systemic headwinds facing the apparel industry.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 209 of the Jason & Scot show was recorded live from the Etail West tradeshow in Palm Desert on Tuesday, February 25th, 2020.

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EP208 - Elliot CEO and Founder, Sergio Villasenor

Sergio Villasenor (@sir_gee_ohhhhh) is the CEO and Founder of Elliot. Elliot is a modern, mobile first e-commerce platform that describes itself as: "The easiest way to sell there, there, there too, yes there & yes all the way over there. No-code e-commerce platform for every there & where you want to sell."

In this interview with Sergio, we get a great overview of Elliot's features, what sets it apart, and what their vision for the first is. Sergio also breaks some news about the platform. As of April 1st, they will offer a free SaaS version (except for payment processing fees), and will open source the entire platform.

You can join Elliots WhatsApp group by sending a message to 347-715-0728, and get early access to new features.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 208 of the Jason & Scot show was recorded on Thursday, February 20th, 2020.

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EP207 - "Billion Dollar Brand Club" author Lawrence Ingrassia h

Lawrence Ingrassia (ingrassia.larry@gmail.com) is the author of "Billion Dollar Brand Club: How Dollar Shave Club, Warby Parker, and Other Disruptors Are Remaking What We Buy". (Amazon Affiliate Link)

In this interview with Larry, we discuss many of the brands covered in the book including Dollar Shave Club, Warby Parker, eSalon, Mohawk, Anker and Tuft & Needle, as well as many of the ecosystem companies that developed to enable the DTC movement including Facebook, Quiet Logistics and Locus Robotics.

We discuss the trends of DTC companies turning to brick and mortar. New ways to leverage data to identify product niche (what Larry called the "money-balling of DTC), and what the future may hold for DTC.

We also cover events that happened after the book was published, including the FTC's blocking the Harry's acquisition, Caspers IPO, management challenges at Away.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 207 of the Jason & Scot show was recorded on Tuesday, February 11th, 2020.

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EP206 - Amazon Q4 2019 Earnings Deep Dive

Amazon released their Q4 2020 earnings on Thursday Jan 30th. In a holiday quarter that has proved to be challenging for many retailers, Amazon soundly beat analyst expectations, and raised their governance for Q1 2020, driving their stock up. Amazon's market cap is currently larger than the next six largest retailers combined, and their competitive advantage may be even greater.

In this weeks episode we do a deep dive into all the details of the earning report. We look at top line results, AWS, ads, physical retail, and Logistics. We break down what it all means, and leave you with our conclusions.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 206 of the Jason & Scot show was recorded on Friday, January 31st, 2020.

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EP205 - CES and NRF 2020 Recap

CES 2020 was in Las Vegas Jan 7th - Jan 10th.

NRF Big Show 2020 was in New York Jan 11-14th.

Scott Galloway (ProfG) hosting a 2020 Tech Prediction lecture the evening of Jan 14th.

PSFK Future of Retail 2020 event on January 15th.

We recap them all with a lens on what's relevant to retailers and digital shopper marketers.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 205 of the Jason & Scot show was recorded on Wednesday, January 23nd, 2020.

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Google Automated Transcription of the show

Transcript Jason:
[0:24] Welcome to the Jason and Scot show this is Episode 205 being recorded on Wednesday January 22nd 2020 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 show listeners well those of you that are regular listeners have probably realized we has been a little while since we put out a show
and the reason why is my colleague Jason here has been traveling like a crazy man.

Jason:
[0:55] This is true I have my annual fun start to the year with the whole CES in RF Marathon which I just got back from.

Scot:
[1:06] I thought this year you weren't doing CS what what what happened we had a client call and Russia.

Jason:
[1:11] Did end up yes having to go for a shorter than usual stay at CES but I did end up having to make an appearance.

Scot:
[1:18] What happens when you're the chief digital retail e-commerce strategist goes goes that way.

Jason:
[1:25] Yes when you yes it's true when you have that many words in your title like unplanned trips are part of the bargain.

Scot:
[1:33] Coco we thought would use most the show to kind of catch up on that and then try to work some news in there too let's start at CES in the first of all big question did you get any new gadgets.

Jason:
[1:45] You know a disappointing year for me personally and part of that may be because it was a shorter trip the,
the stuff like the stuff I tend to discover that like I personally want is maybe deeper in the CES catalog and I maybe didn't get to all of those booths this year I kind of had to hit the main.
Main Milestone booths so yeah nothing super excited I got I maybe have a little.
Personal problem hoarding Chargers and cables and so there are some nice new,
um third-party chargers for the Macbook so I did get a new anchor and the new hyper juice hundred watt charging systems.
Yeah no no super important purpose but yes I have some new Chargers that I have to hide from my wife I don't think she even cares about the spending I think she just cares about all the space that the unused.
Chargers take up in our life.

Scot:
[2:50] Yeah there's a drawer there where they all could live.

Jason:
[2:52] Yeah in my workshop it's more of a a system of drawers for.

Scot:
[3:01] They buy hcf like the 1985.

Jason:
[3:05] I mean people people laugh at me but then we need to find a 30 pin Mac charger for iPhone 3 I have one.

Scot:
[3:14] Boom I got it yeah.

Jason:
[3:18] Yeah so yeah got some new Chargers and I did this is kind of CES adjacent but I did get all new
networking hardware for my home office so I think you and I both did internet connection upgrades.
For the holidays and I added a fancy new firewall router access point and switch.

Scot:
[3:44] Furcal are you gigabit.

Jason:
[3:46] I am so so Comcast just add a gigabit in my neighborhood so we upgraded to gigabit and then I'm using,
this cool new device called the unify dream machine,
which is from I want to say it's a Ubiquiti networks and they do a lot of.
Commercial Wi-Fi equipment for like schools and institutions and things and so this is a a.
A Wi-Fi access point a firewall and and said a managed switches that are all controlled from their commercial software.
Way overkill for a home network but fun for tinkering.

Scot:
[4:35] Yeah I think I've seen one of those is it a it looks like a little cylinder.

Jason:
[4:39] It exactly so historically like they met they mostly make rack-mounted equipment and this is the first time they've,
they've made an all-in-one that that is supported by their sort of,
business level software and it looks like a cylinder and in fact it reminds people a lot of,
discontinued Apple Wi-Fi access point and so there's some people from that we're big fans of that,
that I forget what that was called like they are.

Scot:
[5:11] I had one I can't remember it's called him.

Jason:
[5:16] So yeah so people people think it's the spiritual successor to the Apple.

Scot:
[5:23] Cool what else any interesting Commerce news is he yes.

Jason:
[5:27] Yeah I actually thought it was a reasonably important year for Commerce,
like the Super Readers Digest version on this show it's the consumer electronic show I personally have been attending for 32 years it's the largest trade show in the u.s. like 200,000 people,
attend,
many years ago it was a buying show where people from retailers would go to figure out what they're going to carry for the year now it's mainly a PR show where they try to generate Buzz for new products to,
sell more new technologies but it's where a lot of consumer Technologies where watch for the first time so like the DVD player and the if you go back far enough the VHS.

[6:10] Tape system in the whole VHS beta War played out at CES,
and stuff like that in the Apple the Apple iPhone was famously launched during CES but not at CES as a Steve Jobs sort of did some clever counter-programming,
so people go,
both to like sort of do trend-spotting and see if there's any major new consumer electronics platforms that are coming down the path and from that standpoint I would like there's one big one that had the buzz I'll save for the end,
but there was a lot of smaller more tactical stuff that I think is going to have a meaningful impact on,
retail in particular digital merchandising it retailgeek.
So most of the listeners of this show are probably familiar with e-ink if you ever had a currently have a Kindle book reader it uses e-ink,
and it's a it's an important digital display technology because it's Dynamic you can change the image that's on it,
it's reflective so it works in super bright sunlight and it basically takes no power to display an image so you need electricity to change the image but once the image has changed.
It literally is moving ink around on the display and then you could turn off the power in the ink stays where.

[7:26] Where it was and so it's great for for not using a lot of power in an electronic book reader it,
great for having high visibility even in bright sunlight but a very common retail use case is it's the main display technology that used for all the digital fact tags that I talk about all the time.

[7:45] And one of the big drawbacks of e ink has historically been that it's only black and white or only black red and white or only black yellow and white so very limited,
color palette and so you couldn't do really pretty,
just blaze you couldn't use it for really pretty signs and this was the first year that they were showing full color E Ink that look very vibrant and High Fidelity and so.
You know we'll see you that.
You know maybe we'll have some color book readers in the near future and I suspect we'll see it trickled down to a new generation of electronic.
Price labels and fact tags for retail stores.
So that was an interesting technology and a way cooler display technology was released by Delta Airlines of all people.
And and so this is a new technology to sort of replace a.
Video monitor in a public area and it's called parallel reality and so Delta Airlines found this technology and invested in the company and they've announced that the first commercial deployment will be.
In the Delta lounges at the Detroit airport later this year.
And what this technology does is it lets a hundred people stand in front of a TV screen and have each of them get a different Custom Image that they see.

[9:13] So
so very precisely depending on where you stand you see a completely different image so the use case for Delta in this Lounge is all the customers stare at the flight status display and they all,
see a display that only has their flight information or prominently highlights their flight information.

Scot:
[9:32] Okay how does it know who's looking and we're there.

Jason:
[9:36] So first of all as soon as you describe this to someone they're like this sounds like it's going to be some kludgy gimmick and I was super skeptical so two halves of this problem the first half is,
can you really display an image that that is high fidelity and looks like discrete for each person,
and I went in with very low expectations and I was kind of Blown Away like it it totally works,
the the demo they had their like there's like the pixels weren't tiny so you could kind of see the pixels and,
the display is made up of a bunch of.
Of multiple smaller displays so you could kind of see the frame the internal frames so I'd say it wasn't,
but they were super open to saying yeah we know those are the visual flaws like we already have more advanced prototypes that solve those problems and what we deploy in Detroit later this year is going to.
Not have any of those those visual artifacts but basically what it's using is,
beamforming where they're essentially like each pixel is a projector and they can fire different color lights at different angles so by knowing exactly where your eyeballs are relative to the screen,
they can send you an image that's different from everyone else so that's the display technology as it's kind of like a projector inside of a television or.

[10:57] Thousands of projectors inside of a television and it works remarkably well and then you're very,
pertinent question how do they know who and where those eyeballs are to decide what to show each person and the answer to that is,
a combination of Wi-Fi RFID and your mobile phone so this is not,
this won't work for an anonymous use case in the Delta model the reason they're doing it in the lounge is everyone has to check into the lounge and show that they're a member so when you walk into the front desk,
you scan your mobile app they're using cameras similar to an Amazon go set up to track where you are in the lounge,
and they know who you are because you were holding a mobile phone with your unique ID on it to check in and then they're able to deliver your your unique flight information to you so it.
It's a kind of a combination of Amazon go for the identifying the person and their location and this new parallel reality display technology for,
for beaming the different messages and so it.

[12:07] It works better than I expected it seems pretty darn close to real we'll see if they're really able to get this in a while,
lateral out in an airport this year but like if it all works it's pretty easy to imagine a number of use cases for public displays and checkout systems and things like that and retailgeek,
what it would be really handy to be able to show different images to different customers on the same monitor.

Scot:
[12:30] Very cool was this the big one we're waiting for or know there's more to come.

Jason:
[12:36] No no more to come so the another interesting technology that like was kind of spooky as Samsung was showing this.
These avatars did they call neon life into these artificial humans,
and so you walk up to all these five or six foot tall monitors and if there's like a person in each Monitor and they can talk to you interact you with you and they look like.

[13:04] Completely real people like in so you would assume this was a video but these are computer generated people that are extremely lifelike,
and so the idea is that you could potentially walk into a retail store and you know there might be a artificial intelligence help agent.
That looks like a real sales associate that you're basically looking at through a glass window that can talk to you in,
and be more human that was the kind of use case that Samsung was pitching the the more interesting use case to me is like an you,
render different shapes and sizes of people and put apparel on them so you know could you could this be kind of like,
a digital mannequin scenario for retail stores and.
It was scary life like in the one thing I would say is they would call this an advanced science project so these avatars apparently took a super long time to build and they say that this technology is still three or four years away from being completely.

Scot:
[14:09] They have natural language parsing like kids or talk to them and.

Jason:
[14:12] They did but that wasn't part of the the magic so they were using that were using other Samsung artificial intelligence like in fact Bigsby is their artificial intelligent agent too
like decide what the Avatar was saying and to interpret what you were saying and so they weren't claiming any like.
You know new new Evolution there what was new about this neon life,
technology was how lifelike they could make the visual representation of a person and essentially you know it's,
it's like the next step to like not paying actors to be in the movie and instead having these these digital avatars that.
That will be acting in all the movies and stuff.
But I you know if it gets commercialized I can imagine a retail use case for that the next product that really caught my eye in this got a lot of Buzz at the show and I think this was a,
a darn impressive product came from L'Oreal and it's called perso,
Scot you may have followed this because I know you try to stay close to the beauty and cosmetics base.

Scot:
[15:24] I do.

Jason:
[15:25] But so the idea here is,
personalized beauty and cosmetic products that are formulated at home,
so so they initial concept has three different products there's a liquid lipstick product there's a,
liquid foundation product and there's a moisturizer so each of these is kind of a.
A metal cylinder like like one of those Yeti mug type things a metal cylinder and using an app you say I want this color lipstick,
and you know out of a set of holes in the top of this mug,
that exact shade of lipstick or several lipsticks come out that when you then blend them together with a in applicator or your finger like mixed to the particular color that you ordered.
And so the foundation comes out in a color custom color that you ordered the lipstick comes out in a custom color that you ordered and the moisturizer comes out in custom formulation that you ordered so it may be has.

[16:34] You know more moisturizing or sunscreen depending on the environment you're in or the the weather and a particular day and so the
to me the one that made the most sense in the kind of you know coolest use case is the lipstick they do things like you can point your camera at your outfit,
and it will recommend shades of lipstick that go well with your particular outfit and then it can produce,
that lipstick for you and so the reason I thought this was pretty impressive as it seemed to work really well people that tried it were seem to think it was,
not a gimmick that it was you know that they were quality products and they were totally legitimate and you know I've spoken to lots of women that think that the,
the custom shade of lipstick on demand would be,
total useful and I've smoked I've spoke to some women that think the custom foundations would be useful and I just think we're at this inflection point when more and more products are going to be customized for each individual user so whether that means
they're fabricated custom at a factory and quickly shipped to you or they have the ability to be customized in your own home this is essentially a
3D printer for Cosmetics or an inkjet printer for cosmetics and so I it to me it seemed like one of the first viable,
custom products in this category and one little Nuance that I thought was really clever about the whole thing.

[18:01] That the cylinder like could totally sit on your makeup counter at home and it seems like it would fit just fine but what happens when you want to take your lipstick with you and put it in your purse like that wouldn't work very well so it turns out the top of all of these cylinders,
is removable and it's magnetically attached to the cylinder so after you specify a color and it mixes some of that color up
you can just take the top of the cylinder off which is kind of the size of a makeup compact throw it in your purse and take your custom color with you so,
pretty clever and then you buy refill cartridges just like you'd buy refill ink for an inkjet printer.

Scot:
[18:39] That's where all the money is.

Jason:
[18:40] Yeah oh for sure but so I thought that was super interesting when you get into the Health Pavilion,
there were a number of players like one that caught my eyes was called DNA nudge and these guys are essentially doing a DNA test
and then they're helping you select,
Foods diet nutrition that match your unique DNA so again going back to this notion of customization that like,
you know the diet you select the foods you buy should all be predicated based on your your underlying DNA that they help you help you find.

Scot:
[19:20] Did you just come back and say error you are 99% an espresso beverage.

Jason:
[19:26] That is funny so I have.
Carefully avoided doing any of these DNA because I actually think there's some like significant privacy concerns and I like I don't know maybe I'm I'm.
Overly cautious but like I haven't wanted to just give my DNA to one of these for-profit companies with like dubious privacy policies.

Scot:
[19:53] Cool.

Jason:
[19:55] I don't know what about you Scott are you totally in on 23andMe do you do it like every month to see if your DNA is changing.

Scot:
[20:01] I've done both yeah it's pretty interesting.

Jason:
[20:03] Okay yeah I will be honest I would be totally.

Scot:
[20:06] Hi I don't have any murders out there I'm worried about.

Jason:
[20:09] Yeah well I read too much of a boring life to be very worried but I but here's the thing you could have an interesting relative that you're throwing under the bus by doing this.

Scot:
[20:18] Yeah they shouldn't do their crimes.

Jason:
[20:20] My fair enough,
yeah so again I can see it I might be being a little silly on that but I haven't wanted to do that so then you know it's the car thing is a big thing here they are,
like the car car tech now tends to get launched at CES not at the auto show.
So you know there's there's you know some interesting electronic prototype cars that may or may not ever see the light of day.
The huge thing I noticed this year in the car Pavilion is that every car seemed to have an Alexa integration like that seemed like that was.
Taking over as the like.
New cabin Tech that everybody was marketing and so I think Amazon announced that they're now over a hundred thousand consumer electronic devices that have Alexa embedded.
From more than 9,500 unique Brands and of course the new device with Alexa in it that I imagine you're going to need is the Lamborghini.

Scot:
[21:28] Yes absolutely.

Jason:
[21:29] I think that will round.

Scot:
[21:31] Finally took me over the edge.

Jason:
[21:33] Yeah that around out your stable just fine
they're like speaking of am Amazon Integrations I Amazon has a couple booths at the show they have a booth that's primarily focused on the Alexa and a lot of third party you know,
demos with that they have a booth in the home automation section dedicated to key and all the last mile Solutions and things but in the Amazon Booth one of the interesting ones was.
This this cpg company Reckitt beckon sir.
Commonly called RB they make a bunch of products like baby formula and finish is their big brand of dishwashing detergent.
And so they have upgraded all of their packaging to have Dash replenishment built in.
So when you get low on baby formula the box that you bought your baby formula in just recognizes that and automatically reorders more baby formula and when you get low on those.
Those PODS of finished dishwashing liquid the package automatically orders more for you.

Scot:
[22:47] The saw the Lamborghini thing in the it was funny there was like a poster which had like some amazingly handsome Brad Pitt of time looking dude and he said Alexa I'm hot,
and then she said she she knew to turn on the air conditioner.

Jason:
[23:05] Yeah yeah context.

Scot:
[23:07] So maybe wonder how often is Jason uttering Alexa I'm hot to his devices.

Jason:
[23:13] Yeah I feel like that's not even the most concerning thing you need to worry about me saying to Alexa.
I mentioned Samsung Bigsby earlier computer vision was a big thing I felt like half the booths were doing facial recognition for some nefarious purpose but Samsung built it in a refrigerators so,
in the past they've had these smart fridges that for example had a webcam in them so you could kind of like when you're in the grocery store and couldn't remember if you had eggs you could turn on a webcam and see the inside of your refrigerator.
Which I was like to point out probably wouldn't help you because your eggs are probably in a in an opaque car turn it Carton and you can't see how many are in there,
but that pesky detail aside they're now using Bigsby to do image recognition and take an inventory of your refrigerator so the smart refrigerator knows like,
that you have a quart of milk and how many times you've taken it out and likely how much milk is left in that core.

[24:16] So that was interesting there were a thousand Last Mile solutions that at CES so lots of people like with,
clever approaches and not clever approaches to porch piracy to delivering to your refrigerator to delivering to your garage to your car trunk drones and robots,
um
Kind of improved efficiency for for bow pass orders for store pick up orders and a lot of technology for like building mail rooms,
notify residents when they have packages all sorts of stuff like that so this is not really a retail show and so it's just interesting to me how,
booths were there like specifically solving a Commerce problem around the last mile.
Um so all those were interesting tactical things that I saw at CES that I think May,
may I make an appearance in the future of retail but by far the biggest platform that that you know was
the most strategically important that really had his coming out party at CES this year is the new wireless technology 5G.
So they've been talking about it CES for a number of years they've had prototype product but this is the first year that they have.

[25:38] Mass-produced products that meet all the certifications and work on networks that are deployed in the real world so this is kind of the
the first time that 5G was truly commercialized at CES and you know I I suspect in in the show's heart of hearts,
like if there's you know one news cycle that they want to win it's the you know the wave of coming 5G products and that everyone needs to throw out all their wireless devices and by shiny new,
new 5G devices and then it's going to magically change the world and there are crazy stats that they you know site about how much faster 5G is than 4G so,
you know hundreds to thousands of times faster bandwidth
way lower latency way more devices that can hang on the same networks and you listen all this and you go man 5 G's going to change the world it's the most important technology of all times and that's mostly.
The articles that are getting written about it but as I talked to more engineers and kind of you know.
Really started to understand what was going on I actually am now somewhat bearish on on 5G I think it's overhyped.

Scot:
[26:56] Yeah yeah they always the one I see that for his hearse like some remote surgery over 5G and you're like I don't think five G's going to solve the dead spots in fact up I have more dead spots because I won't be honest meat hours.

Jason:
[27:08] I'm not sure I'm going to be an early adopter of remote Robo surgery but if I am
I'm gonna insist that they have a wired connection to the robot and if for some reason they can't have a wired connection I would way rather have a Wi-Fi connection to the robot then a 5G connection to the robot.

Scot:
[27:25] Yeah we're going to belt and suspenders that puppy yeah if we're not yeah.

Jason:
[27:28] Yeah so it's going to be a long time before you ever going to do surgery on me with 5G but like here's here's the,
the huge Wrinkle In 5G that makes it kind of a mess technology for me is.
You know all these Wireless signals are over particular parts of the spectrum right and so like cellular signals and most of what we call LTE or 4G is,
in the 600 megahertz to 6 gigahertz range depending on which company and what what bandwidth they own and so 5G uses that same bandwidth,
and it uses some new band with that the government just sold the carriers that's at a much higher frequency and so it's what they're calling this millimeter wave frequencies and so this is,
20 gigahertz 295 gigahertz a way higher frequencies than the traditional Four G's and all of the,
dramatic improvements in bandwidth that they're talking about only happen on those new millimeter-wave frequencies.

[28:34] So the the 5G technology works on the 4G frequencies and it is faster but it's kind of incrementally faster in the same way that 4G was faster than 3G,
it's so call it
twenty to a hundred percent faster and then you get this you know hundreds to thousands of times faster when you get on millimeter wave and
so couple problems with millimeter wave number one it's mostly not built out and unavailable like there it's,
there are rumors that the the iPhone that comes out this year that will be the first 5G iPhone,
may or may not even support millimeter-wave but there's very limited coverage of millimeter wave in the United States like like when you don't company says they have coverage in a city that's probably one block that they cover
when this millimeter wave technology and then much bigger deal is that high frequency wave.
Is blocked by virtually any kind of structure so not only will it not go through walls it won't go through windows,
um so you won't ever get millimeter wave signal inside of a building for example.

Scot:
[29:45] Think you're gonna have to do your surgery in a tent.

Jason:
[29:48] Yeah exactly so a legitimate use case is
hey T-Mobile can compete with Comcast for internet bandwidth for Scott's home and if you buy it from T-Mobile what they're going to do is put a millimeter wave antenna on the roof of your building and run a cable inside of your house and convert it to a Wi-Fi signal inside of your house
and because the millimeter wave can be really fast to that antenna on your roof like they can legitimately compete with your,
your cable modem but you are not going to have a phone that you walk around in your office that's you know downloading movies in a second.

Scot:
[30:32] Nursing so a lot of infrastructure to be built to solve this millimeter wave from.

Jason:
[30:37] Yeah yeah and those those
like they need many more antennas and the antennas need much quote to be much closer together to really build out coverage for millimeter wave so it's a huge National infrastructure problem
and it doesn't seem like any of the carriers have really committed to like saturate their Market with millimeter wave yet so again you know most of what the carriers are talking about when they say 5G
is 5G over the existing 4G bands and,
it's a little better like I'm sure we'll all enjoy it but it it's by no means game-changing so that's that was kind of my,
my CES recap I think most people would say oh the big thing that's going to change the face of retails 5G I'm pretty convinced it's actually not but I do think a bunch of these display Technologies are,
potentially interesting and I really think that that this trend of more personalized products is super interesting for Commerce.

Scot:
[31:36] Cool so then you shot straight from Vegas Rider to New York and would a would you see it enough.

Jason:
[31:42] I did so yeah I got to do a prolonged my New York trip this year so I got there a little earlier,
as you know you and I were nominated for an award for best retail media and we were one of the finalists so I actually went to the awards ceremony on Friday night.
And I'm sorry to report that we did not win yeah so not a very credible award obviously I'm teasing.
Is actually the first year of this particular.
In our Enterprise and what they're trying to do is recognize suppliers for the retail Commerce industry because most of the awards are targeted at the retailer so that's kind of appreciate that and that's interesting and it was.
Very well-attended event for the first year but that sucked me into New York early so then I did the whole show I got to walk all the show floors,
and my limited time recap on all the show floors was,
that it was a very incremental year so rather than,
dramatically new stuff and new technology that you know didn't exist at the show asked year most of the booths in the main exhibit Halls were.
Here's our 10% better version of what we showed you last year.

[33:04] And a surprising amount of it was really oriented towards cost reduction and,
operations optimization so I would say like,
the it was rare to see customer-facing stories and improving customer experiences at retail it was mostly about taking costs out of supply chain and taking costs out of operations and Staffing and.
And increase Automation and that you know it things that are important to retail but frankly things I would argue like that's been a play in retail for the last five years and most of the good retailers today have.
Taking most of the COS out and you know so now I feel like to really move the needle you need to be thinking about your customer experience and improving,
that and I did not see a lot of great solutions for that on the inner F floor this year,
the one kind of new use case that showed up in a bunch of booths is what I'll call a smart shelf so this is like Amazon go like technology it's like a shelf that.

[34:12] Either using cameras or sensors or cameras and sensors,
knows what's on the shelf and it knows what you take off the shelf and it can probably recognize you and so sometimes this is used for self-checkout but way more often it was just used for inventory management,
for knowing when something was out of stock or helping navigate customers to the right product or or knowing when a products on the wrong shelf for all these kinds of use cases,
so I like frankly didn't think the juice was worth the squeeze walking the two main trade show floors at in RF,
the the floor I had the most fun on is this Innovation Pavilion that they've had for the last couple of years but it was much bigger this year
and to me like all the exciting interesting stuff was was definitely in this Innovation Pavilion and so this is smaller companies tend to be,
startup companies a bunch of companies,
from other countries like Israel was particularly well represented and you know here you are seeing a lot of Last Mile Solutions you are seeing a lot of.
Like using cameras to solve fitment and returns and things like that so I just I felt like there was a lot more interesting.
New approaches to customer experience in The Innovation Pavilion than on the main main interest rate show floors.

Scot:
[35:39] What was the strangest thing you saw.

Jason:
[35:42] Strangest thing I saw I probably should have come to rehearsal and gotten that question ahead of time so I could have thought about it.

[35:50] Yeah well I'll tell you an odd experience I had so you know I have this weird Affinity / fetish for these digital fact eggs.
And I keep predicting that they're going to be a big thing and they never are.
So of course I had to visit all of the exhibitors at this boot at the show and there's like six or seven.
Big manufacturers and then probably 20 little manufacturers of these things and then RF and so one of the companies I'm not even going to name them,
they're noted in my mind because they were the first tags that Amazon used in the four-star store in Amazon has changed vendors and they now use a different vendor but this first vendor
um had a lot of interesting tags and some new new technology in their booth in the way I remember what I what I see at the booth in order to kind of type up my show notes is I
take a picture of the booth and then I type my notes below the picture in Evernote so I tried to take a picture of this booth and they
tackled me and told me that no photos were allowed and I'm like,
okay do you have like a brochure something I could take no no we don't have a brochure.
So I'm like so wait you have a giant 30 by 30 booth at the show and you paid a bunch of money to come here and like.
You don't in any way want anyone to remember who the heck you are or be able to contact you after the show.

Scot:
[37:13] We were never here.

Jason:
[37:15] Yes I.

Scot:
[37:16] They make you delete the picture.

Jason:
[37:19] No and I mean I could have but I mean I just didn't even want to take a picture at that point I was I just thought that was so funny like
ten years ago that was about get super common thing and people are worried you're going to steal their intellectual property but I feel like if you have intellectual property that you don't want anyone to know about
don't buy a trade show booth.

Scot:
[37:38] Weird that is weird see I knew you had one in.

Jason:
[37:43] So that stuff was all interesting I went to most of the Keynotes and I feel like this is going to be a Captain Obvious comment to you but
I mostly went all the key notes which are all these big retail CEOs
and I've mostly decided that it's a complete waste of time going to any of these shows and sitting in on the on the CEO Keynotes.
Nobody ever said like they're all perfectly media prepped and they mostly Play commercials about their businesses and no you know nobody says anything very like informative or,
you know that isn't already on the public record at these things so I don't know why I always get excited to hear you know some retail CEO speak when.
Like in reality like it's not bad it's just it's just not valuable or super interesting.

Scot:
[38:32] Yeah yeah it's tough there at some point their public companies to so they're in their quiet period by the time this show comes out so they can't even really talked about you know anything that's.

Jason:
[38:43] Oh yeah no I don't even.

Scot:
[38:44] Air and yeah.

Jason:
[38:45] I don't even fault them but I just tough right and so you had like Kevin plank who's you know the founder of Under Armour and you know he recently stepped down as CEO but he's like.
Like Chief brand evangelists or something.
One that got like a little heat Michelle gas is the CEO of coals we'll talk about this later but like you know Cole's kind of underperformed a little bit for holiday and,
and so that's that's interesting but she also won the,
the internet Gala award as the person of the year and there are people that are pointing out like what's the state of our industry of like the.
Person of the year is like a CEO that's like let a company for five years that mostly has been in sales and market cap decline over that entire five-year period.

Scot:
[39:32] Emma close a bunch of stores they've closed Less stores than a lot of other retailers.

Jason:
[39:36] No I would say they have performed better than most of their peers and their Peril I think that's true and that's why it's kind of news that their their performances starting to,
to soften the the one thing that maybe was newsworthy about her Kina like obviously they get a bunch of Buzz for
being the first ones that were all in on like allowing Amazon returns and their store.
Um and I don't know why this gets so much coverage I mean it's an interesting tactic but to me it's not a game-changing thing.
But you know a big question has been like how valuable is that to Cole's like is it working and and she gave a full-throated defense of the tactic and said that it's working.
Quite well and that we're happy we're doing it and that we've expanded it to all stores but then she said like two sentences that didn't like,
and I'm like.

Scot:
[40:38] It was very vague yeah.

Jason:
[40:39] Yeah so so I don't know so that was a little interesting.

Scot:
[40:43] It was interesting there's a lot of pictures on social media accompanying that article and they showed Kohl's store and had a tiny little coal sign and it was just surrounded by Amazon promotional materials all throughout the front of the store and then inside the store.

Jason:
[40:56] Yeah and I think one of the things that's happening is you know Cole's is always been heavily promotional.
Like I think when you return something to Amazon you get like a fifty percent off of a Cole's item certificate that you know they're trying to juice you too.
To buy something presumably it's super little margins when you're on that visit,
so that stuff got a lot of Buzz as you know but listeners may not know a lot of my time as in RF gets booked up with,
these these various committee and Council meetings that are going on and so you know we're members of the digital Council which is a big group of.
Of people that are primarily focused on digital Shopper marketing.
And so you know they have a long meeting at the show and you know I'm still on the board of what used to be called shop dot-org now called the digital Advisory Board.
And we have a long meeting during the show and there's usually some interesting content at those meetings so I would say both of those meetings were good and I'm probably biased because I was the speaker the digital council meeting.
And I gave a presentation about like what western Brands can learn from China so sharing a bunch of,
interesting tactics that are going on in China that my hypothesis is you know that people ought to be trying in in the west and.

Scot:
[42:22] Is this the salty wait for you tried to get your your prediction of QR codes out there.

Jason:
[42:28] Potentially I'll do anything I can.

Scot:
[42:29] Talk about it the Ulta.

Jason:
[42:30] I'll do anything I can to win the forecasting battle against you just got so yeah.
No I did not I did not hit that hard but I got good feedback and I enjoyed doing it it's a scary audience because you know I talk to people all the time but this is like.
50 of my closest work friends that are all like smarter and more digitally savvy than me so like if you say something wrong.
They're pretty likely to call you out on it so which is not necessarily as true in my day job.

[43:04] So I was pleased that that went well and then in a rare treat for me I stayed for a couple days after an RF this year,
and there are a lot of events that other people program to take advantage of everyone being in town for an RF,
so PS FK is a research company that does a lot of great retail content they do a bunch of retail tours in New York the week of in our.
And they had kind of a direct-to-consumer day where they had a bunch of leaders from direct-to-consumer companies come in and talk and so,
I got to send it on that and that was kind of interesting content I think I inadvertently got some Buzz cuz,
unlike some of these really polish CEOs for the big retail companies like the CEOs for some of these startups probably share more information than they should and so one of the founders of neighborhood Goods was there there there.

[44:00] Kind of new retail concept there are like a retail Marketplace so vendors paid rent space in their store they open one store and,
Texas in Dallas there now they just opened a second store in Manhattan and they're about to open a third store in Austin and in our industry via all the Talking Heads I would say they get a ton of Buzz,
and,
you know the one thing they don't do is disclosed like any sales data so you know you never know how meaningful their sales are but the CEO at one point mentioned that their best-selling skew by volume,
by number of units and dollar volume is a t-shirt with their logo on it.

[44:42] And so I you know in my mind thinking like that probably says all you need to know about you know how much of the vendors products they're selling that are paying for space in those stores if they're evil logo t-shirts their best.

Scot:
[44:55] Ouch then he went Savage on social media.

Jason:
[44:58] I did not mean it to be super- but I just thought that was an interesting data point and then I went into the belly of the Beast,
our friend Scott Galloway who loves his predictions as you'll know.
He had an event he's a professor at NYU and he gave a lecture at NYU,
kind of a couple hours sharing his recap of his 2019 predictions and doing his 2020 predictions so I sat in on that and.
I don't think any of the predictions were very new to those of us that follow him regularly like you know he tends to be pretty repetitive and and so these were mostly repetitive,
predictions but there was a question and answer session afterwards and I thought the question-and-answer session was really interesting and people people asked him good questions and he had you know insightful answer so that would that part was fun.

Scot:
[45:56] Yeah he's a very anti Sheryl Sandberg Casper and then he's he's been antitussive for a long time and he's gotten his like face ripped off by Tesla this.

Jason:
[46:06] Yeah so it's funny.

Scot:
[46:08] Predicting it will go bankrupt and you know there's crazy and it's fraud and.

Jason:
[46:13] Yeah yeah he thinks it's way overvalued and he
it's kind of funny because he talks about he like he openly talks about this he's like people that agree with me tend to agree with me on most things I got like he's you know philosophically aligned on most things but he's like most of the people that follow me,
like Tesla way more than me
and they have way more digital privacy concerns than I have so he's like whenever I share my position on those two things I tend to get creamed and so like it almost became a joke like people standing up there were like challenging him on his,
Tesla predictions and like you know people came up and like made an argument for the Tesla evaluation and why it was reasonable and stuff and so there were some,
pretty funny back and forth on that stuff and he was making fun of the fact that like that's most likely what he'll get murdered for,
and then he did a podcast after this event where him and Kara Swisher who generally agree on most things on their podcast like got in a pretty heated argument,
on the whole should Apple unlock the terrorists phones and and Scott comes down heavily on absolutely Apple like should,
should immediately unlock the terrorists phones in the privacy concerns are kind of,
BS in Scott's mind and so and he recognizes that like,
that's the other thing he gets a lot of heat for is that most people that follow him don't agree with that position.

Scot:
[47:43] Wasn't swisher and RF like interviewing the politician or something.

Jason:
[47:46] She was I don't remember who she interviewed because that was during one of my meeting so I missed it.

Scot:
[47:53] I think it was Paul Ryan I didn't understand what the heck that had to do with retailgeek.

Jason:
[47:57] Yeah so there's kind of a tradition that interrupts like a big part of interests job is Lobby is federal lobbying and it that's particularly relevant right now because why.
These privacy laws that all the states pass are passing have.
Potential major intended and unintended ramifications on retailers like a lot of them like arguably make it illegal to run a loyalty program for example,
um so so the lobbying is a big deal in RF it's a lot of their energy as in lobbying and so if you look at the keynote speakers over the last several years in RF
they had Bill Clinton shortly after he went out of office they had George Bush Senior shortly after he went out of office and so they tend to have a
a big name politician and this year it was Paul Ryan but I didn't get to see it
I didn't hear any particularly newsworthy things come out of it but I can't speak to it firsthand.

Scot:
[48:53] Furcal anything else we need to know about NRF.

Jason:
[48:56] So that was my in a referee cap that kind of match up with what you followed on social media in the news or did I give you.

Scot:
[49:03] Was it seemed like kind of the the timing was interesting because you know at the same time you had the Casper S1 filing drop in this kind of,
pivoting to General news but kind of overlapped with an RF a fair amount then you had a fair amount of bad news from Q4
some of this it's hard to tell if it was just kind of there's a bunch of retailers that are kind of in that Molly gedan bucket that held on through Q4 is it's kind of crazy to once you make it to August you might as well not close any stores until
until January so it's hard to know how much is kind of an overhang kind of a holiday overhang and how much is kind of.
The holiday actually wasn't as good as we thought were those some of the topics that NRF.

Jason:
[49:47] Yeah so not in the formal presentations but in the sort of hallway conversations this this was a big point right and,
you know you and I have talked about on the show we were talking about it in December that I sort of felt like it was going to be a soft holiday that you know they were going to be
profitability challenges in talking to people at this show one of the interesting things that kind of reaffirms that it was a soft holiday is
there is apparently like a ton of excess product in the market which has not been the case the last several holidays and so retailers are getting asked to take a bunch of.
You know deeply discounted inventory from manufacturers and what we would call distressed inventory,
that there's a glut of that on the market this year and so that's a bad sign it means retailers didn't sell through all their inventory the manufacturer didn't move as many units as they expected and now they're going to liquidate all that inventory at low cost which.
You know means consumers closets are going to fill up with with cheap clothes and you know it's going to be longer before they can they can sell new stuff and you know a bunch of more of this like.
You know desirable Brands will show up in TJ Maxx and,
places like that so there's a bunch of negative ramifications and you know it's.

[51:06] The my theory is like it's for two reasons like,
that we just did have a soft holiday and people didn't sell as much as they wanted but the last several holidays I feel like retailers have been super careful about constraining their inventory and being really smart and using a lot of,
new modern tools to predict demand better and so they actually,
we're in really good inventory positions the last couple of years and what's different this year is potential fear of tariffs,
and so my my theory which I have no way to validate but my theory is that a lot of manufacturer is particular know they're getting their goods from China.
Made more stuff before tariffs kicked in as a hedge against potential tariffs and so they just ended up with higher inventory positions and they've been you know trying to sell that through to retailers,
and so as you know we have a glut of product and that that actually bodes,
poorly you know for the end of Q4 but also for q1 sales across much of a bunch of retail categories.

Scot:
[52:12] Yeah.

Jason:
[52:14] So I during the show or around the show you know there are bunt you know holiday earnings announcement started to come in.
Before this show MasterCard released there.
Sort of holiday recap and MasterCard has this product called spending pulse where they Aggregate and anonymize all the,
the spending behaviors of everyone that carries a MasterCard branded card.
And they said holiday retail sales were up 3.4 percent from November 1st to December 24th and the online sales were up almost nineteen percent and so those are decent numbers,
that would calm pretty you know favorably with last year I think those are very similar to last year's numbers.
And that would imply that everyone had a decent holiday but then the individual retailer started announcing their earnings and nobody has earnings.
That seems like they jive with that Master card number right so so not shocking the JCPenney was down but they were down you know lower than expectations so they were down seven and a half percent which is huge,
we alluded to this earlier but Cole's was down point two percent and they've been one of the,
the you know better performers in the apparel category for a while so the fact that they're down was was alarming and surprising.

[53:32] L Brands was down 3% Macy's was down,
point seven percent which they had been up the previous quarter so that was a big holiday Miss and then I think to me the one that was most surprising and alarming and kind of triggered some,
some stock alarm Bells was Target and their same-store sales were only up 1.4 percent versus,
5.7 percent last year so that was a big mix against their guidance and you know you,
you listen to that bloodbath of retailers like almost nobody you know performing above their comps and you try to reconcile that with the whole industry being up 3.4 percent and it just doesn't make sense to me I think,
I think that Master Gardener is just wrong or or like there there's something unique about MasterCard carrying people that you know is different than other spending.

Scot:
[54:27] Yeah yeah the.
Jury's out I think until we see how Amazon and they report on the 30th and will be here on the Jason Scott show recapping that for everybody that's going to be really really important and then the second most important going to be Walmart and I'm not sure,
you there in Feb 18 kids are in that off-cycle yeah.
So it's going to be awesome to see how that goes because if they both didn't do well then it really is a head-scratcher but even if they you know let's say Amazon grew like 25% or something.
It's kind of makes the,
you can get the e-commerce number to 19 percent but like what the heck happened to the rest of retail who actually grew everyone that we know that reporting didn't it would have to be Walmart or you know.
Someone else I don't know,
Costco yeah maybe it's the dollar stores there's there has been a bunch of strength and kind of like what we call the value plays the dollar stores the Wholesale Club's the T.J.Maxx has maybe those are the guys that kind of saved the day and there's haven't reported yet.

Jason:
[55:47] Yeah but I think no matter how you slice it like this is another version of bifurcation that like you know if holiday sales are robust like they were not,
robust for everyone that there were you know huge winners and losers and you know if that was the case which it certainly seems like it was
you know you're going to see that play out in you know future store closures and bankruptcies and all the other things that you know retailers have to do when they start to get into distressed.
Situations and you know along those lines I think we have already seen a bunch of announcements now that they've gone through holiday,
the upcoming store closures.

Scot:
[56:30] Any other news you want to cover.

Jason:
[56:33] I mean those are the big things like just to recap the store closures real quick like that was like expresses closing a hundred stores JCPenney's closing 6 more stores
Pier 1 is closing half their stores Bed Bath & Beyond closing 40 stores,
a slightly surprising one of me is bows which had a chain of company-owned stores.
Is closing all of their bricks and mortar they're going to be you know a pure brand and Direct online sales only so you know a significant amount of store closures to start the year,
so it's kind of falling into your whole you know Mama gettin story that you like to always talk about.
And then I guess just a couple of small little news items that are like you know pretty interesting in the Commerce base Google made an acquisition of this company called pointy.

[57:25] And I wouldn't expect people to necessarily recognize pointy but pointy is a,
a data company that makes it super easy for particularly small retailers to upload their store inventory to Google.
So that lets you do local inventory ads where we're like you know you do a search for a coat and Google says oh that coats in stock in this store that's a block from you.
And it also you know facilitates the sort of instant purchasing Google and a lot of other things and so it's it was interesting that Google's acquiring this capability to help retailers on board.
Their inventory to Google much easier that you know could be the first of a bunch of steps we see in Google trying to get more serious about Commerce,
and then you know the Gap had previously announced that they were going to split Old Navy off from the rest of the company,
and they kind of had assigned CEOs and then this month announced that they're actually not going to do that they fired that CEO in the,
the son of the founder I came back to run the company so so a lot of drama going on at the Gap right now.

[58:44] Yeah well I think they were another example like I,
I don't know I think it's a high level the story was a bunch of the Gap brands are underperforming the one Gap brand had been performing strongly was Old Navy and you know so there's an argument that like.
Old Navy wasn't getting full credit in the public markets because they're being dragged down by these other brands so you split up.
The strong brand Old Navy from the weaker brands,
and you know maybe you can carve out more value that of course ignores the fact that,
like all of these Brands share a shared infrastructure the same it stuff the same e-commerce stuff the same supply chain stuff when you split them up you got to spend a minimum shh money to rebuild that you know.
For both companies and and I think the thing that made this untenable was.
Old Navy didn't have a great holiday either and so you know they were left with the prospect of potentially splitting up and having two distressed Brands neither one performing very well and.
You know they just spent a bunch of money and and you know their employees Focus was all put on this this.
Split instead of focusing on on customers and in the right product in the right right brand positioning for that stuff so so I think it became scary and they pulled back.

Scot:
[1:00:08] Must be frustrating imagine if you were on that team and you probably had to separate all the point-of-sale systems and the customer databases and.

Jason:
[1:00:18] Yo and I'm.

Scot:
[1:00:18] Pretty far down the path.

Jason:
[1:00:19] Like I'll be honest I'm sure there were people that were far down that path and the whole time they were doing it we're saying this is stupid we shouldn't be doing this and now they're pissed that they wasted all that.
Because it's yeah it's not going to see the light of day but you know sometimes those are unavoidable things like you know there,
there are storied brand I hope they find their way through it.
But Scott that's probably going to play be a good place to wrap it up because we have hit our usual 1 hour mark so we've used up more than our allotted listener time,
as always if people have a comment or question feel free to drop us a note on Twitter or Facebook
and for sure we need to get those iTunes reviews going for the 2020 year fresh reviews are super important so if you haven't written a review for a podcast yet we'd love it if you jump over to iTunes and write us that review.

Scot:
[1:01:15] And make them five stars thanks everybody.

Jason:
[1:01:17] Yeah until next time happy commercing.

View Details

EP204 - 2020 Annual Predictions

2019 Recap - Predictions made on episode 159

Scot

At least 5k more store closures in 2019. Yes. 9,300 US store closures per Coresight.
Amazon – Prof Galloway is big on Amazon having to create a AWS spinoff and has moderated that to tracking stock. I’m going to predict Amazon doesn’t do either of those things. But this WILL be the year they break ads out. Yes. Galloway was wrong.
eBay/Alibaba – I think this is the year when they both need to do something big and the stars are aligning for a combination there. Nope.
Shopify gets acquired by one of the big ad-based companies (facebook/google most likely) Nope.
Walmart stumbles in e-commerce. Nope

Score 2/5

Jason

Amazon store count exceeds 1000 stores Nope. 571 Amazon Stores
- 22 Book
- 15 4-Star
- 8 Pop-ups
- 25 Go
- 2 liquor
- 499 Whole Foods
Walmart buys a last mile firm Nope
Another big bankruptcy (going to be a tougher than expected year, JCP, category killers Office, BBBY, Neiman). Yep (Payless ShoeSource, Destination Maternity Shopko,Forever 21, ShopKo, Gymboree, Things Remembered, Charlotte Russe, Diesel, Z Gallerie, Charming Charlie, Barneys, Sugarfina, etc ...)
Mobile commerce revenue passes Desktop – Aided by PWA’s, and payment API’s we see mobile gap narrow. Nope. 60/35/5 Desktop/Mobile/Tablet Nov-Dec via Adobe.
Fads (Voice Commerce, Customer facing AI, SocialCommerce, VR BlockChain). Yes

BONUS: Amazon breaks out prime revenue (No)

Score 2/5

An epic fail for Jason & Scot! It turns out the future is difficult to see (and our case the timing is also tough).

2020 Predictions

Scot

Shopify wilts a bit - new competition comes out with different angles (marketcap stays static)
Fedex does something drastic - buy eBay? Merge with Alibaba?
The year of returns - “happy returns” - a startup raises $100M+ in space.
Mallageddon continues At least another 8k stores
Google gets aggressive in ecommerce
- 10% traffic to ‘shopping actions’
- buy ebay/fedex

Jason

Walmart - growth slows due to completion of grocery build out. Marc Lore leaves Walmart.
Amazon - Opens affordable grocery concept. Digital grocery wars heat up.
Owned brands continue to grow. 5% of retail in 2019, could be 8-10% in 2020 (as measured by IRI, for CPG private label).
Installment Payments heat up - At least one company is acquired (Affirm, Afterpay, Klarna, QuadPay, Sizzle)
Digital in-store heats up, QR codes make a comeback

Bonus: Cashier-less stores (Amazon Go), blockchain, 5G, big data, and personalization won’t have a significant impact on retail. No DNVB will break out. No major retail anti-trust actions in US. Brick & Mortar Marketplaces won’t take off (Showfields, Neighborhood Goods, B8ta). Shopify won’t compete with Amazon.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 204 of the Jason & Scot show was recorded on Thursday, January 2nd, 2020.

http://jasonandscot.com

Google Automated Transcription of the show

Transcript Jason:
[0:24] Welcome to the Jason and Scott show this is episode at 204 being recorded on Thursday January 2nd
2020 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 will Jason happy New Year happy new decade hope you had a really good last decade and I hope you had a good holiday.

Jason:
[0:53] I did Happy New Year to you. I'm with you on that new decade but they're you know there's some controversy about whether it is a new decade or not.

Scot:
[1:01] Yeah I don't believe that it's a it's a 10 plus one problem we'll just to sweep sweep past.

Jason:
[1:07] Yeah it's the twenties as far as I'm concerned so.
Yes but it has already happened I nailed our intro despite the fact that we typed 2019 in the show notes.

Scot:
[1:22] Azle Easter I got them there for you you found it.

Jason:
[1:25] Yeah I was I felt I felt special about myself that I was able to fix that on the Fly.

Scot:
[1:32] Who said the most important question is have you been able to see the new Star Wars movie.

Jason:
[1:36] Oh my God Scott I've been thinking about you nonstop because yes I got to see the new Star Wars movie and obviously we'll will be spoiler-free but I I was totally happy with it and enjoyed it.

Scot:
[1:48] Yeah yeah me too weird thing happen to me where I've gotten to where I kind of like the Mandalorian almost better than the movies so I don't know.

Jason:
[1:57] So here's why I've been thinking about you nonstop my 4 year old is now both feet in on Star Wars everything.

Scot:
[2:06] Good quality parenting right there.

Jason:
[2:08] So we wouldn't want some of the movies there's a ton of like kid-friendly Star Wars content you probably knew all about this but there's like the Lego movies and cartoons and all this different stuff,
and like for Hanukkah he got a lightsaber which he has not been separated from since and.

Scot:
[2:27] Nice.

Jason:
[2:27] We got a bunch of Star Wars books including I got him,
like a graphic novel version of episodes for 5 and 6 and so now every night as part of our bedtime ritual he's his down with me and we we you know read us a segment from the book.

Scot:
[2:46] Give us your Darth Vader voice.

Jason:
[2:48] Yeah I'm not doing any voices on the podcast sorry.

Scot:
[2:53] Baby geek I am your father.

Jason:
[2:55] Exactly I have said that exact phrase tan.
The what's super funny is my wife and I like you have enjoyed Mandalorian and we were watching it one night and Stephen King in like you should have been asleep and it came in and saw I like.
30 seconds of Mandalorian which we have not let him watch Mandalorian but Steven is totally 100% fixated on Mandalorian.
So he's already convinced that mandalorians are way better than Jedis.
Like the only character he likes from all of the previous Star Wars work is now Boba Fett and he like he brings them up and every contact and we're like.
You seen 32nd.

Scot:
[3:44] Team Honda.

Jason:
[3:47] Anything he's like he's like four and he's asking like.
Like when he sees Yoda in like Clone Wars he's asking like how is he only a baby in Mandalorian.

Scot:
[3:59] You have time like it's really confusing.

Jason:
[4:05] Star Wars is super confusing to explain to a four year old white guy because you start with the premise that like the bad guys have red lightsabers in the good guys have other colors and then like,
it's only Don's I knew that all the bad guys used to be good guys and then become good guys again and so I.
It's super like that Santa can that it yeah yeah it's a very convoluted but suffice it to say there's a bunch of Mandalorian and baby Yoda posters up in his room and he's like we're leaving in a Mandalorian World which just makes me think of you.

Scot:
[4:37] Regal Walden toys are coming out so that it's going to be exciting in the next couple of weeks are all the they held them because they didn't want to spoil some of the plot elements of Mandalorian soon there's a big wave of toys coming so it's good time.

Jason:
[4:50] I know and in fact a bunch of entrepreneurial people because they did not release baby Yoda toys during the show because they were trying to prove your point keep him Secret.
So everybody and their brother started making baby Yoda toys and like there's been like you know a huge intellectual property Crackdown and there's like you know hundreds of people from Etsy that have been.
Don the cease-and-desist orders over that.

Scot:
[5:17] Speaking of toys I saw on Twitter that you were going to try to hit one of the new Toys R Us did you make it to him.

Jason:
[5:24] I did I am wearing a button right now that says I don't want to grow up I'm a Toys R Us kid.
Because I went to the Houston store a few days after it open so there's,
Tyreke and for our listeners like Toys R Us went bankrupt or done at super sad huge disruption in the toy industry,
a company bought the the intellectual property of Toys R Us and they did a partnership with beta who's been on the show a couple times,
the open initially to Toys R Us stores so there's one in New Jersey and there's one in Houston Texas.
So I got to go to the Houston Texas one and it was fun it was fun to see the brand,
back alive and reimagined then it was a you know it's very different than a Toys R Us a traditional Toys R Us store because these are.
Kind of 20,000 square foot Mall base toy stores versus.
80000 square foot big box toy stores but it was a fun immersive retail environment with a bunch of toys and,
this mall which is a a mall Scott like a week before Christmas felt like a ghost town to me like it was.
Tragically empty but I would argue the Toys R Us with the second busiest store in the in the whole mall and.

[6:49] Behind Apple you're exactly right side note people are only in the Apple store to get tech support but still.
But this one was really busy and people like had made a special trip just to go in like the brand is so strong so it looks like these first two stores are doing pretty well and I know there's a plan to open more so
kudos to them for saving the brand and beta for doing a pretty good toy execution.

Scot:
[7:16] Nice the so
thanks for the trip report this is our annual recap and he's always run long so I think we should just jump right on into it so being the first show of the decade and the year
it is our custom I guess we've done this for fact,
to do an annual prediction and then Square ourselves so way back in episode 159 we had our predictions,
or 2019 so I think what we'll do is score each other to start out with and then we'll put out our predictions so why don't you go to my last year predictions.

Jason:
[7:58] And before you jump and let me just say I despise this show I've had red
leading up to the show in the reason is is I've never done very well
that however will I have done I've gotten progressively worse every year and last year while I did quite poorly you did stupendous wave and so,
it's like I've dreaded even seen what my predictions were last year and hearing about them so I'm just going to rip the Band-Aid off and we'll get through the show
but your first prediction for for 2019 was that at least 5K more stores would close in 2019
and let's get this out of the way you blew away that prediction coresite which is the
company we most often use for kind of tracking Us store closures had like 9300 stores closing this year
IHL did a study in the world even more store closures than that in their in their study Dope by any measure way more than 5,000 stores closed and you know in hindsight I should have let you get away with that prediction because that's why,
it was too easy.

Scot:
[9:12] Well no I don't know if there's a lot of people saying but that was kind of going to be the worst.

Jason:
[9:19] That no so if you had said there is going to be worse than last year that would have been a slightly more predict like.
Tempstar 5000 was less than last year or this year but yeah I agree,
most people thought there be fewer closures this year than last year in that bike by depending on how you count did not prove to be the case that much more controversial thing on the whole store closures is it more
open and closed if you go by the course I track her a lot more closed than open but if you go by other studies,
that are the feel more comprehensive like they're actually were more swords that open then close so.

Scot:
[9:58] Yeah and I know the size Matters right to some of these are mattress stores which are pretty big.

Jason:
[10:04] And I whoop all a lot of the people that say way more stores open then close are also counting like restaurants and stores for example and the end restaurants have a lot of charm and so,
a lot of controversy but bottom line you started out of the gate strong you're one for one and.
Your second prediction,
you just you just jumped right into the gutter because your second prediction was that Professor Scott Galloway would basically be wrong.
Which I like as a general principle but more specifically what you're talking about is the,
an inner 9 people the climate a year ago he had just published a book about the the for one of which was Amazon so he was
he was publicly speaking about Amazon a ton and he you know was really beating a drum around having to split up Amazon and they're potentially Amazon would voluntarily spin off some of their businesses because they're so lucrative and so you know the talk to usually about 8 if you ask until your prediction was kind of
to go negative and say
you always wrong and Amazon isn't going to be split up and isn't going to voluntarily split up in any parts of their business and,
you were certainly correct none of those things happens.

Scot:
[11:28] What have I learned from this anti Galloway bet is that he throws out so many things he gets one right and then looks like a genius show his we work one with hit.
The bus was other ones didn't put the he's ridden the we work one for a good six months.

Jason:
[11:43] Yep yeah I feel like he the first one that hit for him that really like you know he made a lot of hay en was predicting Whole Foods would be acquired by Amazon and then yeah he was instrumental in that kind of picking the,
he was an early picker of the we were demise the pressure point
he also predicted Amazon would acquire a bunch of other people besides Whole Foods that they didn't in my favorite prediction is about 3 years ago he said that Amazon had peaked in that you should short the stock.

Scot:
[12:14] I would not have been good.

Jason:
[12:16] Side note yeah that would turned out not to be good investment advice.
So yeah for your point like anyone in this predictions face like the whole key is to throw a bunch out and just remind people of the ones you got right and not bring up all the ones you got wrong.
But you're doing great you're two for two yeah so third prediction that.
Either or eBay and Alibaba would need to do something big in 2019,
and so you use you propose that potentially they might do some sort of joint venture or some sort of combination.
And I have to say he's got as far as I'm aware that did not happen.

Scot:
[13:03] Yeah but itself StubHub when you said that's pretty big.

Jason:
[13:09] No not relative to their socks.

Scot:
[13:11] It was Lucy 4 billion of 30 billion market cap that's more than materiality.

Jason:
[13:23] Again I'm dreading my own predictions so I'm grading you very very strictly enough so I'm going to say you're two for three right now.

Scot:
[13:35] Another thing just point out is the eBay CEO just got up and left one day if that was kind of surprised I don't know if we count that as something big happening or not there's this line with the Borden peace out.

Jason:
[13:49] Yeah need to do something big.

Scot:
[13:50] That's kind of a shot.

Jason:
[13:52] Sell the property will parts of your company and then watch the Executive Suite I don't think that was the spirit of I think you were more proposing they would do something that would help them reacquired growth.

Scot:
[14:05] Yeah but another thing I didn't anticipate us this anti-china thing that we have going on here right now so the tariffs were one thing but there's just.
A lot of anti-china going on right now that I think is going to make this murderer and possible I don't think the US government would let app.

Jason:
[14:24] Yeah I think there's there are some number of entanglements there that that would be challenges there aren't there were some little Partnerships there some interesting things we like,
well I guess it's more JD and the Walmart in the US but.
Back on track your two for three and your fourth prediction was that Shopify gets Acquired and you said potentially by one of the big add bass companies like Facebook or Google +,
once again to my knowledge that did not happen are you agree or do you have a argument there as well.

Scot:
[15:03] I agree and
you know what's really amazing is if you look at kind of your your Shopify when I made this production was their stock is like at 1:44 and they were attending. Nick on all the stuff like 3x so
weather like a 1012 blade on a company now they're $47 company
they're pretty much on acquirable I think at that price and then the valuation multiple is extremely lucky so if you look at all the different
soccer the service companies yet uses range of like 8 to 10 x there's something like 15 to 20 x is just crazy,
good as those guys they essentially don't they will be at choir and not not a choir.

Jason:
[15:53] Totally agree there they're killing it both in terms of their their financial success and valuations but also their they're just winning in the marketplace and they're like you have continuing to capture more Greyhound away from the Enterprise guys and they're doing a bunch of interesting things
so we'll talk more about them in the future I'm sure but yeah they're a bunch of people that would like to acquire them but for your point like
there is not that's not really economically viable at this point and then number 5,
Walmart stumbles in e-commerce and I took that to mean.
That they're the rate of e-commerce growth would slow over 2018 which was pretty solid gross at like 40%.
And they actually were exactly at 40% again in 2020 so there,
they're growing very quickly they're growing faster than Amazon certainly much faster than the,
the market overall and their growth rate in 2020 or 2019 was basically the same as 2018
so like by that measure I'm not giving them a stumble in 2019 but do you you agree or was you think it was some other dimension they stumbled in.

Scot:
[17:15] Agree I probably underestimated how long they had to kind of Wind by converting grocery over but I think this year probably will give you the.

Jason:
[17:29] I feel like that's a common theme in all of our predictions ynm that I've noticed both you and I are sort of afraid to double down and be like wrong one year and then say say it again the next year but many of our predictions come true a year after we predicted.

Scot:
[17:43] Lyrics the Alexa are pause airpods I did like 2 years and then it came up here I didn't God darn it.

Jason:
[17:49] Exactly which is frustrating yes so being super brutal you ended up 245 which is way off your your historic average.

Scot:
[18:02] Yeah I usually bat 500 but it wasn't wasn't there this year I mean on the stuff I feel like e-commerce slow down a little bit.

Jason:
[18:13] Oh no I for sure feel like it has and I do think.

Scot:
[18:16] But the pace of innovation is really slowing which is makes up makes it harder to throw out big predictions.

Jason:
[18:21] Yeah I also feel like
it is this point like it's the timing of many things is tougher to predict than the actual events themselves and the Horizon is now longer than a year for your point so that's
that's that another challenge with this whole predictions thing but I'm not remotely confident that I didn't any better so so
with no further Ado let's let's see how I did.

Scot:
[18:51] Yes yes so your prediction so let's jump into this the first one is you were very giddy you probably had just visited three or four of the Amazon stores and you said look
I am sure this can be over a thousand Amazon physical stores by the end of the year
so I think.
Whole Foods helps a lot here in this is there were there were a bunch of Articles out there that Amazon was going to because Wall Street Journal that they're going to have,
thousands of Stories the right now we're sitting in about five to six hundred so you got Whole Foods
500 Whole Foods there's some pop upstairs for Stars book stores throw all that together you get sky like 555 75
so that's a pretty big Miss 57% is f on any grading scale so sorry I did not get that.

Jason:
[19:53] Yeah no I'll be honest I thought,
perhaps Amazon go with scale and much more you were generous that they were actually a lot more pop-up stores the last year they closed most of the pop-up store so it's possible there's fewer Stars this year than they were last year of you
if you included those so yeah I wildly miss that in the only like slightly interesting thing in that in that whole thing is I feel like the one concept that has scales slightly More Than People realizes the 4-star store
so there now 15 for Star stores which is like coming up on on you know the number of bookstore so pretty soon we might have more,
more 4-star stores that we have book stores but nowhere close to a thousand I was wildly wrong.

Scot:
[20:38] What are the clothes the popups cuz I've kept an eye on them in our malls and they're pretty popular MMOs price at the.

Jason:
[20:46] Yeah yeah well you know for a while they had a ton of them in Whole Food stores,
and yeah I feel like they opened a lot of them in places where they could get real estate rather than in places where.
Where there was a like strategic audience need a few pop-up stores their main are some kind of interesting Concepts so that yeah I don't I don't know.

Scot:
[21:12] So that's 0 4 5 4
for those homegamers keeping track of the score then your second one and this was one where I think the timing probably is going to be what
this was on the heels of Target buying ships and here we are a year later that's gone really well you have Target,
Ecommerce accelerated they're constantly talking about how should you store is doing well and all those initiatives that if they can anchor on ship,
so your prediction was that in 2019 Walmart would buy a last-mile firm and that did not happen I think the big
idea and last-mile will there be a couple one was going to
just kind of Associates kind of on their way home free stuff and then the second one is this whole body camera thing where they're going to
pop Associates right in your house to deliver stuff I don't think that is really caught on either.

Jason:
[22:10] Yeah I know II do I agree I think they I made that prediction cuz I felt like,
that honey how stuff is really growing for them and they would need more Last Mile capacity and I still think that it is true,
I didn't foresee that last year but you know
like as whole food as a FedEx has kind of gone push the last run away from Amazon
that the company they're running to is Walmart and so we we've seen some like bigger strategic Partnerships between Walmart and FedEx and now that you know they're starting to be some some economic weakness at FedEx,
I do not want to talk about this year's predictions but that
you could almost imagine at one point that that could be an acquisition or some kind of deeper strategic partnership but nevertheless
did not happen last year.

Scot:
[23:03] So that says 045 stole your third one and I think you made a comment last year that you need to be less specific to this one's kind of interesting.
And they said there could be another big bankruptcy but then you said such as JCPenney
one of the office guys Bed Bath Beyond need and Marcus so you kind of had an ore in there or are you know we could have took her to this again.
Being generous since we're sitting here at over to there were a lot of bankruptcies so we had the seat jabri we had Forever 21.
What's rue21 was that a result 2018.

Jason:
[23:49] That might have been 18 or not sure.

Scot:
[23:51] One of the maternity stores Payless shoes and we'll see we had there was one of the mattress stores.
So there were there were some pretty high-profile bankruptcies.

Jason:
[24:07] I'm taking the win but in hindsight like that was a lame prediction like of course somebody's going to go bankrupt every year so if you're not specific at Tulane prediction and if you are specific the names I mentioned.
I still am taking the win and I would point out like the one that gets talked about the most which is actually one of the smaller ones is Barney's was like the,
start a story brand that went bankrupt and I know the one that almost doesn't get talked about but was most crushing and near and dear to your heart is sugarfina.

Scot:
[24:37] Yeah. Steer.
Okay so your fourth prediction.

Jason:
[24:44] Wait wait let's recap the score I'm now one of the three.
Infinitely improved over over the previous two.

Scot:
[24:50] Yeah yeah
you're all on at are two more to make up some some room here so your fourth prediction was that mobile Commerce Revenue would pass desktop and lessors of the show know you are a big fan of pwa
which is not a rap band it's some kind of a technology for mobile stuff and also the new payment apis and some of the other stuff you thought we're going to close the mobile,
I'll defer to you since you're the guru on this didn't did you.

Jason:
[25:21] Yeah did we mention that that e-commerce is slowing down a lot,
none of those things happened at near the scale that I thought they would end so for sure no
mobile Revenue did not pass desktop revenue and I I thought I could like save face and say well that didn't happen
it did happen on the big shopping days
bright like so you know you could kind of make try to make an argument that oh I totally happened on December Monday or things like that but the reality is even over the holiday. If you'll get November through December,
60% of all revenue happened on desktop 35% of Revenue on mobile and 5% on tablet so bottom line I wasn't even close.
Sad.

Scot:
[26:12] Yep sorry dude so let's see that gives us one out of four,
all right last chance on number 5 on this one,
Scot of one of your anti predictions you said following things are going to be fads and not take off voice Commerce AI That's customer-facing social commerce virtual reality and boxing.

Jason:
[26:38] Yeah and again not a very awesome prediction but I'm going to take the win on that and say that those things are all we're all basically feds at least in 2019,
the one that feels like it's trying to get some traction and some some aspects of social commerce but but I would still argue they weren't like.
Meaningful in 2019.

Scot:
[27:02] If I give you that one.

Jason:
[27:03] Yeah I'm desperate for I'm desperate for a win that would give me the 22052 at least IU.

Scot:
[27:08] Yeah yeah and then you threw out because you're you're Jason you just couldn't stop at 5
got a Bonus and you said Amazon is going to breakout Prime Revenue you're really specific I had to go back and listen.
Cuz I had a feeling you're kind of get a little slippery on it so Amazon has not broken out that's that's a no.

Jason:
[27:31] Yeah what really happened is I misspoke what I meant to say is that callonwood breakout primary.
For Amazon and I yeah I said it wrong.

Scot:
[27:43] Yeah but since I was a bonus will you know we won't
we won't count it so it's practically a tie this year so which is to me that's a loss cuz over the over the The Arc typically beat me by three or four answers.

Jason:
[27:59] And so it would be a win for me but since you basically came down to my level it doesn't I don't think it feels good for either of us but at least.

Scot:
[28:06] What are you get better.

Jason:
[28:07] At least we've established our credibility now so I'm sure it was on the edge of their seats to hear our wise predictions for next year now that we've shown how I'm nipotent we are.

Scot:
[28:17] We're going to rebound to I can feel it go do you want to join to do yours first.

Jason:
[28:22] No I want to hear you're so I can potentially use them.

Scot:
[28:27] Yep so here's my five predictions so I mentioned earlier that Shopify is kind of gone up 3x in a year that just feels you know,
very nose bleeding to me and there's a lot of new competition coming out so I think whenever you have a value creation event like that where they've essentially created 45 billion dollars out of town are there could be a lot of money chasing Shopify,
I don't know what their weaknesses but every company always has one so it's going to be interesting to see,
what comes after them what angles they come after and all that good stuff so that's that's my prediction is that they're going to wilt a bit and you know I'll put a.

[29:14] I need to put something more specific there I'll say they did kind of stay at this market cap or go down
10% somewhere between kind of here in temperature I don't think there's going to be another kind of like huge run up type your and it's going to be largely
your folks waking up to say wait there is competition out there for this business model.
But you don't think that doesn't get talked about this to turn just has to be like through the roof right so just on a unit turn to have to just be turning tons of customers and now in a cohort,
it probably is its revenue for the cohort pipe the GMB for the cohort crime makes up and then that's what drives the revenue,
overtime it just feels like there's going to be sup Rider light shown on part of their business model that isn't,
this kind of perfect kind of price for protection company.

Jason:
[30:09] No I would agree with that I do think that maybe the one thing that that mitigates that a little bit is they are starting to successfully go upmarket a bit and get like some slightly more.
Stables lower turn customers with higher gym be so so maybe that balance is out in the long run.

Scot:
[30:29] Yeah it's like a million at the base of the pyramid though and it takes a lot at the top of the pyramid.

Jason:
[30:35] It just takes one Kylie Jenner.

Scot:
[30:37] That last.
That's my first prediction my second one and another prediction we would kind of I can't remember which was did that for a long time is part of me just like the earpods I was saying,
Amazon will get into delivery that is,
that would be a double a man because it sucks such an obvious once and for the longest time FedEx UPS said no no no there are partner or not our competitor
the bloom is totally off that one right now where was like okay this is bad in fact you mentioned earlier FedEx is like getting hammered over this
and so did Amazon kind of dug the knife in further where they won't even let seller fulfilled Prime sellers use FedEx because they say the service level isn't good enough.

Jason:
[31:32] Yeah you talk about throwing some holiday shade.

Scot:
[31:34] Ouch ouch so as a result of FedEx is under a lot of pressure right now and I think it's going to cause some kind of interesting thing to happen
you know you got eBay out there kind of rudderless right now you could see FedEx eBay you could see you mention Walmart I think there's going to be some interesting,
kind of marriage that happens with FedEx in and it's can be driven from the world of e-commerce.

Jason:
[32:04] Get I like that one.

Scot:
[32:06] Predictions for 3 this is not my forte but there's just a lot of Buzz around returns so there's several startups you could probably write them better than I can save Mall.
BCS contact me about this which means it must be like just kind of,
yeah they're all trying to solve returns problems and there's all kinds of clever ways of doing this of no Consolidated return centers different ways of managing the supply chain that kind of thing so I'm going to say 2020 will be the year where
you know they're just probably be some kind of a winner that emerges from that and they'll be kind of like ShopRunner has try to do and not to successfully the offer a prime and
a network of retailers that form an alternative prime one of these startups will be successful and I guess I'll Define it as.
Raising over a hundred million something like that something that's like pretty pretty.
Obvious that their leader they'll be pretty successful in in kind of taking a run at offering an on Amazon,
multi retailer multi-brand approached returns.

Jason:
[33:25] So that's funny I wrote a similar prediction I didn't end up using it because I thought it was two wonky but I
totally agree with the sentiment it does like I think it's returns it become a huge acute problem and so you know we're seeing lots of new investments in the hole
reverse Logistics base to try to solve it so it that that seems reasonable although somebody raising a hundred million dollars is not peanuts so the so I like your.
You're taking a stance.

Scot:
[33:58] That's my third and fourth one is a keeping with my mall again which has been a winner for for two years in a row I'm going to say you know what you call 9000 store closures in 2019
it's a good start. So I think we're going to have many more store closures I'm going to say at least eight thousand so continuing to keep,
about the same as last year if not more I think we are going to see,
I just feels like we're still over stored in a lot of different categories like drug stores that kind of stuff so I put that one out there.

[34:34] And then this one this is one of these I've made a long time and I'm always wrong but I've some reason I'm back to it this year I just finally believe
Google has is waking up to the Amazon Fred and and starting ticket much more seriously now they're there,
terrible branding job at it but I think execution wise there is something there they have this Marketplace which is essentially called shopping Google shopping.
Actions and you know the sink,
they're getting pretty serious about it and I think this year they're going to get really really serious about it so what's that mean so I think I think.
Overall I think I could see them actually in the hunt to buy an eBay or FedEx or something like that that could be interesting
and then you know another one is the shopping actions is it's always just been this kind of on the edge like well a little Beyond 2% of
Android latest Android lollipop popsicle
Twix and yes it is a being like percent of a percent of a percent and not Material so so I'm thinking they get pretty serious about it meaning it's going to get a lot of exposure I'm on
not only just some fraction of Android but across all Google properties.

Jason:
[35:59] So I like it how like what were you cancel BC to know that that that happened like you expect them to be like I'd top 100 retailer like what would what's the.

Scot:
[36:11] I think yeah I think 10% of shopping traffic going through it would be material so I would come start there.

Jason:
[36:20] Oh wow yeah that's quite mature okay.

Scot:
[36:22] And I would look at like search marketing as someone like the referee on this search marketing.
Was that search engine land or one of those.

Jason:
[36:31] Ya SE land.com.
At least to get the ball rolling you know the last month they announced Bill ready who is that executive PayPal is the new,
like VP of Commerce a Google so they like they haven't a new person to sort of weed that initiative so that maybe bodes well for your prediction.

Scot:
[36:53] Yeah I worry about it because these payments guys want you when you've been in the payments world everything looks like a nail so so I worry we're going to get Google pay 8.0 embossing.

Jason:
[37:07] So yeah supposedly and I I don't know but I think he's got some non-competes and supposably like is being hired explicitly not to get involved in pain.

Scot:
[37:17] I did not know that.

Jason:
[37:19] So maybe that will benefit you.

Scot:
[37:23] Let's we can only hope.

Jason:
[37:24] Yes yes I like it though.

Scot:
[37:27] All right those are my five what are your five.

Jason:
[37:29] Awesome duck so my first one is I'm just going to take yours from last year and protect them for this year.
Thinking of you just missed the timing and given all the ones that that have happened the past that's my new strategy so last year you predicted it Walmart,
would would have a hiccup in 2019 so I'm going to say in 2020 is the year that the Walmart rate of growth slows down and I don't,
actually mean that that,
is a distressing anyway I just think sometime this year they're going to finish rolling out online grocery pick-up to all of their stores and they're going to have to comp against,
stores that were opened last year where has for the last few years they've had this benefit of opening a bunch of stores and going from zero to some,
some big number of digital grocery so I think it's going to be much tougher to maintain that 40% growth rate so I expect that growth rate to go down,
which is enough kind of natural and then I'll throw out a wacky one and say I also actually think that this might be the year that Mark Laurie exits from Walmart.

[38:43] Just think like,
that he's probably been there awhile like we weave you know started to see some of hit a lot of the jet people have,
kind of transitioned out now Andy Dunn has transitioned out that the guy has basically unlimited funds in the bank like I think he may just be like he's accomplished with what he can accomplish it at Walmart and we we might see a Changing of the Guard.

Scot:
[39:08] Did Nadal Ray say that he had like four years to make a trillion dollars but so it feels like they're being expensive choice.

Jason:
[39:18] Yeah I think it will be a I think he could afford an expensive choice I don't know how that would all work out like I could imagine him to go shooting some sort of payout,
it made sense for both parties will see.

Scot:
[39:35] Is that a nand or nor.

Jason:
[39:37] Yeah so I want my official prediction to be that the rate of growth slows but if Mark Lori does away this year I want permission to go. Galloway and just like launch a website that's called Jason predicted that Mark would we.

Scot:
[39:52] Got it so it's amore with the Galloway Asterix.

Jason:
[39:56] It's the color its color exactly.
So then my next permit prediction again following the trend that I like to always you always make some Amazon prediction so I'm going to steal that and.
How to be honest like part of me feels like this is too easy and not a very controversial prediction but so many things don't happen that that like I do think it's fair
I think this is the year that Amazon finally opens its own grocery concept bike separate from Whole Foods and I think it's going to be
targeted at a more affordable price points and I think it's going to dramatically heat up the sort of digital grocery Wars and most notably,
the Walmart Amazon Kroger battles.

Scot:
[40:44] Cool.

Jason:
[40:46] So number three is that I think we're going to see a lot more emphasis and talk about
owned Brands this year and that's going to significantly grow as a part of retail so last year about 5% of all retail goods were,
like private label type products and I think it could be dramatically bigger in 2020 I think it could be sort of in that 8 to 10% range.
Which would be a huge disruption in the retail Marketplace.

Scot:
[41:19] What's your data source.

Jason:
[41:21] The 5% is actually 4.6%
and I will have to I do have to get my intern to pull it out
but that's predominantly focused on like the cpg and grocery
space so it's one of those those Data Tracking companies but I'll find it for you.

Scot:
[41:47] So it's not Jason Goldberg go to himself.

Jason:
[41:49] No no no I we need a credible we need a credible external.

Scot:
[41:53] Is a data point out there were on the lam purses.

Jason:
[42:00] Yeah I like that one we just put it in the Echo chamber and and it'll become real.

Scot:
[42:06] That'll be interesting so that does that include digital native recall brands or this is more just like Target spending up.

Jason:
[42:17] Yeah,
so I'm primary thinking about omnichannel retailers like Shifting the focus to Brands they own rather than so like to be it's more of the the,
Captain Jack's of the world like I think Walmart's going to make a major effort to grow their own Brands Target you know me
is is putting a huge effort into their new grocery brand and I I just think,
the big macro Trend in in retailers we're going to see a couple retailers really try to can compete on,
sort of Assortment and being the everything store and then in North America to me that's Walmart and Amazon and every other retailers going to try to win by selling stuff that no one else has and so I just think that's going to result in a lot bigger,
Pechanga retail selling their own stuff instead of other people stuff.

[43:12] We shall see ya.
My fourth prediction is you know you you have on the area that there's a lot of momentum at the moment and returns and reverse Logistics another one for me is the installment payment space so I said installment payments are going to dramatically heat up
and I think that's going to result in at least one major acquisition in that space so I think like,
when I talk about installment payments I'm talking about a lot of these companies that are sort of alternative credit means a lot of them are kind of like,
Finance your purchase in for for monthly payments that kind of thing and cities are friends like affirm and afterpay and Karma and I I just think that
you know next year you see one of those acquired Maybe by a major credit card company or Bank
you know I think some of the big traditional Financial folks are going to want to own a piece of that hot space And so there's going to be some good acquisitions.

Scot:
[44:15] Who who do you think this is an addiction but I'm curious who you think the buyers are going to be like traditional like Financial folks like City or or is.

Jason:
[44:26] Yeah so I think I think the big the big Banks participating banks that have a retail credit Division if you are receiving retail credit services so you do private label credit cards for like Best Buy,
these guys are now taking a chunk of that space and and they've accomplished something that you've always wanted to do which is their built into the checkout flow
which is super valuable to these credit card issuers and so I could easily like imagine
one of those credit card firms wanting to acquire one of these guys I also think you could,
you know it could be a PayPal or,
square or you don't even like one of the big credit networks like Visa.

Scot:
[45:15] Singing payments do you have plans to move to Africa this year.

Jason:
[45:20] I was going to but I've been told that I only have one job and so I'm not qualified to to like move to Africa and remotely do my two CDL jobs.
Who would you be referring to buy a by chance.

Scot:
[45:36] So Jack Dorsey CEO of Twitter and and square
it's just kind of randomly said he's going to move to Africa for some. Of time if she can get Scott Galloway it really angered him he's very upset about.

Jason:
[45:52] Yeah but In fairness like I think of you a shit like Square in particular you're like,
why is my guys been in a lot of his time on this Twitter thing and then now he's going to do it from Africa like that that would seems like,
that would be a legitimate reason to have some concern.

Scot:
[46:12] Yeah yeah yeah.

Jason:
[46:14] Yep I would love to visit Africa but I think it would be on vacation and then my V prediction.
Is one that I feel like I used to do all the time and then you know I skipped a year,
so what will try it again I think this is going to be a year that digital in-store really heats up and the surprising piece of that is
this much-maligned a technology that people in our industry like to make jokes about the the ugly QR code I think is going to make a
a major comeback at retail and we'll see a bunch of of a Retailer's deployed QR codes for various forms of mobile wallets and particularly for like,
letting you scan products and read reviews and things like that ends in retail stores.
So those are my five and then.

Scot:
[47:08] DuckTales risky people hate QR you want a visceral hatred of York.

Jason:
[47:12] Yeah I feel like it's it's a bit of sneaky success I feel like there's a lot of people but they're pregnant primarily pendants that like have all this negativity around the QR code but didn't secretly you know.
There there's a bunch of of use cases where the QR codes have been like Paramount like it's,
it's you know a huge chunk of all payments at Starbucks and it's Walmart pay which is secretly been a success and it's you know it's it's Snapchat and if you go to China it's everywhere is WeChat so,
so hopefully we'll see you by usually I am dead wrong in these things so I am not overly confident about any of them but.
But I'm at least throwing it out there and again because the bonus is always treated me so well I thought I would throw a bonus in this year.

Scot:
[48:03] What do you have for this year.

Jason:
[48:06] So my bonus is I'm just going straight negative because I'll be honest when I first read these forecasts all five of my forecasts are things that we're not going to happen and then I realized
that I can't I can't be that guy right so so I tried to make more optimistic reasonable forecast but then I reserve the right to point out all of the Ebenezer Scrooge bah humbug,
moments so here's my long list of things that are not going to happen this year cashierless retail stores like Amazon go blockchain
5G big data and personalization none of those those Technologies are going to have a major impact on retail Talking Heads are going to go crazy about them and write stories about how you know if you don't do it immediately you're going to go out of business,
but I think they're going to be the examples of success are going to be few and far between I don't think,
everyone loves to talk about DJ need a vertical Brands but I don't think any of those are going to break out in a be particularly successful in 2020,
I for sure don't think we're going to see any major retail antitrust actions in the US.

[49:11] So that would be my negative Scott Galloway prediction I also don't think the the brick-and-mortar marketplace stores
so that's beta showfields neighborhood Goods I don't think they're going to have a huge success or break out in 2020 and Shop of eyes getting a lot of Buzz right now but the the,
thing I hear most about Shopify is that they're going to become a viable competitor for Amazon and I actually don't think they're going to compete with Amazon at all in 2020.

Scot:
[49:42] Yeah that the people that say they can compete feel like they think it Shopify would have some front door kind of marketplace Tech experience that kind of what you think people are looking.

Jason:
[49:54] There's people that talk about maybe they aggregate traffic and have some kind of marketplace experience where you could shop across multiple vendors you know they they bought a logistics company this year in the rapidly building out there with just aches and on paper that looks like,
fulfillment by Amazon and some people are like oh that's competing with a fulfillment by Amazon but as I as we said earlier in the show I admire Shopify think they're making a bunch of the right decisions and they're doing really well.
None of the services they provide to a client in my mind.
Replace or compete with any of the services Amazon provides in anyway and like,
I think they're for the most part synergistic in there they're going to have a lot of customer overlap but it's the end of the day
Amazon is in the business of generating a huge amount of traffic and monetizing that traffic and they sell that traffic to their customers
and that's exactly the opposite of what Shopify does Shopify does everything for you but get you any traffic whatsoever and you are totally responsible for bringing your own traffic and so I just think,
that's a that's a,
both sides of that strategy makes sense for both companies but I just I think all the pendants that are like oh you know the secret competitor for Amazon's going to turn out to be Shopify I just don't see it.

Scot:
[51:15] Any other bonuses you want though there.

Jason:
[51:21] No no no no I think I press my luck enough
hopefully that you know there's some nuggets in their our listeners will be able to use they shake their 2020 and that will be able to redeem ourselves when we unquestionably
I enter the new decade next January.

Scot:
[51:43] Yeah you know what
maybe it would be fun as if listeners I'm just doing this off-the-cuff so what if listeners wanted to add some and we could kind of like aggregate
some of the better ones in and talk about them on the next show but then also when we do the recap see what had a third competitor which of these listeners and see how they do against you.

Jason:
[52:05] Yeah that's a great idea because I it's it's kind of boring coming in second so I feel like third would be that's why I've been to just.

Scot:
[52:14] Looks like it would feel better if it smells cancer.

Jason:
[52:17] Fair enough. So maybe I try to take only the worst products that be funny I try to cherry-pick the worst predictions and then it still be me
so yeah I'm totally in on that if listeners want to
jump on to Facebook and we leave any of their own predictions or hit us up on Twitter will be happy to aggregate them put them in the show notes and include them in our recap next year
and that's going to be a great final call to action because it's happen again we've used up our a lot of time so definitely love to hear all of our listeners predictions and also feel free if you just think,
Scott and I are crazy
and you want to refute any of our predictions we'd love to hear your thinking behind that and as always the beginning of the year before you get really busy at work is a perfect time to jump on iTunes and finally give us that five star review.

Scot:
[53:10] Things are running Jason congrats on salvaging a tie out this year.

Jason:
[53:15] Thanks very much it it it it feels good to be West behind than I usually am thanks everyone for listening and until next time happy commercing.

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EP203 - Shopper insights from NPD Checkout

NPD Checkout is a product from NPD that scan physical and digital receipts from a panel of more than 100,000 users to get a unique look into consumer purchase patterns in a variety of product categories.

Jeremy Allen, Group President of Checkout, and Patty Altman, SVP Client and Business Development at Checkout join us to discuss what we can learn about the holiday from their dataset.

http://jasonandscot.com

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Episode 203 of the Jason & Scot show was recorded on Tuesday November 16th, 2019.

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Support the Show:

The Jason & Scot Show as been nominated for "Best Retail Media Resource" by the VIP awards. We'd appreciate your support, if you could take a minute to vote for us.

Adobe Recap

Taylor Schreiner is the Director of Adobe Digital Insights. He uses Adobe's data to give us a recap of the Cyber 5 (the five shopping days from Black Friday through Cyber Monday, this year Nov 29 - Dec 2).

Adobe Holiday Dashboard

Thanksgiving 11/28 - $4.2B (up 14.5% YoY) below forecast of $4.4B
Black Friday 11/29 - $7.4B (up 19.6% YoY) below forecast of $7.5B
Saturday - 11/30 - $3.6B (Up 18% YoY) at forecast
Sunday - 12/1 - $3.8B
Monday - 12/2 - $9.4B (up 19.7% YoY) at forecast

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Episode 202 of the Jason & Scot show was recorded on Wednesday December 4th, 2019.

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Support the Show:

The Jason & Scot Show as been nominated for "Best Retail Media Resource" by the VIP awards. We'd appreciate your support, if you could take a minute to vote for us.

Adobe Recap

Adobe Holiday Dashboard

Thanksgiving 11/28 - $4.2B (up 14.5% YoY) below forecast of $4.4B
Black Friday 11/29 - $7.4B (up 19.6% YoY) below forecast of $7.5B
Saturday - 11/30 - $3.6B (Up 18% YoY) at forecast
Sunday - 12/1 - $3.8B
Monday - 12/2 - $9.4B (up 19.7% YoY) at forecast

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Episode 202 of the Jason & Scot show was recorded on Wednesday December 4th, 2019.

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EP201 - Cyber5 2019 Hot Take

Cyber 5 is the five shopping days from Black Friday through Cyber Monday (this year Nov 29 - Dec 2).

Adobe Recap

Adobe Holiday Dashboard
(note: numbers updated after show was recorded)

Thanksgiving 11/28 - $4.2B (up 14.5% YoY) below forecast of $4.4B
Black Friday 11/29 - $7.4B (up 19.6% YoY) below forecast of $7.5B
Saturday - 11/30 - $3.6B (Up 18% YoY) at forecast
Sunday - 12/1 - Not reported
Monday - 12/2 - $9.4B (up 19.7% YoY) at forecast

We'll have an Adobe analyst on next week to break down results.

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Episode 201 of the Jason & Scot show was recorded on Monday December 2nd, 2019.

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EP200 - Walmart Chief Customer Officer Janey Whiteside

Episode 200 is our 4 year anniversary, featuring an interview with Janey Whiteside, EVP and Chief Customer Officer at Walmart.

Anniversary Recap

First Show November 13, 2015 (11.11 recap)
176 hours (over 7 days of straight content)
First Guest: Peter Cobb (Episode 15, 2/24/16)
Jason Company Names:
- 4 (Razorfish, Sapient.Razorfish, Publicis.Sapient, Publicis Group)
Most Popular Guest Show: Ken Worzel, Nordstrom
Most Popular News Show: Amazon acquires Whole Foods
Most Popular Deep Dive: Artificial Intelligence
Most Frequent Guests:
- Samir Bhavnani (1010 Data now Commerce IQ)
- EP 103: Amazon Private Label Deep Dive
- EP 125 Johnson & Johnson
- EP 151 Tyson Food e-Commerce
Tamara Gaffney (Adobe)
- EP 60 Holiday Preview 2016
- EP 109 Cyber 5 Recap 2017
- EP 155 Cyber 5 Recap 2018
Special Mention:
- Melissa Dooley 2x and Jamie Dooley 2X

Janey Whiteside Interview
(Timecode 6:34)

In this wide-ranging interview, we cover many topics, including:

Janey's background at Amex
The role of Chief Customer Officer at Walmart
Doing things at Walmart Scale
What does digital mean at Walmart
Private Label
Amazon
Challenges and opportunities of value focus
Innovation
The future of retail

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Episode 200 of the Jason & Scot show was recorded on Wednesday October 9th, 2019.

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EP199 - Dreamforce and Retail Earnings

Episode 199 covers the 2019 Dreamforce Conference as well as this weeks news including Walmart and Target earnings reports..

Dreamforce

Salesforce held their annual Dreamforce Conference in San Francisco this week. They launched a major new functionality "Customer 360 Truth" a universal customer data platform.

Singles Day - 11.11 Day - $38.38 billion US (up 26% YoY)

Amazon News
Nike leaves Amazon
Amazon Grocery Concept in LA won't have Amazon-Go
Amazon is internally testing Amazon-Go in grocery sized space in Seattle

Earnings Reports

Walmart - US up 6.6%, E-commerce up 41% (mostly grocery)
Target - Retail up 4.5%, E-Commerce up 31% (mostly store pickup/fulfillment)

Other News

PayPal acquired Honey for $4b. 20X their $200M Revenue
Kylie Jenner sold 51% of her business to Coty for $600m

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Episode 199 of the Jason & Scot show was recorded on Thursday November 21st, 2019.

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EP198 - Holiday Forecasts

A weekly podcast with the latest e-commerce news and events. Episode 198 covers the 2019 holiday forecasts, store visits, and news.

Reviews

Jason & Scot both received the new Apple AirPods Pro and the Amazon Echo Buds. Both liked the Apple product better. Echo buds had better noise cancelation, but an inferior fit/design, poor microphone, and a case that’s too big for a pocket.

Trip Reports

Nordstrom NYC Flagship
Amazon Bookstore remodels and FourStar
Showfields
Macy’s new Story display
Starbucks Pickup Only location

News

Gap CEO, Art Peck steps down
Sears Closing 96 more stores, leaving 182 Sears and Kmart stores
Barneys Liquidation
- Assets – Great American Group and Tiger Capital Group
- IP – Authentic Brands, will be licensed to Saks Fifth Ave
Profitero Price Study (Amazon is price leader)
Shopify – Adds an Email ESP
First Insight Study “Amazon Past it’s Prime” – Pretty silly methodology (stated preferences of 1000 people), don’t put too much stock in it.

Holiday Forecasts

NRF

Nov-Dec excludes automobile dealers, gasoline stations and restaurant

3.8% – 4.2% over 2018 to a total of between $727.9 billion and $730.7 billion (vs 2.1% last year, or 3.7% last 5 years).

AlixPartners

November-January

Total Retail increase of 4.4% to 5.3%

Deloitte:

November – January

Total sales are expected to exceed $1.1 trillion

Total Retail 4.5% to 5% rise in 2019 (vs. 3.1% last year)

Digital $144-$149B 14-18% growth (up from 11.2% in 2018)

Kantar

Oct-Dec

Total Retail 3.8% (vs. 3.1% last year)

Online 14% vs 10.8% last year

Salesforce

November 1 to December 31

Digital revenue growth this holiday season at 13% YoY to 4136B

Hub: https://www.salesforce.com/solutions/industries/retail/holiday-insights

Adobe

Nov-Dec

14.1% increase online (totaling $143.7B)

MetaForecast (summary of the forecasts):

14.25% Online (range is 13-18%)

4.35% Total Retail (range is 3.7% – 5.3%) – last yr was 2.1%

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Episode 196 of the Jason & Scot show was recorded on Thursday November 7th, 2019.

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EP197 - Personalization Deep Dive

This episode is a deep dive into Personalization.

Definition and Level Setting
Best Commerce Practices
Future Opportunities
Conclusion and Recommendations

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Episode 197 of the Jason & Scot show was recorded on Monday, September 30. 2019.

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EP196 - Apple Flagship, News, and Listener Questions

A weekly podcast with the latest e-commerce news and events. Episode 1946 covers a visit to Apple's new flagship on 5th Ave in NYC, recent industry news, and listener questions.

Apple 5th Ave Flagship Reopens

News

2019 Holiday season has 6 fewer days between Thanksgiving and Christmas
Credit card companies release new e-commerce payment flow EMV SRC
Best Buy moves to one-day delivery
Nordstrom opens New York Flagship
Barneys Bankruptcy
eBay, Nike, and Underarmour get new CEO's
Google Shopping flash sale and ‘buy on google’

Listener Questions

Q1: Michelle Grant - Amazon and Walmart have patents around predictive shipping. Could you speculate on what impact predictive shipping will have on commerce? You mentioned it in episode 187, but it would be great to get more details.

Q2: Holly Marie Pfeifer What’s the future look like for personalization with ITP cracking down on Safari and talks about Google being close behind in restricting third party cookies?

Q3: Jeff Vogl I saw Jason’s question to Tobi about performance and PWAs, do you see them actually sticking? I know they “hot” right now, but how many PWAs do either of you have on your phone? Of those, besides Amazon, how many do you really use? Seems like something that works for the Amazons and Nordstrom’s of the world, but do you see it as a mid market reality?

Q4: Karri Koivuniemi Any new info regarding what Adobe is doing with the Magento? What's your brief take on the current ecom platform landscape?

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Episode 196 of the Jason & Scot show was recorded on Thursday October 24th, 2019.

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EP195 - Coca-Cola VP of Shopper Marketing April Carlisle

April Carlisle, VP of Shopper Marketing National Retail Sales, The Coca-Cola Company. In this broad-ranging interview, we discuss Coca-Cola's digital footprint and strategy, digital shopper marketing, the evolution of e-commerce for consumables and grocery, and the future of shopper marketing.

April was inducted into the P2PI’s 26th Hall of Fame this year.

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Episode 195 of the Jason & Scot show was recorded on Monday, September 16th, 2019, live from the Grocery Shop trade show in Las Vegas, NV.

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EP194 - Amazon Q3 2019Earnings and News

Amazon Q3 Earnings

Revenue accelerated in the US and intl due to 1-day prime juicing demand

US - 24% (Q1 - 17%, Q2 - 20%, Q3 - 24%)
Intl 21% (Q1 - 16%, Q2 - 17%, Q3 - 21%)
Unit growth (items sold) accelerated to 22% - 4% acceleration (18%) - fastest in 2yrs.

This came at a cost - profits were down 26% y/y and TODO wall st estimates because shipping costs grew 46%

Specifically GAAP operating income of $3.16b came in 2% below street consensus of $3.22b EPS was $4.31 vs street $4.56.

This caused the stock to soften by 7-9% in after-hours trading and articles are already out that bezos no longer richest man.

Amazon’s Q4 midpoint revenue was $4b below Wall St. estimates and they projected lower margins than wall st expected.

Specifically, guidance is $80b-<->$86.5b with midpoint of $83.25b - implies 15% growth, 5% below Wall St.

Amazon’s Ads biz which grew 45% y/y and represented $3.6B in the Quarter. Brian T. Olsavsky - CFO: “So other revenue, which is principally advertising grew 45% this quarter, up from 37% last quarter. And the biggest thing in there is advertising and advertising grew at a rate higher than that 45%.”

Amazon News

Amazon Ad Conference - 400 people “AdCon 2019” 10/2 & 3
Cutting back on apparel Brands
Free shipping on $1 items, no more CRaP, No more Add-On
Amazon Counter Expansion
Amazon acquires digital health start-up Health Navigator
Amazon Launches Premium Gin “Tovess”
Amazon charges brands for slots in holiday catalog
Jeff Bezos’s Master Plan by Franklin Foer of The Atlantic
Is Amazon Unstoppable? New Yorker Charles Duhigg

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Episode 194 of the Jason & Scot show was recorded on Thursday October 25th, 2019.

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EP193 - Hershey's CDO Doug Straton

Doug Straton, Chief Digital Officer at The Hershey Company. In this broad-ranging interview, we discuss Hershey's digital footprint, the challenges of temperature-sensitive products, incumbents versus challenger brands, Amazon, Hershey's data strategy, and the future of digital grocery.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 193 of the Jason & Scot show was recorded on Tuesday September 17th, 2019, live from the Grocery Shop trade show in Las Vegas, NV.

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EP192 - Macy's VP of Innovation Parinda Muley

   Parinda Muley (@parinda), the VP of Innovation and Business Development at Macy’s. In this broad-ranging interview, we discuss a number of Macy’s innovation initiatives including ThredUp, Macy’s Market @ Macy’s, B8ta, Story, and Style Crew. We also talk about the strategies for fostering innovation, and how retail innovation is likely to evolve in the future.

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Episode 192 of the Jason & Scot show was recorded on Wednesday, August 21st, 2019. live from the eTail East trade show in Boston, MA.

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EP191 - UNTUCKit Chief Digital Officer Lockie Andrews

Lockie Andrews is the Chief Digital Officer of UNTUCKit (@untuckit). In this broad-ranging interview, we discuss UNTUCKit origin, Omni-Channel strategy, customer acquisition, Amazon, and challenges and opportunities of scaling a direct to consumer business.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 191 of the Jason & Scot show was recorded on Wednesday, August 21st, 2019. live from the eTail East trade show in Boston, MA.

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EP190 - Marketplaces Deep Dive

This episode is a deep dive into Marketplaces.

Background
Product Marketplaces Today
Trends in Product Marketplaces
Trends in Non-Product Marketplaces
Recommended Resources
- Jeff Jordan a16z Blog Page (@JEFF_JORDAN)
- Andrew Chen a16z Blog Page (@ANDREWCHEN)
Action Items

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Episode 190 of the Jason & Scot show was recorded on Monday, September 30. 2019.

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EP189 - Code Commerce and Grocery Shop

This episode was recorded right after Jason & Scot received their iPhone 11 Pro Max's. Jason mentioned a new iOS feature to take full page screenshots. Here is how to take full page screenshots in iOS 13.

Event Recaps:

Code Commerce - Sept 9 and 10 in New York City
Groceryshop - Sept 15-18 In Las Vegas

Amazon News

Amazon orders 100,000 electric vans from Rivian
Amazon Changed Search Algorithm in Ways That Boost Its Own Products

Other News

BDO reports more than 7k stores already closed in 2019, which is already more than any other year
Some contreversy over store closure numbers. IHL disagreed with Coresight methodology and findings.
- Coresight store closure tracker
- IHL score closure study

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Episode 189 of the Jason & Scot show was recorded on Sunday, September 22nd, 2019.

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EP188 - CarMax CMO Jim Lyski

Jim Lyski is the CMO of CarMax. In this broad-ranging interview, we discuss the keynote Jim delivered at EtailEast, "CarMax Goes All-In On Omni-Channel: Building, Scaling And Deploying With Speed", as well as discussing the digital disruption of the automobile business, and where it might all be going.

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Episode 188 of the Jason & Scot show was recorded on Wednesday, August 21st, 2019. live from the eTail East trade show in Boston, MA.

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Updated 9/23: Fixed editing mistake in audio file (sorry!)

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EP187 - Euromonitor Michelle Evans - Commerce 2040

Michelle Evans (@mevans14) is the Senior Head of Global Digital Consumer Research at Euromonitor Intl. She recently published a new report, "Commerce 2040: Revolutionary Tech Will Boost Consumer Engagement."

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Episode 187 of the Jason & Scot show was recorded on Wednesday, September 4. 2019.

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EP186 - BottleKeeper CEO Adam Callinan

Adam Callinan is the co-founder and CEO of Bottlekeeper (@thebottlekeeper). In this broad-ranging interview we discuss Bottlekeepers origin, their experience on Shark Tank, Amazon strategy, protecting intellectual property, and challenges and opportunities of scaling a direct to consumer business.

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Episode 186 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.

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Amanda Tolleson, the Chief Customer Officer at Birchbox. In this broad-ranging interview, we discuss Birchbox's core business, their price increase, their personalization strategy, and their new partnership with Walgreens.

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Episode 185 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.

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EP184 - Tapestry CDO Noam Paransky

Noam Paransky is the Chief Digital Officer at Tapestry, the parent company of Coach, Kate Spade, and Stuart Weitzman. In this broad ranging interview we discuss Tapestry's vision for a Global Digital Experience, some of the challenges with global localization, organization structures for a house of brands, and the future of commerce.

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Episode 184 of the Jason & Scot show was recorded on Tuesday, August 20th, 2019. live from the eTail East trade show in Boston, MA.

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EP183 - Jason Del Rey Land of The Giants Podcast

We catch up with Jason Del Rey (@DelRey) Senior Correspondent, Commerce at Recode. Jason was last on episode 67. We discuss some recent industry events and get update on this two big projects:

Code Commerce September 9 and 10, in New York City.
Land of The Giants: The Rise of Amazon Podcast.

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Episode 183 of the Jason & Scot show was recorded on Thursday, August 8th, 2019

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EP182 - Amazon Q2 Earnings and News

Recap of Amazon 2019 Q2 Earnings.
Starbucks productizing Mobile Order & Pay
UPS/FedEx go to 7 day delivery
FedEx quits Amazon

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Episode 182 of the Jason & Scot show was recorded on Wednesday, July 31st, 2019

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EP181 -'Think Like Amazon' Author John Rossman

John Rossman is a former Amazon executive who helped launched and scale the Amazon Marketplace, and he’s the author of “Think Like Amazon: 50 1/2 Ideas to Become a Digital Leader“.

In this wide ranging interview we cover some of the 50 ideas from the book about how Amazon operates, as well as how the ideas can apply to other businesses, and what businesses that are competing with Amazon should know.

You can read more from John on his blog “The Amazon Blog“.

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Episode 181 of the Jason & Scot show was recorded on Thursday, July 25th, 2019.

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EP180 - Deloitte's Kasey Lobaugh, Surprising Consumer Changes

Kasey was last on the show for Episode 114, where he introduced "The Great Retail Bifrication." This time, Kasey is back with a new report, "The consumer is changing, but perhaps not how you think. A swirl of economic and marketplace dynamics is influencing consumer behavior."

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Episode 180 of the Jason & Scot show was recorded on Thursday, June 20, 2019.

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EP179 - Edge Ascential VP Chris Perry

Chris Perry is the Vice President of Global Executive Education for Edge by Ascential.

Topics covered:

Digitally Native Brands
Brands Going Direct
Crazy things CGP executives say
Amazon

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Episode 179 of the Jason & Scot show was recorded on Monday, June 17, 2019

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Join your 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.

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EP178 - Chewy IPO and Listener Questions Part 2

Recap of Chewy IPO (Chewy S1)

Listener Questions Part 2:

Q5: Nick Barrett Would be really interested to hear your guys thoughts on how an established e-commerce store should expand into new product categories. Is it a good idea to launch new niche websites through Shopify to do this, or is it better to keep focus within a single e-commerce site and expand within that?

Q6 Rebecca Saunders Have you seen any recent data on the costs of customer acquisition online via the various channels, and how these have changed over time? I hear a lot anecdotally but haven’t managed to access any reliable data. Thanks in advance! Love the show btw (all the way from rainy London).

Q7 Amit Agarwal Have you ever done some research on e-commerce subscriptions such as amazon subscribe and save or autoship? Also, what is the industry trends for bark box, hello fresh and other bundle subscriptions?

Q8: Parker Block

Hey Scot, What do you see as likely business implications of rising appetite for anti-trust action (see FTC/DOJ announcement , Lina Khan joining Congress staff, etc ) on platforms which monetize consumer data ?

Q9: Baxter Overman

How do you put consumers at ease with in-home delivery services? (i.e. Walmart grocery). Wouldn’t drop-off when the customer is home for certain items (or lockers) be easier to sell?

Q10 Aakash Gupta

What’s your favorite app that you’ve downloaded in the last few months?

Q11 Twitter: Natalie Dillon mentioned us as one of her top podcasts – thanks Natalie!

Q12 Ted: Mixed use retail entertainment?

Q 13 Michelle Grant

Thoughts on pricing strategy in an omnichannel world where price transparency is high and filled with bots to find the lowest price

Q15 Melissa Burdick

The advertising race to the wallet – We’ve seen some big news lately: Target in talks to buy Triad, Walmart who is bringing advertising in house and just made a key hire Suresh as their CTO….where is this going for ads? Is it going to be a war for brands wallet? Is everyone going to take a page from the Amazon playbook, bring ads in house, and move to a self-service performance advertising, PPC world?

Where is the $ coming/going to come from? In the chart below, it looks like Amazon is taking from Google. (I asked a big CPG this question and I asked where is this coming from – or are you just getting more $$? Their answer – more $$).

How should brands prepare?

Q16 Melissa Burdick

Is Amazon going to do to walgreens/bartells/CVS what they did to the bookstore (kill the bookstore to build a bookstore) with the acquisition of pill pack + private label (aspirin, etc) and enable the ability to sell mass CPG profitably?

Q17 Melissa Burdick

Can Scot please update his Amazon Scape – how has it changed?

Q18 Melissa Burdick

When is Spiffy coming to Seattle?

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 178 of the Jason & Scot show was recorded on Tuesday, June 18th, 2019.

http://jasonandscot.com

Join your 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.

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EP177 - Internet Trends 2019 and Listener Questions Part 1

A recap of Code Conference and Mary Meekers Internet Trends 2019 Presentation, as well as Part 1 of Listener Questions.

Recap of the Code Conference in AZ.

Recap of Mary Meeker "Internet Trends 2019" from Code Conference

Listener Questions Part 1:

Q1: Perry Solomon What do you project the effect of the FedEx contract termination to be, this especially applies to 3P merchants using FedEx for SFP?

Q2: Danny Sheridan If a brand is ready to partner with an Amazon channel-consultant, how do they tend to find each other? Is the industry growing or shrinking from your point of view?

Q3: Ben Kates How will the CDP change in the next 3 years? How does personalization continue to evolve? Thanks for all of your time and energy into the show. -Ben from CompassRed in Philadelphia

Q4: Jamie Dooley Hey Jason & Scot! Have you heard any news or updates around Amazon Singularity? (combination of Amazon Vendor Central & Seller Central). I’ve heard the project’s rumored codename is “Hybrexit”....?

Tune in next time for listener questions part 2!

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Episode 177 of the Jason & Scot show was recorded on Friday, June 14th, 2019.

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EP176 - Tuft & Needle Co-Founder JT Marino

Tuft & Needle (@tuftandneedle) is the original digitally native direct to consumer mattress brand (founded in 2012). In 2018 they merged with Serta Simmons Bedding company. JT Marino is a co-founder of Tuft & Needle, now Chief Strategy Officer for Serta.

Topics covered:

Tuft & Needle origin story
Merger with Serta
State of the online mattress industry
Tuft & Needles Amazon strategy
Future of Direct to consumer model
Omni-Channel opportunities

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Episode 176 of the Jason & Scot show was recorded on Monday, June 3rd, 2019.

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EP175 - Hudson Yards and retail earning news

Review of Hudson Yards mixed used shopping development in NYC (thye don’t like to call it a mall).

Upcoming Shows:

Code 6/10
RetailX 6/25
NRF NXT 7/22
Etail East 8/19
Grocery Shop 9/15

Walmart, Macy’s, Kohls earning reports.

Direct to Consumer Valuations (Harry’s, Away, and more)

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Episode 175 of the Jason & Scot show was recorded on Tuesday, May 21st, 2019.

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EP174 - Web Smith of 2PM

Web Smith (@web) is the Founder and Editor-in-chief of 2pm, a curated, subscription-based media company. We cover a wide variety of topics around digitally native vertical brands, including the recent Harry's acquisition, and Away investment.

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Episode 174 of the Jason & Scot show was recorded on Wednesday, May 16th, 2019.

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EP173 - Live show from ChannelAdvisor Connect http://jasonandscot.com

This is a live presentation from the ChannelAdvisor Connect show in Austin, Texas. If you'd like to follow along, you can download the deck here:

https://www.slideshare.net/retailgeek/jason-scot-show-channeladvisor-connect-2019

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Episode 173 of the Jason & Scot show was recorded on Monday, April 8th, 2019.

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EP172 - Amazon Shareholder Letter and Q1 Results

Amazon Annual Shareholder Letter

Jeff Bezos released the Amazon 2018 Annual Shareholder Letter, which this year was focused the the phenomenal success and growth of the Amazon Marketplace. In the process, Amazon disclosed the breakdown of it's 1P and 3P revenue from 1999 - 2018, as well as giving us the "physical gross merchandise volume (physical GMV)" for the first time. In 2018 1p = $117B, and 3P = $160B. For a total GMV of $277B (which means US GMV is approx $161B). Prior to this disclosure we've all had to guess as the the actual size of Amazon's retail business. This makes Amazon the second largest retailer in the US, behind Walmarts $318B (excluding Sam's Club), and ahead of Krogers $116B.

The letter also talks about the importance of companies being allowed to experiment (wondering as Jeff calls it), even if many of those experiments ultimately fail. No customer ever asked for AWS, but a few success like AWS can fun many failures. Even failures can be valuable, such as the Fire phone, which ultimately led to the Amazon Alexa. Jeff argues, that as the scale of a company grows, so much the scope of these failures.

The letter takes a victory lap for some of the improvements in employee pay and benefits that Amazon has put in place and a challenge to other retailers. A challenge that other retailers like Walmart did not particular appreciate.

As always, the letter closes with a reminder that the 1997 shareholder letter still accurately reflects the guiding principals of the company.

It's very likely that this years letter, is in response to an increasing call from thought leaders and politicians to regulate and even break up large tech companies like Amazon.

Q1 Results

Revenue came in at $59.7B, 19% y/y growth ex-F) which was in-line with Wall Street consensus. Overall operating margin was 7.4% compared to a 5.2% consensus, so that was a clear beat. There is some concern about unit sales decelerating (a risk as Amazon saturates the market, and Prime membership plateau).

Surprisingly, ad sales growth also plateaued but that was explained as mostly an accounting change.

The big news from the Q1 earnings was that Amazon would be investing over $800M to move from free 2-day shipping for Prime members, to free 1-day shipping for Prime members. With most retailers already struggling to match Amazon's 2-day delivery promise, this is a meaningful moving of the goalposts by Amazon.

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Episode 172 of the Jason & Scot show was recorded on Monday, April 29th, 2019.

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EP171 - DTC brands physical experiences

 A discussion of Direct-To-Consumer brands physical retail experiences, recorded live fromThe Domain mall in Austin. Jason & Scot were in Austin to speak at the annual ChannelAdvisor Connect conference, and took time out to do store visits at The Domain. Update: In the episode we state that Domain is owned by Simon Properties, which is not accurate. Domain is actually several developments that are separately operated. Domain Northside is operated by Northwood Retail, it is phase III of the development of the Domain. Domain I is operated by Simon Malls. Most of the tenants we were talking about are Domain Northside, Neiman Marcus is Domain. (5/24/2019)   **Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.**

Episode 171 of the Jason & Scot show was recorded on Monday, April 8th, 2019.

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EP170 - ThredUp President Anthony Marino

Anthony Marino (@amarino) is the President of thredUp (@thredup), the nation's leading online marketplace for women's and kids' like-new apparel. Over 25,000 brands, ranging from Gap to Gucci, are listed on thredUP.com at prices up to 90 percent off retail.

In this interview, we cover the basic thredUp value proposition, challenges and opportunities for the re-commerce business model, the dynamics of operating a two-sided marketplace, customer acquisition, reverse logistics, and the dynamics for brands in the re-commerce space.

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Episode 170 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

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EP169 - GGV Capital Principal Robin Li

Robin Li is a principal at GVV Capital, a global venture capital firm that focuses on seed-to-growth stage investments across Consumer/New Retail, Social/Digital & Internet, Enterprise/Cloud and Frontier Tech sectors. The firm was founded in 2000 and manages $6.2 billion in capital across 13 funds. Past and present portfolio companies include Affirm, Airbnb, Alibaba, Peloton, Poshmark, Slack, Square, Wish, and many others.

In this interview, we cover a wide range of topics around the hot trends in retail and consumer in North America, and we deep dive in what’s going on with retail, social and e-commerce in China well.

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Episode 169 of the Jason & Scot show was recorded on Wednesday, February 20, 2019 from the eTail West tradeshow in Palm Desert, CA.

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EP168 - Bombas founder David Heath

David Heath is the CEO and Co-Founder of Bombas (@bombas), a fast growing, energetic e-commerce apparel company, focused on making the most comfortable socks in the history of feet, while helping those in need. Founded because socks are the number one most requested clothing item at homeless shelters, for every pair they sell, they donate a pair to someone in need.

In this interview, we cover a wide range of topics including the Bombas founding story, their SharkTank experience, the DTC business model and growth challenges, social marketing, innovation, the brick and mortar.

If you’re inspired by the Bombas story, they are hiring! FREE SOCKS included. https://boards.greenhouse.io/bombas

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Episode 168 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

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EP167 - Instagram Checkout Hot Take

This episode is a hot take on Checkout on Instagram feature. We cover the main features, details about the closed beta, potential pros and cons, and a recommendation for brands thinking about selling on Instagram.

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Episode 167 of the Jason & Scot show was recorded on Wednesday, March 20th, 2019.

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

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EP166 - Shipsi CEO Chelsie Lee

Chelsie Lee (@ChelsieAnnLee) is the CEO and Co-Founder of Shipsi, a software solution for aggregating and managing last mile delivery services.

In this interview, we cover a wide range of topics including last mile solutions, curbside pickup versus delivery, changing customer behaviors, and the Amazon effect.

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Episode 166 of the Jason & Scot show was recorded on Wednesday, February 20, 2019 from the eTail West tradeshow in Palm Desert, CA.

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EP165 - Amazon Alexa's David Isbitski

David Isbitski (@thedavedev)is the Chief Evangelist for Alexa at Amazon.

In this interview, we cover a wide range of topics including the growth of the Alexa platform, the evolution of the developer community, the future of voice, and voice commerce specifically.

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Episode 165 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

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EP164 - News live from ICSC OAC

http://jasonandscot.com

Jason & Scot gave a presentation at the International Council of Shopping Centers Open Air Centers show in Austin Texas and got together afterward to record a news update.

Amazon Project Zero - New brand protection program
Walmart Earnings. Same store sales up 4.2%, E-Com for the quarter up 43% (up 40% for the fiscal year), guidance for next year is that e-com will grow 35%. Profitability of e-commerce continues to be a challenge for Walmart, and they expect that to continue. Walmart stores offering "Online Grocery Pickup" (OGP)_ grew from 800 to 2100 stores this year, and is expected to grow to 3100 next year.
JCPenneys Earnings. Revenue down 8.4%, same store sales down -4% (vs. 4.3% expected). They announced the closure of 18 stores, and said to expect more in subsequent years).
L Brands Earnings - Victoria's Secret same store sales down 7%, will close 53 stores.
FedEx launched a new delivery robot, SameDay Bot
Stamps.com dropped it's exclusive deal with USPS, a possible precursor to an Amazon partnership (or acquisition).
Target launched Target Plus, a new invite only marketplace to expand Targets online assortment.
Marketplace software vendor Mirikl announced a new $70M fund raise, reflecting investor confidence in the marketplace model.

Jason will be at ShopTalk in Las Vegas next week and will moderate two panels:

MONDAY, MARCH 4, 2019 TRACK 4, SESSION 4: 2:50PM - 3:30PM

TOPIC: Selling on Marketplaces

John Evons, VP, Global Direct-to-Consumer, KEEN
Bridget Davies, VP, Revenue & Seller Growth EBay
Jordan Bass, Head of eCommerce, The Wonderful Company

TUESDAY, MARCH 5, 2019 TRACK 2, SESSION 5: 3:35PM - 4:15PM

TOPIC: Creating a Single View of the Customer

Charlie Cole, Chief Ecommerce Officer, Samsonite
Steve Miller, SVP, Marketing & eCommerce, JOANN Stores
Greg Fancher, SVP & Chief Information Officer, Express

Jason and Scot will be giving a joint presentation (and recording a live show) from ChannelAdvisor Connect in Austin on April 8th and 9th.

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Episode 164 of the Jason & Scot show was recorded on Thursday, February 28th, 2019.

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

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Digital Alcohol with Diageo and Drizly

Jason & Scot will be podcasting live from the eTail West which is held Feb 19-22 in sunny Palm Springs, CA. As a special gift to listeners, you can use the code JASONSCOT for 20% off.

This episode is a deep dive into the digital alcohol market with Diageo and Drizly.

Taylor Burton (@TBurton86) is the VP of Strategic Partnerships at Drizly, the world's largest alcohol marketplace to shop beer, wine and spirits, currently available in 95 cities.

Wayne Blum (@waynegblum) is is the Director, U.S eCommerce strategy and partnerships at Diageo, A global leader in beverage alcohol, with over 200+ brands.

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Episode 163 of the Jason & Scot show was recorded on Monday, February 11th, 2019.

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EP162 - Amazon Q4 2018 Earnings Hot Take

Jason & Scot will be podcasting live from the eTail West which is held Feb 19-22 in sunny Palm Springs, CA. As a special gift to listeners, you can use the code JASONSCOT for 20% off.

This episode is a hot take on Amazon Q4 2018 earnings

Amazon Q4 Earnings Highlights
- $72.4BB, which is a 20% y/y increase
- $19.4B in Free cash flow
- Amazon grew North America 18% y/y and International 15% y/y, for a blended growth rate of 17%
- Unit growth decelerated to 14% from 15% in Q3
- Revenue from brick and mortar down 3%
Amazon Web Services - Grew 45% to $7.4B for the quarter and generated $2.2b in operating income which was up 61% y/y
Marketplace
- 52% of units, down from 53% levels in Q2 and Q3
- Wingo GMV estimate -> 150B GMV for the quarter. $450B GMV for the year ($300B GMV in North America).
Amazon Ad Business - grew 95% y/y to $3.49B (Estimated $10B for the year)
- Pivotal estimates $38B by 2023

Jason & Scot will be podcasting live from the eTail West which is held Feb 19-22 in sunny Palm Springs, CA. As a special gift to listeners, you can use the code JASONSCOT for 20% off.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 162 of the Jason & Scot show was recorded on Thursday, January 31st, 2019.

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EP161 - Verizon Enterprise Solutions GVP, Michele Dupre

Episode 161 is an interview with Michele Dupre, GVP of Verizon Enterprise Solutions, live the National Retail Federation Big Show. We cover a variety of topics including:

Verizon's Holiday Retail Index Findings
5G and it's likely impact on commerce
Security

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Episode 161 of the Jason & Scot show was recorded on Tuesday, January 15th, 2019.

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EP160 - CES 2019 Recap, and NRF Update

Episode 160 is a recap of the 2019 Consumer Electronics Show, and an update from the Nation Retail Federation Big Show.

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Episode 160 of the Jason & Scot show was recorded on Monday, January 14th, 2019.

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EP159 - 2019 Predictions and 2018 Recap

Our annual predictions episode for 2019 and a recap of our 2018 predictions.

2018 Recap - Predictions made on episode 112

Scot

Mallageddon 2.0 - We saw 7000 stores close in 2017, I think this accelerates in 2018 as the 30-40% of weak malls fail closures. YES
Amazon will NOT buy another offline retailer, triples down on private label. YES
Amazon will squarely get in the last mile business in 2018 and compete with FedEx and UPS. NO
Amazon’s ad group will get so large that they have to break out details about it and everyone will be shocked at how large it has gotten so quickly YES
Walmart will make a big M+A - top candidates would be Instacart, postmates and eBay. YES
Somebody acquires Magento, or they go public. YES

5/6

Bonus - Amazon comes out with Alexa powered wireless earbuds - because I want them. NO

Jason

Grocery gets disrupted by digital (led by curbside pickup). Digital grocery doubles in US, at least one delivery firm peters out.YES
Drug gets disrupted by digital. NO
AI Gap - biggest trend of 2018 NO
Voice - Huge but not for commerce. YES
Payments - Retail digital wallets die (except Starbucks/Walmart/Amazon). Bitcoin tanks. YES

3/5

Bonus - Amazon launches a wearable. NO .

Scot crushes Jason!

2019 Predictions

Scot

At least 5k more store closures in 2019
Amazon - Prof Galloway is big on Amazon having to create a AWS spinoff and has moderated that to tracking stock. I’m going to predict Amazon doesn’t do either of those things. But this WILL be the year they break ads out.
eBay/Alibaba - I think this is the year when the both need to do something big and the stars are aligning for a combination there.
Shopify gets acquired by one of the big ad-based companies (facebook/google most likely)
Walmart stumbles in e-commerce

Jason

Amazon store count exceeds 1000 stores
Walmart buys a last mile firm
Another big bankruptcy (going to be a tougher than expected year, JCP, category killers Office, BBBY, Neiman)
Mobile commerce revenue passes Desktop - Aided by PWA’s, and payment API’s we see mobile gap narrow
Fads (Voice Commerce, Customer facing AI, SocialCommerce, VR BlockChain)

Bonus: Amazon breaks out Prime revenue.

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Episode 159 of the Jason & Scot show was recorded on Sunday, January 6th, 2019.

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EP158 - NYC Holiday Store Visits

We're in the peak of the holiday season, which means Jason is going to be visiting stores. This year he went to NYC and visited 33 new or updated store concepts. If you'd like to follow the tour yourself, here the Retailgeek NYC Retail Map.

Some favorites this year included:

Nike
Dyson
Allbirds
Amazon 4 Star
Casper
Covergirl
FAO Schwarz
Glossier
Google Hardware
Macy’s (especially the B8ta shop-in-shop)
Showfields

Some disappointments included:

Restoration Hardware
Saks
Apple
Away

Amazon News

Bloomberg article had a great piece about the 1099 amazon delivery network
Amazon extended delivery window
Amazon new air hub in DFW
WSJ article on CRAPfest
Amazon Go in airports
Small format Amazon Go
Opening Amazon Go in UK

Other News

IBM sold its commerce platform (Websphere) to HCL

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Episode 158 of the Jason & Scot show was recorded on Monday, December 17th, 2018.

Happy holidays everyone... talk to you in 2019!

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EP157 - Bain & Company Partner Cesar Brea

Ceasar Brea (@cesarbrea) is a partner at Bain & Company, focused in the Advanced Analytics and Marketing practices. We cover a variety of topics related to the disruption and future of commerce.

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Episode 157 of the Jason & Scot show was recorded on Monday, November 19th 2018.

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EP156 - Profitero's Keith Anderson Holiday Recap

Keith Anderson (@KeithAnderson) is the SVP of Strategy and Insights at Profitero. Profitero is a leading global provider of e-commerce analytics for brands and retailers. As head of strategy & insights for Profitero, Keith leads Profitero's product strategy and global analyst team.

In this episode, we discuss Keith's insights around last weeks Cyber-5 as well as 2018 in general.

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Episode 156 of the Jason & Scot show was recorded on Thursday, November 29th, 2018.

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EP155 - Cyber-5 Recap w/ Adobe's Tamera Gaffney.

Tamara Gaffney (@tamarag) is the Adobe’s Principal Analyst, Experience Index. Tamera joins us to discuss the holiday e-commerce results from Black Friday through Cyber Monday (Cyber 5). Tamera has access to anonymous, and aggregated data from more than 5,000 companies worldwide that use the Adobe Digital Marketing Cloud (including Adobe Analytics formerly known as Omniture), which represents one of the largest samples of the overall e-commerce industry available. Her team publishes useful insights based on that data throughout the year.

Adobe 2018 Holiday Forecast and Realtime Holiday Dashboard

Adobe Digital Insights

Adobe CyberMonday Press Release

Long time listeners will remember that Tamara first appeared on Episode 60 with Holiday Predictions for 2016, and Episode 109 for a recap of 2017 Cyber-5.

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Episode 155 of the Jason & Scot show was recorded on Wednesday November 29, 2018.

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EP154 - Turkey-5 2018 Recap

Episode 154 is a quick recap of all the retail and e-commerce activity over the Turkey-5 weekend (Thanksgiving through CyberMonday).

Jason interviewed by eMarketer about AmazonGo stores

Jason article in Forbes "The Future of Brick-And-Mortar Retail is Mobile"

| Adobe | | Revenue | YoY Growth | | Thurs | $3,700,000,000 | 28.00% | | Friday | $6,200,000,000 | 23.60% | | Sat | $3,200,000,000 | 25.00% | | Sun | $3,200,000,000 | 25.00% | | Monday | $7,900,000,000 | 29.00% | | Turkey 5 | $24,200,000,000 | 26.41% | | Nov-Dec | $124,100,000,000 | 14.8% | | * Adobe Forecast |

Amazon Cyber-5 Press Release

Salesforce Holiday Insights Hub

Adobe Holiday 2018 predictions, actuals, and analysis

IBM Analytics Outage

J Crew Website Outage

Google and Facebook Outages

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Episode 154 of the Jason & Scot show was recorded on Tuesday, November 27, 2018.

http://jasonandscot.com

Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, 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.

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EP153 - Pre-Thanksgiving Industry News and Listener Questions

Thanksgiving road trips with Jason & Scot have become a tradition in the digital shopper marketing industry. Here is an hour of new and listener questions, to get you ready for the Turkey-5 holiday!

Spiffy announces connected car initiative. The first connected car feature grants limited access to vehicles through OEM (Original Equipment Manufacturer) connected car capabilities. Eliminating the step of handing off keys prior to a service makes Spiffy's on-demand services even easier for customers.

Amazon News

HQ2/3 discussion
Amazon offers free shipping w/o Prime (how will Target/Walmart respond)
Apple establishes an official presence on Amazon

Other News

11.11 Recap
Walmart earnings (e-com up 43%)
Walmart CEO Doug McMillon on Tim Ferris podcast
New store concepts dominated by mobile experiences
- 7Fresh (JD Grocery)
- New Nike NY Store "House of Innovation 000"
- 7-11 scan and go
- Sams Club Now
- Amazon Go / 4-Star / Books

Listener Questions

Sri Rajagopalan
- Is the Amazon business in consumables really growing?
- Why are we not embracing Alibaba in the USA?
Anonymous
- Anker rose to be a powerhouse of an Amazon business. Can you analyze their changes to highlight the overall marketplace transition to differentiated product development?

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Episode 153 of the Jason & Scot show was recorded on Sunday, November 18, 2018.

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EP152 - Salesforce.com Shopper First Research with Rick Kenney

Rick Kenney (@rickkenney) is Head of Consumer Insights at Salesforce. Rick recently completed a "Shopper First Retailing" study in conjunction with Publicis.Sapient.

The study included data from:

Shopper activity: Digital shopping behavior of 500+ million shoppers

Consumer survey: Preferences of 6,000 global consumers

Mystery shopping: 70 brick-and-mortar stores evaluated for consumer experience

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Episode 152 of the Jason & Scot show was recorded on Monday November 12th 2018.

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EP151 - Tyson Food E-Commerce VP Tim Madigan and Samir Bhavnani of 1010data

Tim Madigan is the Vice President of eCommerce at Tyson Foods. Samir Bhavnani is the Vice President Consumer Insights at 1010data. We caught up with Tim and Samir at the 2018 GroceryShop tradeshow in Las Vegas.

"The State of Grocery" PDF Report from 1010data

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Episode 151 of the Jason & Scot show was recorded on Monday, October 29th, 2018.

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Amazon plans to split HQ2 to two cities

Amazon Plans to Split HQ2 Evenly Between Two Cities (WSJ)
Amazon Plans to Split HQ2 Between Long Island City, N.Y., and Arlington, Va. (NY Times)

GroceryShop Recap

GroceryShop is the first year of a new show focused on disruptive trends, technologies and
business models in grocery & CPG that includes both established and startup CPG brands, supermarkets, c-stores, drug stores, discount stores, ecommerce players, warehouse clubs, grocerants and non-traditional grocery retailers. The show took place October 28-31 in Las Vegas, at the Aria Hotel and Convention Center.

Jason's Activities

Jason interviewed Sanjiv Mehra, co-founder and CEO EOS products for a keynote fireside chat
Jason moderated a panel "Evolving CPG Retailer relationships" with Constellation Brands, e.l.f. Beauty, and Fairway Market
Jason moderated a panel "Using product content to build brands" with Boston Beer Company, Chobani, and The Wonderful Company

Keynotes

Yael Cosset, Chief Digital Officer, The Kroger Co.
Andy Katz-Mayfield, Co-Founder & CEO, Harry's
Sanjiv Mehra, Co-Founder & Co-CEO, eos Products
Apoorva Mehta, Founder & CEO, Instacart
Chieh Huang, CEO, Boxed
Nina Barton, President, Global Growth, Kraft Heinz
Luke Jensen, CEO, Ocado Solutions
Narayan Iyengar, SVP, Digital & eCommerce, Albertsons Companies
Nick Green, Co-Founder & CEO, Thrive Market

Key Themes

Digital Disruption of Grocery
Store picking vs. Dedicated Fulfillment Center
Startup Brands vs. New products from established Companies
Private Label/Owned Brands

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Episode 150 of the Jason & Scot show was recorded on Monday, November 5th, 2018.

http://jasonandscot.com

Join your hosts Jason "retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, 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.

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Happy Birthday, to Jason's wife, Leila!

Scot Wingo is contributing the Forbes Digital Council, and writing about his new Vehicle 2.0 Framework. Introducing Vehicle 2.0. Jason Goldberg is also contributing to a regular retail column on Forbes, starting with his first article: What Competitors Are Missing About Amazon's New 4-Star Retail Concept.

Scot is appearing in a national TV spot promoting his alma mater, North Carolina State, "Think and Do!"

Jason is leading several sessions at GroceryShop October 28-31 in Las Vegas, including a keynote interview with Sam's Club Chief Merchant Ashley Buchanan.

Amazon Earnings:

Amazon's third-quarter earnings beat Street estimates, but its revenue and fourth-quarter outlook fell short of expectations.
Revenue: Revenue increased +29% Y/Y (+30% ex-FX) to $56.58B, 1% below the Street's $57.11B. 29% Revenue growth was below consensus expectations as Int’l revenue disappointed with a ~$1B shortfall.
North America revenue (ex-AWS and ex-WF) of $30.10B was up 25%, in line with 2Q18 growth. International revenue of $15.55B was up 13% (+15% ex-FX), a notable deceleration from 27% growth in Q2 (+21% ex-FX). AWS revenue of $6.68B was up 46%, down from +49% growth in Q2 but in line with expectations. Physical Stores revenue of $4.25B was slightly ahead of consensus expectations.
Amazon's "other" category, aka advertising, jumped 123% to $2.5 billion in revenue
AWS revenue: $6.68 billion vs. $6.71 billion estimated, according to FactSet
Net income, meanwhile, grew more than 10-times from the year-ago period, to a record-high $2.8 billion, marking the fourth straight quarter of topping $1 billion in profits. The $3.7 billion in operating income far-exceeded Street estimates of $2.1 billion
GAAP Operating Income of $3.72B was higher than the Street's $2.12B. Gross margin of 41.7% came in above the Street's 40.5%. GAAP Operating Income margin of 6.6% was higher than the Street's 3.7%. Profitability, once again, was a positive surprise with Op Inc ~$1.5B ahead of consensus expectations,

Other News:

Implications of the US pulling out of UPU Treaty
Implications of Sears bankruptcy

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Episode 149 of the Jason & Scot show was recorded on Thursday, October 25th, 2018.

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EP148- Amazon 4-Star Retail Concept Store

Amazon 4-Star, Amazon’s latest brick and mortar retail concept, opened in the SOHO neighborhood of New York City on Thursday, September 27th. The premise that its assortment of merchandise available in the store is rated 4-star or higher, curated by customers, a top seller or is new and trending on Amazon. Jason was on-hand for the grand opening and gives a first-hand account. "What Competitors Are Missing About Amazon's New 4-Star Retail Concept" from Forbes.

Overview of Amazons brick and mortar formats to date
Description of the Amazon 4-Star Store
Digital Fact Tags
- SoluM is the hardware provider
Checkout Experience
Implications for other retailers

Upcoming:

Groceryshop October 28-31, Las Vegas

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Episode 148 of the Jason & Scot show was recorded on Monday, October 1st, 2018.

http://jasonandscot.com

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EP147- Industry News, Amazon, Apple, Recode, Shop.org, and holiday forecasts

It's a news-a-palooza this week including including Amazon, Apple, Recode, Shop.org, and holiday forecasts and more. Scot and I get together in person in Chicago to discuss all the news an implications.

Amazon News

Amazon Go opens in Chicago and Jason has a trip report
Bloomberg reports Amazon may have plans to open 3000 Amazon-Go stores
Amazon Storefronts is a new feature for small businesses to curate collections
Amazon has launched a new AI based visual discovery tool, Amazon Scout
SnapChat and Amazon have partnered on a new social shopping experience, using visual search
Amazon launched 14 new Echo devices
Amazon and Good Housekeeping partner on Mall of America Pop-Up

Apple News

Iphones ship with new commerce features
- Background NFC Scanning
- Native QR Scanning
- Augmented Reality in web-browser via ARKit 2.0

Other News

Holiday forecasts are beginning to come in
- Deloitte: 17-22% ($128b-$134b) (19.5% midpoint)
- Internet Retailer 15.5% ($120b)
- Forrester (preliminary) forecast 14-16%
Adobe acquires Marketo
Farfetch (luxury e-commerce marketplace) has successful IPO

Event Recaps

Code Commerce in New York. All the interviews are available on YouTube (thanks to @DelRey)
Shop.org in Las Vegas. Interesting new vendors:
- Seek - Augmented Reality in Mobile Browser hosted solution for retailers/brands.
- Hero - Connecting online shoppers live with associates in the physical store.

Upcoming:

Groceryshop October 28-31, Las Vegas

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Episode 147 of the Jason & Scot show was recorded on Monday, September 24th, 2018.

http://jasonandscot.com

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Sucharita (Mulpuru) Kodali @smulpuru is the Vice President and Principal Analyst at Forrester Research covering retail and e-commerce. She has previously worked at Saks Fifth Ave, Toys R Us, and Walt Disney Company.

In this interview, we cover a wide range of topics including shop.org 2018, Amazon, marketplaces, holiday 2018 predictions, personalization, and the future of e-commerce.

Upcoming:

Groceryshop October 28-31, Las Vegas

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Episode 146 of The Jason & Scot Show was recorded on Thursday, September 20th, 2018.

http://jasonandscot.com

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EP145 - Industry News Amazon, Walmart, Apple

Amazon News

Amazon (briefly) passes $1 trillion market cap
J-Crew selling on Amazon
New Amazon Ad tracking pixel
Amazon Go opens third store (with more announced openings in IL, CA, and NY)

Apple News

New iPhones being announced 9/12
iOS 12
Ipads/AppleWatch

Other News

Instagram Shopping App
Kylie Cosmetics coming to Ulta
Walmart Premium Outdoor Store
Who will win holiday toys?
Kroger Simple Truth expands to China

Upcoming:

Shop.org September 12-14th, Las Vegas
Groceryshop October 28-31, Las Vegas

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Episode 145 of the Jason & Scot show was recorded on Wednesday, September 5th, 2018.

http://jasonandscot.com

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EP144 - Tommy John founders Tom Patterson and Erin Fujimoto

Erin Fujimoto and Tom Patterson are the founders of Tommy John, a vertically integrated consumer brand in the underwear category. They have recently expanded to include direct to consumer, woman's apparel and are now opening their own stores.

In this interview, we cover a wide range of topics including the origin story, direct to consumer versus wholesale, the challenges and opportunities of being a digitally native brand, omni-channel expansion, and the future of commerce.

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Episode 144 of the Jason & Scot show was recorded on Tuesday, August 8th from the eTail East tradeshow in Boston.

http://jasonandscot.com

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EP143 - Dell head of digital transformation Sarika Puri

Sarika Puri is a Senior Director and Head of Digital Transformation Acceleration Organization at Dell Technologies.

In this interview, we cover Sarika's background and discuss Dell Technologies journey to digital transformation.

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Episode 143 of the Jason & Scot show was recorded on Tuesday, August 7th from the eTail East tradeshow in Boston.

http://jasonandscot.com

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EP142 - Industry News and Retail Earnings

   Scot Wingo Tarheel of the week.

Amazon News

Amazon licensing it’s Amazon Go “Just Walkout Technology” to Hundai in S. Korea
Whole Foods now selling via Alexa
Whole Foods offering 30-minute windows for curbside pickup
Party City selling on Amazon

Walmart News

Earnings – Same Store Sales up 6% y/y (highest in 10 years)
40% E-Com Growth
Traffic and Tickets up 2% in US
Grocery pickup is now in more than 1,800 locations (40% of US Pop by EOY)
“Clearly, the consumer backdrop is favorable, we’re getting a little bit of benefit from that”, Dan Binder VP Investor Relations
Allowing 3p returns in stores
Walmart co-leads $500M investment in Chinese online grocery service Dada-JD Daojia

Target News

Same Store Sales up 6.5% y/y (highest in 13yrs)
E-Com Up 41% (vs 36% last year)
Traffic up 6.4%
“I’ve been doing this for a long time, and I think this is the healthiest environment I’ve ever seen” Target CEO Brian Cornell
Same Day Delivery 1100 stores / Curbside pickup 800 stores
Owned Brand Cat & Jack $2B in 1 year

Mallageddon

4,379 closures / 2,239 opens = 2,100 net fewer stores (net 2800 reduction in stores in 2017)
Loss of 35M ft sq of retail space (closed stores are typically smaller footprint than new store openings)
Industrial space is now MORE expensive than retail space

Upcoming:

Shop.org September 12-14th, Las Vegas
Groceryshop October 28-31, Las Vegas

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Episode 142 of the Jason & Scot show was recorded on Thursday, August 23rd, 2018.

http://jasonandscot.com

Join your hosts Jason “retailgeek” Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, 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.

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Liraz Margalit, PhD, is a Web Psychologist, a Keynote Speaker and Head of Behavioral Research at Clicktale. She integrates Cognitive Psychology and Behavioral Economic perspectives to analyzes online consumer behavior and delivers actionable insights for business stakeholders.

In this interview, we cover Liraz's background, digital body language, the mobile mindset, and the role of emotion in shopping.

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Episode 141 of the Jason & Scot show was recorded on Tuesday, August 7th from the eTail East tradeshow in Boston.

http://jasonandscot.com

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EP140 - Stripe Head of Stripe Issuing, Lachy Groom

Lachy Groom is the head of issuing at Stripe.

Stripe is a payment processor that provides a set of tools to help businesses accept payment online. Their clients include Warby Parker, Wish, and Target. Lachy was the 30th employee at Stripe, he leads Stripe Issuing which is an end-to-end platform for quickly creating, distributing, and managing physical and virtual cards.

In this interview, we cover Lachy's background, the range of Stripes services, the state of online payments, mobile payment best practices, digital wallets, and marketplaces.

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Episode 140 of the Jason & Scot show was recorded on Friday, August 3, 2018.

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EP139 - B8ta founder and CEO Vibhu Norby

Vibhu Norby is the founder and CEO of b8ta. b8ta is a software-powered brick and mortar retailer designed to improve the customer and maker experience. They help people discover, try, and learn about new tech products while empowering makers with a simple retail-as-a-service model that puts them in control.

In this interview, we cover Vibhu's background, how he came to the idea for B8ta, b8ta's retail partnerships (including Lowe's and Macy's), their unique marketplace dynamic, their experiential retail as a service offering, their recent fundraising success, and Vibhu's vision for the future of retail.

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Episode 139 of the Jason & Scot show was recorded on Wednesday, August 1, 2018.

http://jasonandscot.com

Transcript **Jason:
[0:26] Welcome to the Jason and Scott show. This is episode 139 being recorded on Wednesday August 1st 2018.
I'm your host Jason retail geek Goldberg. And as usual I'm here with your cohost Scott Winslow.

**Scot & Vibhu:
[0:42] Jason and welcome back Jason's Ghosheh listeners. Jason I don't know about you but I've been on pins and needles this week no we have a special guest tonight.
You and I are both probably the biggest gadget geek ever and we have a new favorite store and it's pretty exciting to have someone from that store on the podcast.
There's a company that we have talked a lot about on the podcast so I'm hoping longtime listeners can kind of guess what we're talking about here.
The company is beta and that's B the number T.A.
Beta is such a unique company. I don't want to get in the middle of describing it to everybody.
I want to kind of leave that for our guest who is the CEO and founder of b8ta, Vibhu Norby.
Thanks for having me. I'm so excited I've been listening since the first episode.

**Jason:
[1:37] We are we're thrilled to have you.
And I do think Scott and I are the target market for your concepts. We'll get to that in a moment.
But before we do normally we'd like to start interviews is get a little rundown from our guests on their career progression and what led them to their current role. And in your case.
Beta is not your first cool gig. So definitely want to share that with the audience.

**Scot & Vibhu:
[2:10] Yes so I I grew up programming,
and fell in love with computers and software when I was an early teenager and sort of joined a series of startups and then end up leaving to do one of my own.
And we got funded by Y Combinator and then raised a couple of million dollars from,
some investors and that we were making a social network for the phone and back in 2011 when snap chat and a bunch of these guys got started and we didn't make snap chat.
So the company didn't totally work and we we found a home at Nest a few years ago.

[2:53] At the time when they had one product and were just starting to think about launching multiple products and so there I joined as an engineer and brought my whole team and company over.
It was sort of an acquisition. And that was where I got introduced to retail for the first time really from the brand side.
Nest was a really pioneering company. A lot of ways we were were really introducing the idea of smart home to the consumer not just the Nest Learning Thermostat and doing that was complicated. It was a complicatedproduct.
We also really love retail because a lot of the team had come from Apple and understood the value of retail beyond sort of sales.
And so we used we used retail as a as a place to store and make people aware of the product and get them hands on and that was what the genesis but actually I want to talk about the first time I talked to you Jasonbecause,
it's kind of you know four years ago I actually didn't know very much about retail and so when I was trying to learn about the first thing I did was like you know basically typing like who who to follow about you knowin retail,
and your name came up and I ended up falling on Twitter for a bit.
And at a point when I wasn't sure if I should we should actually do beta.
I called him LSU and is like hey can we get a call I want tell you the idea that working on and just get your feedback and so we got on the phone. Do you remember this.

**Jason:
[4:20] I totally remember this. I wasn't sure you wanted to disclose it.

**Scot & Vibhu:
[4:25] Yeah. So we we got on the call and I was like hey you know this is what we're thinking about doing.
We don't know much about retail what we understand the problem.
And I think you said you know this is like been done a lot,
or it might work but you'd be much better off if you could solve this other problem that I have which is that people are not buying chewing gum anymore because they're looking at their phone and they're checking out atthe supermarket.
And I was like oh that's that's interesting like I me think about they actually spent way too much time thinking about how to get people to buy chewing gum after that conversation.
But I'm very thankful that we decided to move forward with this. Remember that.

**Jason:
[5:05] Yeah I totally do. I might slightly I don't.
I'm not sure I necessarily tried to completely pivot you. But I'm also glad you stuck to your guns.

**Scot & Vibhu:
[5:17] If you ever saw the chewing gum problem I'm not sure what.

**Jason:
[5:20] No no. I feel like there still is an opportunity as the world moves to auto replenishment for for you know all of those consumable items like you know impulse purchases are likely to go away.
So if there's any entrepreneurs out there with a clever idea you know we've got to we've got to figure out how how we're going to do impulse purchases in all digital purchases path.

**Scot & Vibhu:
[5:45] So spoiler alert but I think we should put a gum station in every beta Boom problem solved.

**Jason:
[5:51] Yeah that that's one way to go. The part in conversation I remember us talking about though which I think we should come back to later is the role of other retailers in your concept.

**Scot & Vibhu:
[6:09] Yeah. I mean you have I think if I remember you had suggested that we should talk to some other retailers who were pretty focused on building something for ourselves on the software side.
But that opinion obviously change in the last 2 1/2 years.

**Jason:
[6:25] Yeah I was gonna I mean that you probably got the sequence right.
But I think I feel like I mentioned that,
there would be potential interest in some established retailers and partnering with you or potentially funding the idea you had and at that time,
as any entrepreneur you were you were laser focused on crushing all the traditional retailers and doing it all yourself.
And so I think that's that's how you started that.
You may have progressed since then. So one other thing before we jump into beta hardcore though is you were at Neste pre Google right so you were actually acquired by Google is that do have the timing right.

**Scot & Vibhu:
[7:08] That's right. Yeah. Very shortly after I joined,
and it was you know the acquisition was I think we learned about it like January 11 2015 14 and then it closed in February and I had joined just four months or five months prior to that.
But it was the company was at an inflection point when I had joined and it made a lot of sense.

**Jason:
[7:33] Yeah for sure. I feel like a super friendly product to everyone now but,
if you go back to that Genesis you original concept was sort of,
what with a smart thermostat look like if Apple were to design one and when you guys want that first product it was one of the original digitally native vertical brands right.
Like you you made this product that you were predominant you were selling direct and partnering with retailers on it required a bunch of education because no consumer knew they needed it.
And so I feel like there was a big retail education play in it which is of course interesting.

**Scot & Vibhu:
[8:15] As funny. I mean we didn't see it that way at the time.
And even it took even after we started the company I didn't realize that but every single Early Stage Harbor company was a DnD VB as you noticed,
because they were selling the product direct and and that and the advantage that a lot of Harbor companies have relative to other types of,
DNA BS is that they always have the users contact information because most of them have an account sign up as part of the onboarding process.
And so it sort of they're sort of natively by default dnt Bebe's.

**Jason:
[8:59] Absolutely.

**Scot & Vibhu:
[9:02] Yes. Let's let's jump into beta so let's start at kind of the the origin story.
Anything kind of tell us how you got that idea and maybe kind of tell folks what how you describe it today.

[9:21] Sure. So I don't think any good idea is sort of,
a singular eureka moment maybe it is but for us it was a lot of different kind of influences came together to create this.
The the biggest the biggest thing for me was working at NASA and,
understood and sort of seeing this disconnect between how we as a brand and as a supplier to stores thought about are the value of our presence in their stores versus the value that a retailer saw.
And the presence in their stores and that disconnect is is incredibly fundamental and incredibly hard to fix.
And so you know as a brand we wanted stores to be education point for customers.
We needed a scalable way to get our product Nest thermostat in the hands of customers.
And and we felt that you know when we came into a store we wanted to present the product in a beautiful manner kind of let it let it live like a hero product there.
We never came into a store without uncap or display or you know something that was sort of taking the product out of the box.

[10:45] And and in order to do that you know we end up spending a lot of capital a lot of time you know deploying a lot of people into the field to sort of ensure that like every time we had our product out there that cost.
And when a customer saw that it was presented beautifully and and frankly retailers back then and it wasn't that long ago. But you know how fast things have changed in this industry.

[11:10] This was not a totally common idea for them I think they had an Apple shop and shop and maybe a few of their large brand partners but to allow of any new company to come in and build a cool experience wasn'tnative to their business.
And you know they their business model of retail is really set up to to be the end of the supply chain the store right.
They've got a buyer they figured out that this is a product they want to bring in. This is how many units they want to get.
They think they can sell and the store is sort of like this the warehouse with a pretty face as a retailer wants described to me and you know for us it was the start of the consumer journey. And so.

[11:54] This basically what happened is I learned about this because I had asked our Head of Retail who's now my co-founder Philip RHA UB and he had a retail analyst.
I asked him why we weren't in more stores. You know we were in Target. Apple Best Buy Home Depot Lowe's.
And I was looking at our sales force.
One of the bucket in sales force and I just noticed like hundreds of retailers from you know globally who are asking to get its products in their stores.
And I was like This is a you know an amazing opportunity.
And he said well because we don't see retail as a surprising pivot you want to make sure the products are presented well and so we just can't,
give away it to anyone who asks and that was like you know that that gave me this aha moment that maybe there was,
a way to fix that.
At the fundamental level for a retailer.

[12:53] But but you know we.
You know I sort of sat on that kind of learning for a while and then I got more involved the retail team at NASA when they asked me to build a training system for associates inside of other people's stores.
And you know when I started working with the customer support team on trying to figure out how to,
address you know sort of this you know when a customer buys a product at a store but then they call,
our support center and then you know where we said that customers should they return the product and I realize that like a retailer like a brand like Nasz never wants the customer to go back to the store.
There's all these kind of weird things that I was finding out and I wondered if you know if we were having these issues that probably means that every other supplier in Best Buy.
That is like us like GoPro for example or Fitbit at a similar stage was probably having a similar similar fundamental issues.
And and you know if we were building sort of code bases and processes to solve this and they were as well that that's a very inefficient use of all of our resources.
So beta was this idea to create a retail platform from the ground up that supported a customer experience as the primary use case for the store.

[14:20] And supply chain as a secondary or test Cherry use case.
And then we I mean it is really that simple honestly we just want to we didn't you know the business model kind of came around later.
You know if you're if you're going to separate yourself from the supply chain use case of a store then you can't buy the product and so it kind of made sense to rent space to companies.
But yeah the disconnect was the genesis.
And as it turns out like you know now nowadays anytime we find a disconnect between,
two parties that are doing business you know a customer brand or a brand and a retailer or a retailer and a customer we think there's an opportunity to deploy business new business models or software to fix it.
There's but anyway that's that's a bit about the company but we can talk more. Yeah. So.

[15:19] Maybe this is a good place to start. How big is speed of just kind of from a store footprint perspective.

[15:27] So we have eighty two stores that we managed today and own operate 70 of those are inside of LOEs so we have a quite large partnership with them around smartphones.
We've got a store with Macy's inside of their flagship store and we've got,
13 actually I think 12 owned like kind of flagship in line stores or kiosks inside of malls.
And in terms of the scale of people we about 350 people that work inside of these stores and we're at our per post office call so I've been in Palo Alto is kind of what you would think of as the flagship store,
flagship for us we have.
We have a number of flagship. So we just we just mean any kind of any store that has our flag our logo on it that it was our first store.
That's actually a very unique store none of our stores look like that today it was it was built on a budget in a woodworking shop.
Beautifully done. But but definitely a one off. So the newer ones are fancier who's that Congressman.

[16:42] Yeah we spend a lot more time in designing them. It's the series a store the Series B stores are much nicer.
The Up series is this the series a sort of the best and then you start to realize that you've got to build a business and that every single thing that you see in the store has to be cut from a tree. Yeah.

**Jason:
[17:02] Yet it's all the timbre turns in all the hardwood turns into a particleboard is basically what happens in other curves.

**Scot & Vibhu:
[17:09] 100 percent is exactly exactly right cool.
The way I've described it is it's kind of a you know Apple Store like kind of feel with seems like about 2000 square feet there.
And but you know literally hundreds of different kinds of products you can interact with mostly in the kind of gadget electronic category.
It's not fun because you come to the folks that work there are super helpful so if you had an idea of what you wanted they were ready to leave bailable.
But I thought my experience was just kind of spinning like two or three hours and they're just kind of touching everything and trying it out and learning about it.
Is that kind of how you think about the old experience at this point is that a decent description.
Yeah. So each store is about 25 100 square feet features that are 120 different brands.
You know maybe 130 different products.
Every price out of the box and it's a real live working demo.
Like we when we get a new product in a store we actually take like the first one out of the shipment and just take it out and set it up like we were a customer.

[18:20] There's a lot of space between the products. It looks like an Apple store although that wasn't the intention it was really designed around actually or analytics system and how overhead cameras capture information.
But you can definitely spend two to three hours in there because everything that you're seeing is kind of a one of a kind.
Interesting thing that you probably haven't seen before and these are complet.
You know the price to carry the tech products are complex and and they were hard time to understand.
And so you know having really good staff is super important to us.
I think two to three hours is definitely way above the average visit which is about 15 minutes.
But the average customer only usually look at about a third of the assortment on a given at a given time.
So but we have a tremendous amount of customers who kind of see it like a museum they come and they look at everything one by one and want to make sure they don't miss something.

**Jason:
[19:25] And it's funny because in one way I would argue you're sort of the the opposite of an Apple store in that,
there's not a lot of surprise and delight moments in an Apple store anymore.
They actually used to carry more third party products than there was a little more variety but my sense today is you know exactly every single product you're going to discover in the Apple store before you walk in there.Right.
So it's it's most people that walk into an Apple store are walking in with some kind of mission in mind.
Like they're either coming for service on an existing product or they're coming to buy a product that they already know about and know that Apple has there or maybe they want to see it and make a final determination inin a big way.
I would I sort of feel like your story is the opposite.
I'm not likely to know. I know the kind of products you're going to have in your store but I'm not likely to know exactly what you have and I'm almost certain to discover some products I didn't know about.
And so to me it feels much more like a sort of serendipitous discovery moment for the shopper versus a specific mission in mind a moment like I might have at Apple is that.

**Scot & Vibhu:
[20:37] Yeah. So the data proves that out for sure. So 70 percent of the products at a average customer season are store they're discovering for the very first time.
So and actually on the other side of that and Apple and Apple stores about 70 percent Apple products.

[20:55] Oh you're probably 70 percent Sandras seeing something that you you definitely saw before.
But we have two types of shoppers in our store. There is there is the shopper who kind of wanders into just be surprised and be delighted by everything that people are making in the world.
But we definitely serve a use case for a lot of our brands of high quality demonstration.
So a lot of the company and you can if you if you like google some of the companies that we have in our store you can see when you go to their website they have a store finder and the store finder is just pointingcustomers to us you know saying hey if you want to check this thing out in person.
This is the place for you to do that and we love those kind of visitors because they come in for one thing and we give them that amazing demonstration experience that you know no one else could give except for beta.
But of course while they're there they'll find a bunch of other things that maybe,
they didn't know about and that's that in terms of a percentage of traffic about 40 percent of our traffic is driven by the brands that individually use case but in a mature store for us that that that tends to go up and up.
So basically like if you lived in Palo Alto once you've been to the store once and you've seen everything are a couple times the next time you come,
back is because you saw like a prophet on the Internet that you were interested in trying out first and then you'll come in for that specific thing and try it out.

**Jason:
[22:21] Yes. That makes perfect sense. It's funny because I imagine as people get more familiar with this door that you definitely could have some sort of mission shoppers and it it sounds like one way,
they might find you is through the product manufacturer's website.
But you do now have your own Web site as well. And that's another discussion you and I had when you first launched you didn't have your inventory online.
And I mentioned that like in the long run customers that became familiar with your store would want to be able to see what kind of products you were carrying before they made a visit.
So now that you apparently took that advice and so now I'm going to ask a terrifying question.
Has that had any value or are you finding that that you do have perhaps a subset of your shoppers that that shop your website and then decide oh cool you've got a new a new kind of product in stock that I want to go see.

**Scot & Vibhu:
[23:18] Yes so funnily enough we I mean I think we specifically avoided doing an e-commerce site for a while because we wanted to stay focused on on stories which was our kind of unique value prop for brands.
And we also didn't want to do e-commerce that we didn't have something to offer that was special and we act.
We launched e-commerce in August officially last year.
So it's been one year to date in that time period.
It's gone from obviously zero percent of our sales volume of products to almost 20 percent today.

[23:55] So we've had a lot of growth there. I think you know what we learned more than anything was that our associates in the store needed a place to,
can point shoppers to who maybe wanted to do more consideration or you know had some kind of education like they were traveling and you know the product shipped somewhere you know.
And and so it serves an essential function.
Are our sales associates. I would say more so than customers.
We don't like buying from beta dot com is not better than buying from Amazon.
If you're a Prime member for example so we're not trying to compete for every single sale but it's been an effective tool on the store side of the business.
I would say we built the entire platform in-house for a reason which is that we have a lot of really cool things coming down the pipe that,
will give us at least some advantages over maybe shopping on Amazon or from the brand's website that we can uniquely do because we have a lot of stores.

**Jason:
[25:04] Nice. And just a clarification.
I like that to me is exactly why I was suggesting you have the inventory online was sort of as an adjunct to your sales process.
Not so much that you'd capture a ton of sales via e-commerce but that people would wanna know what you had in stock before they visited the store or or people would want to do that final consideration after the store.
So I'm glad to hear that. That's providing some benefit to you.
I get that you're you know nobody wants to our Amazon Amazon so it probably doesn't make sense to just try to compete with their exact customer experience.
But one of the things that I perceive is also true and I'd be curious to hear from you is I do think it's possible for you to be selling products before they're likely to show up on Amazon.
So I do think there's some early stage new new products that you know where manufacturers reach out to you as early experience and they may not be distributing through Amazon yet.
Is that true or does everyone go to Amazon Day one these days.

**Scot & Vibhu:
[26:16] No that's totally true. And in fact it's not just that they come to us.
You know before Amazon but they also come to us after Amazon a lot of brands that we work with.
They start selling there and they don't necessarily get what they want out of that experience and it was a bit more control they want more data and they'll come back and you know will be sort of be one of the onlymultibrand experiences that can carry it.
We also have a lot of international companies that don't have a,
local distributor or as a Web site where you can you can buy from here and so there are a lot of cases where we are the only place you could buy that wasn't necessarily our strategy initially but,
you know more and more I think that will be a focus for us.
The other interesting thing is I think you know.

[27:07] When you sign up with beta as a brand,
your entire experience of managing your stores with us and deploying content and training and materials is all through our dashboard.
And so we've found that companies don't want to have to sort of manage all these different silos of of you know information and marketing information.
And so our our our system allows a company to sort of make a change once in it and that content reflects everywhere in-store online,
in our accounting backend in our checkout you know everything all at the same time and that's for the right type of company at an early stage that's actually better than even selling on their own website.

**Jason:
[27:52] Yeah. And I think that teases something that's unique about your model that we haven't totally covered yet which is you are not a pure traditional wholesaler where you just,
go discover some product you want to sell the people you buy a thousand of them at a wholesale price you mark them up to retail and sell them to someone else.
You're actually closer to Scott Wingels favorite thing a market marketplace right where you're essentially providing a platform and you're letting manufacturers,
leverage your platform your drive you're generating traffic and then you're letting them sell to do that traffic through your platform. Do I have that right.

**Scot & Vibhu:
[28:37] Yeah we're actually a two sided marketplace and it's it's hard to see from the outside because we look like a kind of technology store brand.
But on the inside you know brands are subscribing to space in a store.
But we also work really closely with landlords and on that side they're competing through lower rents or things like you know funding for store build outs or you know marketing.
They're actually competing for these brands dollars and our store is sort of the glue that that brings those two together.
And so you know across our every store of ours is different because companies that sign up with us they can choose where they want to be and they don't have to be in every everywhere if they don't want to.
And they can also in every store sort of price differently and so you'll oftentimes you know you might see a company that is you know maybe moving from store to store or trying to figure out the right markets for themto be in.
And what really makes their decision is how good the data is in that in that spot and what and what the economics look like and that's driven by the landlord in our case that you know we didn't.
Again a lot of the stuff we didn't really see going into it we were just like we wanted to solve this really central problem that brands had.

[30:00] But it's evolved to look more like a marketplace on the business model side than any other type of retailer today.
And I think that you know just I can anticipate your next question but I think that's where we started getting interested in working with other retailers because you know there are effectively some of the largest landlordsin the country.
And and I think as we export our model further we knew that square.
Good square footage was going to be the thing that the supply side that sort of drove a lot of the demand.

**Jason:
[30:37] Yeah and I want to come back to that in a bit. It's even it's good square footage with high buying content which is even more exciting.

**Scot & Vibhu:
[30:44] Of yes. Yeah.

**Jason:
[30:45] But the so one of the things that I'm always curious about.
So a brand has to want to work with you. The economics have to work. They have to see the benefit. You know they likely they have to have a product that requires some storytelling or some demand.
And so there's a bunch of factors that would make a brand want to work with you.
But it probably wouldn't work for you to just accept any brand that wanted to work with you. Right.
So you know you wouldn't want to end up with a bunch of brands that just were struggling to sell their crap.
And so therefore were were willing to you know be a tenant in your store and sell their stuff.
It does feel like you have a curated assortment of cool gadgets that people like Jason and Scott Wingo would like to buy.
So like I guess I'm I'm curious how you work that curation in a in like a traditional retail model of curation is easy the merchant decides what they're going to carry and what they're not going to carry.
It feels like your emergence if you even have a of merchant sort of has a harder job because they have to both decide what they want and then it has to be an appealing model for that stuff.

**Scot & Vibhu:
[31:58] So we actually philosophically are anti-corruption.
We think that a lot of the problems that brought that retailers have encountered over time is is because of their you know quote unquote curation process on the buying side.
The way curation works. And the reason that that the products in the store are actually you know out to be really good is that their business model we chose.

[32:29] Weeds out bad products extremely quickly in the same way that maybe you know an advertiser in an auction system like Google AdWords weeds out bad ads as well.
Basically when you have a product that doesn't resonate with customers they don't want to spend money and so they leave.
And when it comes when a product is resonate with the customers they never want to leave because they're making money.
And in fact they start to expand with us and take over more space and more and more stores.
And we've seen this effect really dramatically in three years of running this model where you know we've built up you know for every 10 companies and maybe you know two or three of those company turns out to begood.
And we've built up a roster of you know the best brands in the world who again have great economics and would never want to go.
But it's important for us to compete you need to bring in new things,
because you know and we don't want to make the choice upfront all the time as to whether that product you know would sell because that you know frankly like you know maybe buyers have some some algorithmic helpand you know spreadsheets all kinds of stuff.
But like you know a lot of decisions are made at the gut level and I can tell you from our kind of internal game of trying to guess what their product going to do well with us.
We just get it wrong so often that it's not even worth trying to be honest with you.

[33:55] I think where we have a couple of of sort of post launch with beta curation moments for example with a product return block and we have an algorithm for that.

[34:06] We take it out. You know if the if the product doesn't have a you know a return policy that jives with ours.
We oftentimes won't accept it but we're pretty open.
I mean we I think to be honest that's what makes us really unique and.
And the other thing is like I think for customers retail can be a decision making tool and sometimes that decision is a negative decision.
This learning that that you don't want this product.
Maybe you saw this thing in mind but you know after seeing it in person it's not for you.
Disserve that kind of function you have to take things to that are kind of on the edge.
So I don't know if you expected the answer but I we we we take this. I mean we've really thought a lot about this and it's it's a big part of our business.
Yeah. I'm intrigued on the marketplace side of building a two sided marketplace.
Seems easy but it's hard because I always tell folks that are starting on it is kind of like rowing if you row on one side of a canoe or a kayak or something like that too much then you just go in circles ChAFTA.
There's a there's a balance you have to fall and there has been harder building this on the supply side which I think you call makers or on the demand side or tussle bit about it.
Any interesting stories there. I'd love to.
I think other marketplace people would love to hear.
Yes the supply side for us is there a state side. On the demand side as the Brandts.

[35:30] So it has been hard. And one of the reasons it's been hard is that we we have grown significantly faster than the category itself.
And so you know we ended up finding a lot of opportunities on the supply side.
You know really early on and so we've we've had to actually really control how many locations were launching every year and keep in lockstep with our best companies.
But the thing is like there's enough there's enough brands out there that are launching every day every week that we've been able to.
We've been able to open stores that are added and grow at a pretty good rate.

[36:16] You know the I think there I think there will be a point in the future that where it's not clear that you know opening another store is best for all of the brands.
But you know so far so far it's been working and it hasn't been as much of an issue as maybe you would think.

[36:39] Another interesting challenges like where do you stop. We all kind of like as a soccer guy your practice.
You know you like to solve customer problems.
I have this problem of where stuff.
So I imagine it's kind of interesting. So on the brand side you guys have done a really cool job of you know I can be in five stores in California and then I can kind of like you give me this life cycle that I can use right allthe way to.
You know I think you call it store open concept flagship when I looked to your site you have this kind of like model that I could even see on the soccer side.
You know if someone wanted to start selling on on Amazon there's no reason you couldn't like you know launch them there you know.
So. So that's interesting and then you know maybe you can almost become their PM.
You know there's there's because like you said earlier you've got their product data.
They've started with You Can you be you know is that an interesting place to go or do you start there and then on the landlord side.
I imagine you guys are you know generations ahead of a lot of these landlords on now to think about Dhara why are these things what's resonating with their customer.
So I can see you going deep there too. How do you think about those aspects.

[37:49] Yeah we we actually I mean we've we've talked about projects like that a lot.
But we've I think the opportunity that we have stumbled upon is really in physical retail becoming.

[38:07] Experiential rather than supply chain focused.
And I often started to to think that you know experience for retail is a third channel.
It's a new channel you know compared to maybe wholesale is the first one and an online as a second because it doesn't cannibalize your,
or other channels you're the focus is different you're capturing customers at maybe a different part of the of their lifecycle.

[38:40] And so.
For us we think about growth really on three vectors I would say.
One is on the contacts where one might find products.
So today we have like you said we have owned stores and they come in different flavors. We have that flagship in line.
We have the open air format and then we have this full store as a service product that we launched called built by beta.
And then you know in other contexts there's Lowe's. We just added Macy's as a big partner for us. And maybe you can imagine others as well coming down the pipe.
There's environments so these are the different ways that a brand might want to represent themselves in the physical world.
So you know we started with a two foot display that was the only option that companies had.
And then we we started adding more options you could take forefeet you could take a table you could take a room you could take half of the store you could take a TV,
you know create a whole store and and then on the on the third vector you have,
product categories and we've been really focused on tech for a long time but I think if you watch us closely especially if you watch our product assortment over time we started to to bring in other things like apparel andcosmetics and and so on.

[40:04] I think those each of those three vectors is is is growing for us and we're we're exploring them as far as we can take it.
But we've I mean I think you can. I think one day we we've imagined sort of building that that software distributions system that you're talking about,
but the online experiential retail opportunities is such a fast growing category that,
we'd be remiss not to to see how far we can take this. There.

**Jason:
[40:38] Very cool. And you you mentioned something in that answer I want to drill into a little bit more of the built by beta program.
Real quick you guys have like I mentioned that right from my perspective you guys have built a platform you engineered a lot of the pieces yourself like as opposed to a lot of retailers go out and buy,
a POS from company eBay and they buy you know gondolas from Company B.
You guys built the digital signage system for the stores and a content management system that the that the brands have access to to publish content to those digital signs you you build your POS you alluded earlier to thefact that you have.

**Scot & Vibhu:
[41:18] Training system.

**Jason:
[41:19] Yeah. Training for the sales staff. You alluded to that,
detail the in-store analytics package that's not just purchase analytics but actual browse analytics so you're you're watching shoppers flow through the store.
So you're using that in your own stores and obviously in your shop in shops in Macy's and was,
built by beta is you selling that whole platform of tools to another brand that wants to have their own branded store is that right.

**Scot & Vibhu:
[41:56] Yes so as I mentioned like experiential retail is a different channel and what we realize what we noticed you know in sort of trying to find the right tools to build the business.
We notice that everything has been subtly architected around the store as a sales channel as a place to get a box out the door.
And and and you know as it is as one example a lot of the companies that we work with don't see the first purchase from a customer as the as the last time they're going to make money from that customer.
Right. They are thinking about it as a customer acquisition cost but they maybe have a subscription package or accessories other things that they are or are you know consumables that they think are going to drive longterm value from a customer.
And the typical In fact every single point of sale system in the world today,
does not support a customer or checking out and adding on a cloud subscription or does not support a customer or checking out and adding on accessories or or other sort of options like that.
And so we we you know in order to serve the brands that we work with the best we had to we had to think about those challenges.
And we ended up just sort of building a lot of the pieces ourselves.

[43:17] But that that kind of example I mean that's just one of many many things where like the existing tools out there are just not good enough for this new channel thats being created.
And so when we you know I think as Scott was mentioning before like this this continuum of like you know a company is the way we are.
The ideal path for a brand with us is that they start with something small in a handful of stores that they think are really good.
Maybe a display is two feet and as they find success though maybe take out a room and build something thats a,
more custom and and a bit more of an experience and I think we started to hear from some of our our our best customers are especially our large customers that,
maybe a room inside of our flagship store wasn't enough and they wanted,
a much larger kind of representation.
And so we said Well of course like why not like we can easily take a lot of the stuff that we built and help other companies.

[44:18] But the store just like we have. And I think even the business model that we have was useful in thinking about this because,
when you are a new brand opening a store and maybe your vertical brand and you sell a few products but you don't have that many.
It's actually hard to figure out like what your store looked like and what other like should you bring other third party products in there like you know should you have like you know a product duplicated. You know 20times in the same space.
So our business model actually helps companies who deploy stores with us,
find other brands that that may want to participate in their ecosystem and so they in effect.
The the people who consume our platform on that side also kind of plug into this marketplace as a supply supplier.
And so it's a unique product I don't think anyone else has ever worked or built a turnkey storefront that has staffing and build out and all the things that you need included.
It's I mean we launched in April it's super early but you know we've there's a couple of.

[45:34] But you know definitely a lot of interest on that saw from companies across categories not just in tech.

**Jason:
[45:39] Nice in my remembering right. So I feel like I read something about him. There was a TED store that may have permanently or temporarily opened using built by beta. And then I think you guys did a net gearcompany in stores right.

**Scot & Vibhu:
[45:56] Yeah. So we. So we launched it at TED. TED had asked us to come in and build the store with them.
So that was that was a really cool experience for us.
But yeah the net net your flagship was the first one that we announced and is live today in San Jose at Santana Row.
So basically it's it's a it is it's a Netgear store it has their signage.
It's got you know their logo on the receipts it's got their logo on the bags and on the employee's shirts.
But behind the scenes we've actually we're actually running the store so it's our people they're on our payroll.
We designed the experience with them and then we worked with them to find other third party products that would be sort of merchandise around theirs.
But it's the first time that they've ever done something like this before.
They've typically I mean they're gigantic company but they've typically,
you know a wholesaled to Best Buy and a lot of multi-brand retailers like that and like a lot of enterprise company a lot of large companies they had been thinking through,
this transition that's happening from wholesale direct to consumer and they don't want to miss out.
And so you know in in that when you become a direct to consumer brand you start to think about retail differently.
And I think we were we really worked with them to define the first version of the beta to be honest with you.

[47:18] But they're just one of many companies that are going through this right now. This transition very well girl.
It's kind of like experiential retail as a service. So everyone you know you have to have as a as a service on your name these days that is exactly how we talk about it.************

[47:37] Very cool that is a good time to pivot. Fellow entrepeneur so I love to talk about the nuts and bolts.
I was looking on base and it said that you guys have rates 38 million.
So progress on that and you have some really good blue chip investors like Khosla Ventures Comcast and then some strategics like me.
And there I imagine it was kind of fun. Two or three years ago when you started pitching VCs on a retail concept because you know every headline is about end of stores and mageddon and whatnot,
but you've restarted it. So I'd love to hear a little bit about that journey there.

[48:13] Yeah. Yeah. We've we've raised a lot and in a short time frame. So what I'm going to say it doesn't sound authentic but it's true.
It wasn't easy to raise the money. I think we you know in our seed round we must have approached about 75 investors and a lot of them didn't even want to talk to us.
They didn't believe in brick and mortar the kinds of things that we heard about stores were apt to be honest with you were ridiculous.
We we you know I think retail is kind of interesting in the sense that like everyone thinks that they know it because they shop in stores but very few people actually understand the dynamics.
And we definitely face that a lot.
But as as time has gone on I would say each year of our company the environment has gotten easier and easier for brick and mortar are concepts.
And you know in this year Larry you've seen a lot of direct consumer brands getting funded and a lot of that a lot of funding is going into opening stores.
And so I think our business case has been validated increasingly so.
But you know a couple of years ago when we started it was definitely like you said like the headlines were just not good and a lot of people based there in vestment decisions on how the group is thinking.
And that was probably a mistake.

**Jason:
[49:41] And we're coming up on time but I want to ask this question because you guys you know you guys have developed some interesting category leading experiences up to now.
Do you have a vision for where experiential retail is going.
Like if we jump in a time machine and move forward like five years what's awesome experiential retail environment going to feel like that as it is it just a slightly more polished version of,
what we're doing a day or do you see some significant changes.

**Scot & Vibhu:
[50:14] So we were not a gimmicky company. So I don't you know we don't think a lot about how the store experience itself is going to change.
But I would say that if you look at a macro level every.
I mean you know this as well as I do but every bad retailer is going to go out of business.
Between now and like you know 2040.

[50:34] And they're you know a lot of them are going to be replaced by these new brands who are you know getting to a point where stores start to make sense.
You know brands that sort of online. And and I think when you walk into a mall in the future really five years from now,
it will primarily be a bunch of kind of direct to consumer and vertical brands taking up the space there and,
I think that's great for customers because those products are better.
They resonate with a different audience than maybe the typical traditional retailers that today occupy a lot of square feet,
and and frankly like the business model these companies are using kind of naturally lends itself to better customer experience in the store because there's certain no conflict of interest between you know what a customerwants and what what the brand wants like that.
These brands don't care whether that customer buys the product right there and then they they think about the store for lots of thing for customer service for learning for for events all things that people love.

[51:46] But yeah we don't have a lot of insight into what the store will look like but I can tell you that if we have something to do with it a lot of stores will be designed around analytics and data and data capture.
And so they'll probably look a little bit more like our stores than than not.

**Jason:
[52:05] Yeah I hope you're right on that one. I know you and in the show you know at the beginning of the year we do this prediction show.
And I feel like I used to do a prediction every year that retailers would get more serious about their in-store analytics and I keep losing on that prediction.
So I would I would love your help in making that one finally be true.

**Scot & Vibhu:
[52:26] Well it will be true by NEC and by just by companies these retailers going out of business and being replaced by new ones like us.

**Jason:
[52:34] Yes yes. Although that cooling takes a little bit of time.
But it's happened again. We've used up our allotted time serve if listeners have any questions that they didn't get answered during the show.
We encourage them to jump on Facebook and ask questions and we certainly feel free to reach out to you you know to the extent that any of them are,
focused on your business and of course if this show is valuable to you we sure would appreciate if you jump on iTunes and give us their five star review.

**Scot & Vibhu:
[53:08] Thanks for joining us. And where can folks follow you online if they want to learn more about either what you're up to or beta.

[53:17] Site. I look at every e-mail I get. So definitely email me via B.H.
You made a dot com or you can follow me on Twitter.
But to be honest with you I just tweet about beta. So if you if you want that that's the best place for Beta news.

Jason:
[53:34] Nice and Until next time. Happy Commercing.**

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EP138 - Amazon Q2 2018 Earnings Hot Take

This episode is a hot take on Amazon Q2 2018 earnings

Amazon Q2 Earnings Highlights
- $52.9B, which is a 39% y/y increase
- $2.98B in operating income
- $21.8B in Free cash flow, less $11.4B in capex, $6.2B in lease repayments = Net $4.1B Free Cash Flow
- AWS had a material acceleration up 48% y/y constant currency and profits were $1.4b
Amazon Web Services – came in at $6.1b – 49% y/y growth (an acceleration from last quarters 48% growth)
North America – $32.2B up 44% Y/Y, operating income of $1.84B
International – Revenue increased to $14.6B (+21% Y/Y) for a $0.494B loss
Marketplace
- 53% 3P by Unit sales
- 3P Growing at 55% (constant currency)
- Wingo GMV estimate -> 1p – $37.6b/ 3p – $71b = $108.6b GMV
Amazon Ad Business – grew 129% y/y to $2.19B
- Cowen estimates $8.6BN in 2018 rising to ~$37BN in 2023
- Amazon increasingly bypassing agencies to go directly to advertisers
Increasing likely Amazon becomes first $1 trillion dollar company

Jason & Scot will at eTail East in Boston next week.

Don’t forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 138 of the Jason & Scot show was recorded on Monday, July 30th 2018.

Join your hosts Jason “Retailgeek” Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, 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.

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Industry News

NRFTech
- Peter Schwartz
GetSpiffy Fund Raise
Google Express Traction

Amazon Prime Day

Amazon Press Release
USA Today Recap
Target results on Prime Day

Listener Questions

Joan Abrams asks: How important are progressive web apps going to be for retailers? Any retailers doing this really well yet?

West Elm Example: https://mobile-beta.westelm.com/

Julie Acosta asks: Any updates on multi-touch attribution models/partners - who’s doing online/offline (brick & mortar) right?

Upcoming Events

Jason is doing retail visits in Australia July 21 - 29. Ping him on twitter if you’re there.
Jason and Scot will be doing shows from eTail East (8/6 - 8/9 in Boston)

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 137 of the Jason & Scot show was recorded on Thursday, July 19th 2018.

http://jasonandscot.com

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Amazon News

Amazon Prime Day this year has leaked and will be July 16-17
Amazon today announced the acquisition of Pillpack for $1b
Amazon recruits small businesses, to deliver packages
Amazon was fourth-largest advertiser in the US ahead of Walmart, GM and Ford.
Amazon is merging 1P and 3P and the robots are winning vs merchants - "hands off the wheel"

Industry News

Supreme court rules in favor of South Dakota in South Dakota v. Wayfair, Inc., et al. The ruling effectively overturns the previous Quill Corp. v. North Dakota precedent and opens the door for all states to require e-commerce sites to collect and remit sales taxes to states.

Amazon stands to be the biggest winner in the ruling. Amazon already collects sales tax on all 1P sales. Amazon will now be able to charge 3P merchants 2.9% to collect tax for them. Amazon 1P will be more competitive with 3P and other e-commerce sites (eBay, NewEgg, etc..).
Small E-Commerce sites and marketplace sellers are the biggest losers, as they will now need to collect sales tax (and likely pay a 3rd party to do it on their behalf), and navigate a multitude of complex out of state sales tax laws that are likely to emerge.
All eyes turn now turn to Congress, to see if they will pass a law to clarify/simplify the sales tax collection issue on behalf of small businesses.

Listener Questions

Alex Volakis asks: Should others try the Warby Parker school bus store concept. Who do you think would benefit most from it?

Amit Agarwal asks: Do customers like bundled products or do they like to create their own bundles? What are different merchandising tactics used to sell a collection of products?

Jill Dvorak asks: Any leadership or managing through change tactics. at the corporate level to infuse more nimbleness in established brands?

"The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change)" by Clayton M. Christensen
"The Lean Startup" by Eric Ries

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 136 of the Jason & Scot show was recorded on Thursday, June 28th 2018.

http://jasonandscot.com

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Chuck Davis is the CEO of Prodege (Swagbucks, MyPoints, and Shopathome), a leading rewards discovery site. Chuck was the first President of E-Commerce for the Walt Disney Company, former CEO for ShopZilla, former CEO of Fandango, and is a former Shop.org board member.

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Episode 135 of the Jason & Scot show was recorded on Tuesday, June 5th, 2018.

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Episode 134 is a recap of Mary Meekers "Internet Trends 2018" report, and the weeks news.

Industry News

Walmart Shareholder Meeting
- Walmart Launches JetBlack
Ulta, Sears, Macys, Target report quarterly earnings
Apple WWDC

Mary Meeker, State of the Internet 2018

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Episode 134 of the Jason & Scot show was recorded on Monday, June 4th 2018.

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EP133 - Hot Take: Adobe acquires Magento

Adobe announced that they are acquiring Magento commerce for $1.68b. It was disclosed as part of the deal that last year magento’s revenues were $150m, so that’s a 11X multiple which is pretty awesome. Adobe’s largest deal in decade.

Adobe announcement

Magento Blog

Mark Lavelle, CEO, and Peter Sheldon VP Strategy at Magento Commerce were on Episode 50 of the Jason & Scot Show.

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Episode 133 of the Jason & Scot show was recorded on Monday, May 21st 2018.

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EP132 - NPD Idea 2018 Recap

NPD held it's semi-annual customer conference, Idea in Austin Texas on May 16th and 17th. Jason and Scot both presented content at the show. This weeks episode is a recap of the show.

Target CEO Brian Cornell Keynote
Google X, Captain of Moonshots, Astro Teller Keynote
Author Michael Dart Keynote (Retail's Seismic Shift: How to Shift Faster, Respond Better, and Win Customer Loyalty)
Scot Wingo "MarketPlace Madness" (PDF)
NPD Retail Trends
- Don Unser, Group President at The NPD Group
- Steve Baker, Vice President, Industry Analysis at NPD Group
Jason Goldberg "Last Mile In The Customer Experience" (PDF)
- Oren Shauble, Partner Guinn Partners
- Jamie Sohosky, Walmart VP Marketing, Customer Experience
- Jaron Waldman, Co-Founder, Curbside
Generation Z Panel
- Connor Blackley Youth Logic
- Madison Bregman Youth Logic
- Jonah Stillman - Genz Guru
- Alexandra Levit (moderator)

Entertianment by Runaway June and The Doobie Brothers

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Episode 132 of the Jason & Scot show was recorded on Monday, May 21st 2018.

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Retail's Seismic Shift: How to Shift Faster, Respond Better, and Win Customer Loyalty

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This episode catches up on the latest e-commerce news

Walmart News

Walmart Acquires 77% of India E-Commerce Site FlipKart
AllswellHome.com launch
Website Redesign
New Delivery Partners Doordash, Postmates

Amazon News

Sears Tire Partnership
Kohls traffic is up at Amazon Stores
Chicos says presence on Amazon is driving more store traffic

Other News

Google IO
Facebook F8

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Episode 131 of the Jason & Scot show was recorded on Thursday, May 10th 2018.

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EP130 - Comcast Ventures Daniel Gulati

We caught up with Daniel Gulati (@DanielGulati) at ShopTalk 2018. Daniel is a partner at Comcast Ventures a venture capital firm that focus on early stage consumer internet investing. Comcast Ventures was an early investor in Away, MealPal, and recently invested in Zola (hear Zola founder Shan Lyn in episode 98).

We spoke with Daniel about his background, his book, Passion and Purpose: Stories from the Best and Brightest Young Business Leaders, his portfolio companies, the direct to consumer market, competing with Amazon, and the future of retail.

Episode 130 of the Jason & Scot show was recorded on Tuesday, March 20, 2018.

http://jasonandscot.com

Passion and Purpose: Stories from the Best and Brightest Young Business Leaders

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EP129 - Amazon Q1 Earnings Hot Take

This episode is a hot take of the Amazon Q1 2018 earnings

Amazon Q1 Earnings Highlights
- $51b, which is a 43% y/y increase - 39% constant currency, 27% ex- Whole Foods
- NA was up 46% y/y which drove $1.1b in profits (26% ex WFM)
- Intl was up 21% constant currency and lost $622m
- AWS had a material acceleration up 48% y/y constant currency and profits were $1.4b
Amazon Prime fee increasing to $119 (20% increase)
Marketplace
- 52% 3P by Unit sales
- 3P Growing at 60% (constant currency)
- JMP GMV analysis-> 1P - $31b / 3P - $69b = $101B GMV
- Wingo GMV estimate -> 1p - $37b/ 3p - $66b = $103b GMV
Amazon Ads - $2B quarter 132% y/y growth (72% y/y growth before accounting change vs. 60% last quarter)
Increasing possible Amazon becomes first $1 trillion dollar company
Bezos Annual Letter
- 100M Paid Prime Members (likely 60M in N.A vs. 124M Households)

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Episode 129 of the Jason & Scot show was recorded on Monday, April 30th 2018.

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EP128 - TopHatter CEO Ashvin Kumar

We caught up with Ashvin Kumar at the ShopTalk 2018. Ashvin is the co-founder and CEO at Tophatter an innovative live action site for mobile shoppers. With the engagement and psychology of a game and the economics of a marketplace, Tophatter generated over $300 million of GMV in 2017 (100% up on 2016) and sells 100,000+ items every single day. We talked with Ashvin about his background, including his previous start-up Blippy. The pros and cons of various auction format and how Tophatter appeals to it's entertainment seeking value oriented shoppers.

Episode 128 of the Jason & Scot show was recorded on Tuesday, March 20, 2018.

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Episode 127 is an interview with Katya Ermak, Director of E-Commerce and Digital Marketing at Sabon NYC. We caught up with Katya Ermak at the ShopTalk 2018. Katya is the director of E-commerce at Sabon NYC. We talked with her about how Vertically integrated brands think of Amazon. How they leverage their omni-channel tactics and the future of malls. How Sabon is approaching e-commerce including their Magento platform, and some of their current tools such as Dynamic Yield.

Episode 127 of the Jason & Scot show was recorded on Monday, March 19, 2018.

New beta feature, Google Transcription:

Transcript Jason:
[0:25] Welcome to the Jason and Scott show this episode is being recorded on Monday March 19th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your Wingo.

Scot:
[0:38] Hey Jason welcome back Jason Scott show listeners we are podcasting live from the shock talk show here in sunny Las Vegas and we're excited to have on the show today Katja or Mac.
Katya is director of e-commerce and digital marketing at sabon NYC she has also spent time with Brands such as rainbow Century 21 and isobar welcome to the show.

Jason:
[1:02] Thanks for joining us it's a little known fact but Scott exclusive.

Scot:
[1:06] Did we use it as your.

Jason:
[1:07] FedEx in his own bath so.

Katya:
[1:09] That's great to hear.

Scot:
[1:11] Yeah I'm going to have the bath bombs.

Jason:
[1:13] So he's very excited about having you here when the things we always like to do on the show is talk to her guest.

Scot:
[1:20] About their backgrounds and how they came to the control so could you.

Jason:
[1:20] And how they came to their current role so could you tell us a little bit about as you got into the industry and and what your current role is.

Katya:
[1:28] Wright's Okerlund director of e-commerce and just the market at sabon started there about.
Two and a half years ago before that I decided I was with isobars.
Worked on their engagement seem he ran out of states and before that I did a Content management for Rainbow shops.

[1:51] E-commerce was definitely something that,
I was interested in when I was in college I have a fashion business degree and I was just thinking of where can I go with that degrade dad would make the most value out of my account.
And I got a couple and their shapes e-commerce internship especially one with Century 21 which really to cough.
And I love my job love what I do eCommerce is fantastic and it's such a growing animal and there's so many different things that you can do with us.

Scot:
[2:26] Did you go to the fitt isn't that the big fashion School in New York.

Katya:
[2:30] Right now I went to Berkeley College which is Elsa in New York.

Scot:
[2:33] Okay cool awesome yeah I mean a lot of young ladies that are studying fashion and there's a lot of different ways it go to nursing you chose e-commerce you feel like it's still scratches your fashion itch or.

Katya:
[2:44] Absolutely that was like a business degree with a fashion flavor to it and as a side like.
I was interested to see I came to the Barclay because I wanted to be a buyer but while I'm studying there was.
Digital start taking off at that time and people start talking more and more about it and how did brick-and-mortar it will be going away and at some point it was very scary for fashion students because there was not a lot of job available and them.
I was looking for something that's going to be very up and come in and which I think I did a very right turn.

Scot:
[3:24] Do they have chai have classes on how to do some digital marketing in that kind of thing or did you have to come pick it up on your own.

Katya:
[3:30] Pick it up on my own I think we had maybe social media class or something like that.

Jason:
[3:38] And can you tell us a little bit about like what the scope of your role is now so are you you responsible for operating the website and digital marketing.

Scot:
[3:44] Responsible for operating the website and digital marketing and.

Katya:
[3:49] The right I usually have I go about this the question like that as Dad to company currently has three ways of doing business so we have brick-and-mortar stores and in New York and we have wholesale Channel and we help outside so.
Each channel is has its own Department.
So my department and I'm head of the eCommerce department is responsible of running the website all the maintenance all the development all the digital marketing aspects.
Currently we doing things with be social with Google with your panel ads what do Google shopping ads email marketing.
Merchandising of the website the only thing that I'm not touching bases inventory and their warehouse relationship.

Jason:
[4:39] Can you tell us a little bit about subbing for our Wizards I might not know I think of you is a vertically integrated brands.

Scot:
[4:43] Think of you vertically integrated Brandt to you you guys make your own.

Jason:
[4:47] Products in you sell them direct as well as through wholesale channels is that right or.

Katya:
[4:52] Sabon at the bath and body products to reproduce by describes different moisturizing moisturizing lotions where electro brand,
originally we're from Israel.
So our products and natural in the based on that sea salts and minerals and that seemed muds original or the company was billed as the,
franchise which country was its own franchise had at the store it's only Commerce about a year-and-a-half ago we got bought out by grouper shop.
And older franchises for kind of put together and now we're. Like its own company we.
Getting our products from Israel from our Global office and then we end up here you missed it then floss with your wholesale as well.

Jason:
[5:46] Got you and you have a number of stores as well.

Katya:
[5:49] So in New York with have down stores.
Which primarily in the Hat and one in Brooklyn One Long Island around the world we have about I want to stay 200 stores.
I'm waiting when country is when France England New Orleans Japan Korea.

Jason:
[6:12] Don't you very cool that's one of the questions I'm always interested in when there's a brand selling online that also own stores.
Is some of the omni-channel aspects but you know so like.

[6:27] Any attribution and figure out how the website is potentially driving people to your store or any any sort of digital experiences in the store those sorts of things.

Katya:
[6:39] It's always has been an ongoing chat challenge for us.
Because the company was a franchise so originally it was just about driving Revenue we didn't talk about how,
what the customer experiences are what are they experiencing the stores,
with the expansion of Commerce and how it's all blending together how we can drive traffic for both and support each other so.
This is currently changing and though we talked with talking about it was talking about different experiences that we can create one of the projects the wave.
Working on right now is offer and we start War friends.
So glad classes and understand our stores and just set it up like serve booking and the schedule and through the website,
set of creating the tide out therapy, the experience with,
tile store experiences but it's an ongoing challenge will always talk about it right now and will always thinking of how can we restore the very beautiful and we have this personal experiences when you get.
Hand treatment there is a big whale when you can start a product if people owe people doesn't know customer doesn't know our brand and they're the coming to the website that getting.
Very slightly different experience rather than to the store so it's always a conversation how do we get that will experience the very personal that spends on the website and.
It's an ongoing conversation ongoing challenge for us which I'm hoping to grab more answers on the shop.

Scot:
[8:15] It would be a Jason Scott show if we didn't talk a little bit about Amazon and you talked about wholesale is Amazon so when you guys wholesale with and how would you describe your your kind of Amazon strategy and I'm thinking around them is up,
partner slash competitors which is always a very much a friend of me with for everybody.

Katya:
[8:34] So that the company has a partnership at wholesale partnership with Amazon I think it was started about 3 year 3 years ago it took off and.
Brought us Revenue brought us some sales and brought the brand recognition but we experience on the challenge of that it's very hard for us to manage and change the prices and change.
Kind of given that experience that we have.
On our Ecommerce outside or in the stores so with that being said but decided to launch Amazon is a Marketplace.
With a felon buy on Amazon and we.
Got a partner Channel advisor which is helping us kind of guiding us through and helping us set it up that channel is currently rolling out so I think we should be good to go I started selling there in about couple weeks.

Scot:
[9:26] Thanks for being a great that and then are you guys going to do hybrid we still do some wholesale and some third-party.

Katya:
[9:35] So we think when we going to go out there Amazon Marketplace looking to see what's out of traction and we getting it sad is going to be different products.
That wholesale had done from with Amazon Marketplace we're going to be doing and we'll see how it's going to go if it's going to be,
very successful we're going to slowly over allowed their wholesale piece off the table or,
maybe it's going to be a bad idea to keep them in a conjunction working so it depends like really wanted to see and learn first to make it in time decisions.

Scot:
[10:07] Brickell conditioner at the path to purchase showing you had to head out and I wouldn't get a chance to talk about it but I'm in the queue today it was interesting,
as Brands brought up to the challenges with with Amazon more and more of them were being sought for this hybrid model so for example one brand was complaining Amazon wouldn't order their product fast enough and one of the panelists,
because most actually recommended you know you can actually have your you could you can you do Marketplace for that same item and then if Amazon sales your item,
you can at least have some guarantee that your product will be there there some other examples like that were in the early days of hybrid it was just selection you know Amazon has ex and I want them to have x + y and now there's like some more advanced strategies there for.

Katya:
[10:48] Marriage Style.

Jason:
[10:52] What are things that was interesting to me about any on the show is that I have this right you were one.

Scot:
[10:58] Very early.

Jason:
[10:59] Hours of dynamic yield.
Is a software tool for doing personalization based on some some AI deep learning your chop talk those are the big buzzwords is personalization and Nai in so I was I was just curious.

Scot:
[11:10] I was just curious what kind of experiences you were you were in able.

Jason:
[11:19] You are enabling for your Shoppers with Dynamic yield and is it just email is it on your site and.

Katya:
[11:27] Sabon was the very early adopter robbed and I make you up and it just started out.
And Esteban will love Dynamic yield and we pretty much do everything with them. Potentially.
Did done utilizing their platform we just roll out and I think in August.
Product recommendation on our homepage on the mobile on our product pages on in the car.

[11:59] We also serve banners all over Bennett's in the website was served through the night make you all them would do it be testing reason Infinity.
And we starting up looking about 30% of them would just roll them out in conversion rate and customer satisfaction.

[12:22] I think there's so many things that you can do is then I make your old and strategies that we can Implement and you see it like I constantly seeing their case study that they're releasing or how they communicate with their how they work.
There are other clients on the smaller scale of what the what weekend do mechanics executor so many things.
Execution part where smallest unit sabon so it's a little bit harder.
I think they doing an event in April in New York and it's going to be talking about more proficiency how different strategies for product personalization.
We started with the product personalization on a homepage was started with a B test and soda personalized ended by customer who did its website and then we'll switch they were committed the resistance in today.
Animation that learning in the recommended products that way and we'll see.
Tremendous increases and sales in conversion other things in there and Genesis.
So interesting and it's.
Why don't those things that blowing my mind do you put in a smoke JavaScript X all on your website and you can.
Change in the real time you can you can test,
different with the with Dustin different pages would destined for muscle ache if you have how many different fields you can have and which one converts bad or so before before releasing anything pretty much on the website experience-wise for.

[13:54] Customers were always faster always create 3/4 in Arizona with Dustin which one performs better same goes for all of our batteries all the copy that would do for the.
Banners and difficult to actions and different images and different backgrounds and it's open it up so.

[14:14] It's open. So many opportunities to learn who your customers and what they like and kind of a learning curve you constantly it's not it's not a platform that you just kind of.
Started doing the things for you to constantly need to learn.
Your phone those tests but it's open it up in a big door in personalization and making you a customer experience very personal for them.

Scot:
[14:39] I'm not a personalization experts maybe you guys can answer this so so does it kind of learn,
okay this particular customer loves the flavian of the lavender or something then it'll show them more of that kind of thing I know it sounds like you got some maybe optimization kind of testing stuff,
but then the personalization does it kind of like learn what people like and then it changes the website based on those earnings.

Katya:
[15:01] Right so it's obviously a quickie that every single person who comes in they said they cook it and we can sell what.
What Journey did they had enough said what kind of batter the cloak on,
what kind of products they looked at since they looked at the exfoliating products are monosaccharides and products,
did they make a purchase at the after the cards post was there about cars value in Basin that information.
The next time to come back we're going to serve them a different experience which could be anything we can recover the products if they were added something to the car is that the dead purchase.
And then they come back maybe it will show them that product with the potential deal that they can get for that or if they weren't.
Product page and then the added something else of the cards will show them assume all products in the car this wall there's a lot of different scenarios they can think about is how to personalize.

Scot:
[15:59] This is some married to Magento or is it a it's at Works within him.

Jason:
[16:03] That's a space tool you can Implement in NY Bridal platforms I think you guys impact are running it on Magento though what's was cool to me.

Scot:
[16:13] We had personalization for a long time.

Jason:
[16:17] What are the better you get to know the.

Scot:
[16:18] Where the better you get to know the customer over multiple sessions you you can stay.

Jason:
[16:22] D'Amore.

Scot:
[16:24] I've been to that customer in that that's still really important.

Jason:
[16:27] I still really important for monocytes though the majority of visitors are first-time visitors and so.

Scot:
[16:33] So where a lot of personalization is a Scorpion falling down.

Jason:
[16:35] Falling Down is.

Scot:
[16:39] Every customer is unknown so they get the same generic experience and.

Jason:
[16:40] So they get the same generic experience and you know you.

Scot:
[16:43] Come back over and over again get this great personalized.

Jason:
[16:45] But they are small percentage of the.

Scot:
[16:46] Small percentage of the total traffic better now is what I'll call.
Incontact in session personalization where they like in Forever explicit and implicit signals.

Jason:
[16:54] Concession personalization where they like in fur explicit and implicit signals from.

Scot:
[17:02] The browsing you're doing in the single session.

Jason:
[17:04] 10 + *.

Scot:
[17:05] Dynamically personalizing for those unknown first-time visitor.

Katya:
[17:09] Describe Viking Camper for I'm sort of some sort of actually writing this scenario would the customer perform some sort of action like this subscribe to newsletter click to the body scrub at it since the car we're going to start time at the front experience based on what they see in.

Scot:
[17:23] Do you start to so sounds like it'll also work with display ads which is cool how about like your email marketing Ken can I personalize your email marketing so you know some lady likes a certain sent you can send her,
Fort Worth jet something in her cart watch pie easy with cart abandonment emails but any personalization keep personalized like the emails you send out to.

Katya:
[17:42] Within Emma Guild you can upload the back so that we can put their dinner,
your vagina inside of your email and you can serve them to like you have your content of the email like a promotion your content and down on the bottom you can show.
Products specific was looking for that customer.

Scot:
[18:03] That's the first way that these.

Jason:
[18:06] This way that these tools.

[18:10] Well then it is for the whole platforms of.

Scot:
[18:12] In the cool new feature that these guys are all.

Jason:
[18:16] Starting to roll out now is personalization.

Scot:
[18:17] Right now is personalization at open.

Jason:
[18:21] You can imagine like you send.

Scot:
[18:23] Email and if you have some personalized content in there it may be.

Jason:
[18:25] Personalize content in there that maybe is.

Scot:
[18:30] Has been personalized to the weather or something you buy.

Jason:
[18:31] Whether or something you browse for.

Katya:
[18:33] Based on time,
for example if if we're running a promotion or some sort of dro sale so while the promotion promotion is running you going to see a clock down so you open,
you open up your email and see if you can see it back down that says like,
this promotion going to add in one hour if you open it at 30 minutes is going to say the promotions going to end 30 minutes and when the promotion ends in from simple to say I miss that and I open it up email after a week is going to show me something.

Scot:
[19:01] Buckeye Jail.

Jason:
[19:05] And its tail when the person oppa.

Scot:
[19:07] Awesome so it sounds like you have a relatively small e-commerce operation guys are dog doing a lot of pretty cutting-edge things what was kind of next on the road map where do you see e-commerce going.
I with you guys then we'll talk Bradley about where your overall you so you can respond.

Katya:
[19:23] So another says so I was talking about.
Sorry about that was talking about experiences Brandon to gather their stores and online we're working for another big project for us is the CRM.
And we have a little to program and how how do we.
Like the date of the week coming from magenta from our e-commerce platform is very clean the date of that we getting for people who signed out in the stores for loyalty program is not that clean so right now we're working on how do we combine,
dos2 Joseph data points and create that.
Loyalty emails and loyalty programs campaign so we talked with our loyal to customers at the same.
But you can start at them the same it doesn't matter where they shop and where they saying up because we don't know but we think there is a lot of Gap and there's a lot of them.
Cross reference of the people shopping at the shop in the stores and the shop online I feel like it's Crossing each other this year,
we talkin in the company lied about CRM and loyalty and how do we bring this together what kind of campaigns were created and what kind of software we using one of their things why we came to the shop talk and like they do is mine,
what is to find a CRM solution that we can use all of the data sort of segments that other than Kinect.

Jason:
[20:54] Very cool and there are several of them there so I suspect you'll you'll be successful in that mission you mentioned loyalty programs and that's been interesting to me cuz.

Scot:
[21:00] You mentioned loyalty programs and that's been interesting to me cuz that.

Jason:
[21:04] Feels a little bit like one of the themes of this year's show in.

Scot:
[21:08] Ulta Keynotes.

Jason:
[21:08] Ulta keynote they they mention that like the wealthy members represented something I want to say 90 or 95% of their total revenue which is.

Scot:
[21:20] I mean astronomical the Nike Chief digital officer talked about.

Jason:
[21:21] Michael the Nike Chief digital officer talked about how how successful their their Nike Plus loyalty program had been.

Scot:
[21:28] Nike Plus royalty program it been it sounds like you've had a loyalty.

Jason:
[21:33] You had a loyalty program for a while is it like a straight points for purchase program or how does it work.

Katya:
[21:39] So
Historical we had to separate program Swan was the e-commerce little to program when you collect points for every purchase to do you make and then you released and then you redeem it for purchase online and we had a loyalty program in the stores.
I'd same idea it was a little bit different so e-commerce it was once a once-a-month going on dollar stores with tiered I think it was five tiers,
so this summer when we just launched the new upside in August and will I see the new pair of system in July.
2027 able to pick you up for a lot of different changes and we'll launch our new loyalty program the idea was this to combine their loyalty program in the stores and and online,
kind of make it more sing with experience so it's currently is the same program you Wednesday for every dollar you spend.
And then you can redeem at there's no cap and Redemption you also is a part of the Lord's apart of me also get welcome coupons and will be found as Dad.
There's two coupons when is set up but you can use the next month.
And the next next month so that's something that we actually got from overcome our parent company in Israel this is how they do it and they saw a lot more traction with just given a 10% sign up coupon,
people people people coming back to redeem it more often and it works pretty well for us but we have a birthday.

[23:17] Coupon that we said that the birthday gift that was on for the people to read them during their birthday month.
And will do a lot of activities for our world passport will call them roll past board members would do events in the stores where are we.
Do different treatments or different parties and we have I would do like new collection previews for them.
It's another big thing that would Jordan like one of them stuck in before about CRM and how do we connect them it's still a little bit separated in terms of the promotions and like.
I feel like in the store part would do much better much better job for the Loyalty rather than on the website so we talkin about how we can come by and make that experience more seamless.

Jason:
[24:04] Since you mentioned that you were going to look for some CRM Solutions it shoptalk we're sort of one day another show a day and a half in the show.
Have you seen anything or or setting on a sessions that would be interesting to you.

Katya:
[24:20] Not yet.

Scot:
[24:23] Did she the Ulta keynote the kind of edger talk about experiences in a store,
she's saying they're going to add a lot more experience than I already have like a salon in the story but I think they're going to add you almost more like taking it to a spa level of so it's kind of reminds me of some of the things you talked about that you guys doing your store I don't know if you saw it or not.

Katya:
[24:39] I saw something the Sephora was talking about it and they were showing all this experience as they did they create it's for their Shopper and this is it was very inspiring conversation the presentation that she had.
She was talking about all of this this is exactly what we're looking for and I think that's exactly what the industry needs and like,
the eve what the economist is moving Taurus is to like for example somebody get a notification that they forgot things in their cards and they're walking by the Sea for the,
that they put a sample in there Carlin Dave it's there so this is why I would email them or send them a notification from there uh.
Dad there's a store and the samples of all been there so you can come and pick it up.
And you're passing by the store you come over talking to the sale associate to give any of that sample while they're doing that the same oh we also do all this experience is in the store treatments would you like to set up this and you know.
Right there and then they perform the treatment on you and all the product of what he's doing the truth then you will receive the samples and then to send you an e-mail.
Where is all this products and how do use them and the price point so then you can come back and either purchase them in the app.
In the under your desktop in the Commerce website or you can come back back to the store to the store so I feel like they're doing great job in tiny tiny and those experiences in this something that.
I really wanted some time and think about it if so I'll come back from the shop.

Scot:
[26:14] You kicked off what kind of Go full circle you talk about when you started your career,
you were at heard in the stores are closing you want to get me Commerce how do you feel about stores now, they've been in the industry for a while if you think you think the small again and Retail apocalypse thing is over done or do you think it is tough for store what's the future stores.

Katya:
[26:32] It's interesting that's what the a lot of feel like a lot of things on top soccer talking about exactly like is the freaking word dad or.
As odd involving the different way I personally think and a lot of people in the industry as wild that.
Brick-and-mortar is not that bad but there was people who doing a ride and people who are not quite there yet and depending on how fast they can get there.
What could it mean if they're going to keep their stores or not people definitely looking for some personalized experience as what we can do in a store to make it more relevant the more exciting.
What are those experiences and I feel like this is where the industry going.

[27:14] And I feel like they're at the seam of everything that I said today is about those experiences like what can we make so exciting for the customer.
For them to come back obviously they're interacting with their sales associate interacting with the product when you see can't touch them smell them it's so much different from you, so I feel like.
There's the stores going to definitely stay there not going anywhere but it's going to be involved into something completely different then we'll just have to buckle up.
The bump it right and see where it takes us.

Scot:
[27:48] Buckle up buttercup a perfect.

Jason:
[27:51] Place to end it because it has happened again we've used up all our a lot of.

Scot:
[27:56] The time.

Jason:
[27:57] But we certainly want to thank you for.

Scot:
[27:58] I want to thank you for taking time off.

Jason:
[28:01] Join us.

Scot:
[28:02] Other folks have questions you're welcome to jump on a.

Jason:
[28:03] Questions are welcome to jump on the Facebook and continue the conversation there is always if you enjoy Today Show we'd love it if you jump on the iTunes and give us that 5-star review and until you do that we will be buckled up here.

Scot:
[28:17] Thanks Ryan Scott you're really appreciate you taking time.

Jason:
[28:21] Until next time happy commercing.

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EP126 - American Eagle former CDO Joe Megibow

We caught up with Joe Megibow at the RetailNext party at ShopTalk this year. Joe is the former chief digital officer at American Eagle Outfitters, he's also served as President at Joyous.com and General Manager for Expedia.com. We talked with Joe about his impression of ShopTalk this year, his early experiences in the e-commerce industry (including at TeaLeaf which was acquired by IBM), how American Eagle thinks about Omni-Channel.

About RetailNext Conference:

Retailers and brands at scale can apply for a complimentary pass for the CommerceNext conference - The Summit for Next Level Customer Acquisition - Jul 25/26 2018 NYC. This show is a combination of strategic keynotes from the likes of (Amit Shah – CMO 1800flowers; Sid Jatia – VP, Global Commerce at Under Armour; Charlie Cole, Global Chief Ecommerce Officer and Chief Digital Officer, Samsonite/TUMI, etc.); and tactical ‘how-to’ speakers like Amy Africa (CEO, Eight by Eight) and Facebook expert Emily Hickey.

Announcing the CommerceNext "Nexty's": A new peer-reviewed award program identifying and rewarding the best marketing performances among retail and eCommerce professionals. Awards include “Marketing Innovator of the Year” and “Highest ROI with the Least Resources”. Visit commercenext.com to nominate a fellow retailer for an award and to apply for your free conference pass.

Episode 126 of the Jason & Scot show was recorded on Monday, March 19, 2018.

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EP125 - Johnson & Johnson E-Com VP Sri Rajagopalan and Samir Bhavnani of 1010data

We caught up with Samir Bhavnani of 1010data (previous appeared on Amazon Private Label Deep Dive Episode 103) at ShopTalk this year and he brought Sri Rajagopalan, VP of E-Commerce at Johnson & Johnson with him. We cover a variety of topics including brands going direct to consumer, brands working with Marketplaces, Amazon's entry into Healthcare, and Amazon Private Label OTC.

Episode 125 of the Jason & Scot show was recorded on Tuesday, March 20, 2018.

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Bob Kupbens is the VP of B2C and seller experience at eBay. He's has previously been responsible for E-Commerce at Target, Delta Airlines, and Apple. We covered a variety of topics including the latest innovations at eBay, as well as if and how brands should use Marketplaces and eBay.

Episode 124 of the Jason & Scot show was recorded on Monday, March 12, 2018.

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Luke Rauch is the Sr. Director of Insights at Walgeens. We caught up with Luke at the PathtoPurchase Summit, where he gave a key-note about how to success in the Age of Amazon.. We covered a variety of topics including:

Unique assortments and customer expereince
Loyalty Programs
Omni-Channel
Future of E-Commerce

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Episode 123 of the Jason & Scot show was recorded on Monday, March 12, 2018.

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ShopTalk is an annual trade show held in Las Vegas focused on retail and e-commerce innovation. In it's third year, it has become the fastest growing can't miss event in our industry. This year 8,400 industry professionals attended the event (up from 5,400 last year). The 2018 version took place March 18-21, 2018 at the Venetian in Las Vegas.

There is so much content at the show, that we've divided our recap into two parts. You can get part 1 here, in Part 2 we cover:

Grocery Track - Catering to new consumer - Narayan Iyengar, Senior VP of Digital at Albertsons
Glossier Keynote - Emily Weiss, CEO+Founder
Amazon Keynote - Eric Broussard - VP of International Marketplaces and Retail
Coach Keynote - Joshua Schulman
Walmart Keynote - Mark Lore and Andy Dunn
Houzz Keynote - Alon Cohen president and co-founder
Google Keynote - Daniel Alegere, President, Retail and Shopping
Code Commerce - Erik Nordstrom (President of Nordstrom) and Don Kingsborough (CEO One market)
Code Commerce - Doordash - Tony Xu, CEO
Code Commerce - Jennifer Hyman, CEO, Rent the Runway
eBay Keynote - AI eBay Keynote Jan Pedersen, Chief Scientist and Scott Cutler, SVP, Americas
Ascena Keynote - Ascena Keynote - David Jaffe, Chairman & CEO
Boxed Keynote - Chieh Huang, CEO

We've been honored to be included on a few lists of top e-commerce podcasts this week.

DisruptorDaily Top 10 Retail Industry Podcasts

BoldCommerce 16 Best E-commerce Podcasts of 2018

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Episode 122 of the Jason & Scot show was recorded on Thursday, March 22, 2018.

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EP121 - Shoptalk 2018 Recap Part 1

There is so much content at the show, that we've divided our recap into two parts. In Part 1 we cover:

Macy's Keynote
Target Keynote
Amazon Go Keynote
Future of Grocery - Moderated by Jason Goldberg
Zia Wigner Keynote (Global Chief Content Officer for ShopTalk)
Ulta Keynote
Nike Keynote
Ocado Keynote
Pinterest Keynote
Fresh Direct Keynote
Facebook Keynot

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Episode 121 of the Jason & Scot show was recorded on Monday, March 19th 2018.

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EP120 - Negotiating with Amazon with Andrea Leigh

Andrea Leigh is the Vice President of Client Services at Ideoclick, Inc., an Amazon managed services agency. Andrea enjoyed a 10 year career at Amazon where she served in a number of Buying and Category Leadership roles.

We caught up with Andrea at the PathtoPurchase Summit, where she gave a key-note on selling on Amazon. We covered a variety of topics including:

Andrea's new role at Ideoclick.
Amazon's presence in grocery and relationship with WholeFoods vendors
The language of Amazon metrics
Best practices in negotaiting with Amazon
Brands selling on Amazon

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Episode 120 of the Jason & Scot show was recorded on Monday, March 12, 2018.

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EP119 - Amazon expert Melissa Burdick

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Melissa Burdick is the president of Pacvue, and a former Amazonian who was involved in Amazon’s entry into the CPG space. She’s one of the most popular guests on the show, so with all the changes Amazon has been going through it’s a great time to have her back.

We caught up with Melissa at the PathtoPurchase Summit, where she gave a key-note on selling on Amazon. We covered a variety of topics including:

Melissa’s new company Pacvue and their Amazon advertising automation tools
Brands strategy on Amazon
Amazon private label
Advertising on amazon
- Amazon SSPA – Self Service Performance Advertising
Brick and mortar retail

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Episode 119 of the Jason & Scot show was recorded on Monday, March 12, 2018.

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This episode catches up on the latest e-commerce news:

Upcoming Industry Events

Etail west 2/26 – 3/1 Palm Desert
Path to Purchase Summit – March 12-14 – Chicago*
IBM Think 3/19-22 Las Vegas
ShopTalk 3/18-21 Las Vegas*
Adobe 3/25-3/29 Las Vegas
NPD Idea 5/15-17 Austin*
SAP Sapphire June 5-7, Orlando
IRCE, June 5-8 Chicago
Shop.org, Sept 12-14, Las Vegas*
Denotes shows Scot and Jason will be attending and broadcasting from.

Amazon News

Amazon acquires Ring for $1.1B
Funny article about clues to the selected city for Amazon HQ2
Amazon Go to expand to 6 more stores
Listener Question: What happens to Fresh when Amazon delivers from Whole Foods?

Walmart News

Walmart reports slower than anticipated e-commerce growth
Gartner blog on Walmart Pricing
Walmart new apparel brands
Walmart unveils Allswell home brand of mattresses, bedding
Specialty Home redesign
Walmart in-store mobile app redesign

Other News

Target CEO Squak-box interview

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Episode 118 of the Jason & Scot show was recorded on Tuesday, February 17th 2018.

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EP117 - Listener Questions

Amazon launches"Ship with Amazon"

Listener Questions

Q1: Amit Agarwal- Thanks for the amazing podcast. What is the future trend in pricing ? EDLP or coupon based pricing?

Most new retailers will adopts EDLP, promotions aren't as effective in the age of transparency, but it's very hard for existing promotional retailer to switch. Eventually we'll get to more dynamic, personalzied pricing. Every Nanosecond Low Pricing #ENLP!

Q2: Kiri Masters - What are the coolest or smartest things that brands and retailers are doing with voice commerce? And, what is within reach for smaller brands who don't have a $200k+ budget to drop on developing skills, etc. Where are we on the maturity curve?

Transactions are limited to recurring and replenishment purchases, so Pizza places and Starbucks have the early lead. Brands like Patron and Tide have made good use of voice skills for top of funnel marketing. Small brands should think about voice for on-site search, and voice SEO on search engines. It's VERY early in the maturity curve.

Q3: Patrick Paroline - Hi guys I love the podcast listen to it every week. When the numbers say that e-commerce revenue is up 17% does that include Amazon? If so what would be the e-commerce industry revenue increase if you took out Amazon? I believe you guys said that Walmart.com growing and 60% and Amazon at 30%. Would this mean if you removed these two companies then e-commerce as a whole is contracting

Good question! If you take the top 3 retailers out, e-commerce growth is very modest:

| 2017 GMV | 2018 GMV | 2018 Share | YoY Growth | | Amazon | $177 | $230 | 49% | 30% | | eBay | $35 | $37 | 8% | 5% | | Walmart | $15 | $24 | 5% | 60% | | Other | $173 | $177 | 38% | 2% | | Total | $400 | $468 | 17% |

Most e-commerce data is based on or correlated to the US Commerce Dept data, which is somewhat suspect. Jason and I both believe the total market is probably a bigger, which means "Other" is probably bigger, and growing faster than 2% but still much slower than Amazon/Walmart.

Q4: Ari Nahmani - Mobile payments in 2018 - can we hear more about Android Pay / Google Payments API, Apple Pay, W3C Payment Request API, etc? Do we have any data that shows that when implemented properly, these things truly reduce the 'mobile gap'?

Apple Pay and GooglePay have loyal but small user bases. Paypal and Pay With Amazon have proven that digital wallets do improve conversion. W3C Payment Request is great, easy to implement and likely to improve conversion, most sites should have it on their roadmap to implement.

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Episode 117 of the Jason & Scot show was recorded on Thursday February 15, 2018.

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EP116 - Industry News, Geek Week

SuperBowl News

Ad Coverage
Amazon won the Superbowl
Nike Launched a new sneaker direct to consumer. Nike’s SNKRS site for new releases (who’s name I couldn’t remember during the recording, sorry Kevin).

Amazon News

SpaceX successfully launched it’s first Falcon heavy rocket, and recovered two of the boosters. The photos and video of the Tesla in space were amazing. And there appears to be a thawing of relations between Jeff Bezos and Elan Musk.
Prime Now delivery from Whole Foods stores
Expansion of FBA On-Site
Amazon expands it’s airport plans from 900 acres, to 1100 acres
The Spheres launched at HQ1
Private label continues to get traction especially premium denim “Hale and Denim Crush”
Amazon Go store opened to the public
Amazon is the largest spender on R&D, much larger than any other retailer

Walmart News

Walmart acquired Spatialand out of Store 8 for VR Capability
JD.com Coming to US
Walmart – Rakuten partnership ads digital books to Walmart.com

Drug News

Helena Foulkes becomes new CEO of HBC (from CVS) replacing Jerry Storch

Deliv launched DelivRX home delivery pharmacy service

Upcoming Events

Etail west 2/26 – 3/1 Palm Desert
Path to Purchase Summit – March 12-14 – Chicago
IBM Think 3/19-22 Las Vegas
ShopTalk 3/18-21 Las Vegas
Adobe 3/25-3/29 Las Vegas
NPD Idea 5/15-17 Austin
SAP Sapphire June 5-7, Orlando

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Episode 116 of the Jason & Scot show was recorded on Thursday, February 8th 2018.

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EP115 - Amazon Q4 2017 Earnings Hot Take

This episode is a hot take of the Amazon Q4 2017 earnings

Amazon Q4 2017 Earnings
- $60B Revenue =~ $129B GMV ($47B 1P + $82B 3P)
- New Amazon A+ Content Options
- Amazon, JPMorgan Chase Health Care Project
- Supreme Court to hear South Dakota sales tax collection case
- UPS - Amazon Problem
- eBay - PayPal breakup

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Episode 115 of the Jason & Scot show was recorded on Thursday, February 1st 2018.

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Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, 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.

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EP114 - Great Retail Bifurcation, Kasey Lobaugh of Deloitte

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Kasey Lobaugh is a Principal and Chief Retail Innovation Officer at Deloitte Consulting LLP, he first appeared on episode 68. You can follow him on twitter at @klobaugh. Kasey and his team publish some of the most useful research in the industry including The New Digital Divide which helps quantify the effect of digital on in-store purchases, and the Deloitte Retail Volatility Index which measures disruption in the retail industry. Kasey sat down for an interview live from the NRF Big Show, to discuss some new research he'll be publishing in March at ShopTalk. Kasey is giving our listeners an exclusive first preview.

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Episode 114 of the Jason & Scot show was recorded on Monday, January 15th, 2018.

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EP113 - NRF Preview http://jasonandscot.com

Episode 113 is preview of the NRF Big Show 2018.

Recap of CES 2018
Preview of NRF Big Show 2018
Retail News

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Episode 113 of the Jason & Scot show was recorded on Sunday, January 15th, 2018.

New beta feature - Google Automated Transcription of the show

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EP112 - Annual Predictions for 2018

2017 Recap – Predictions made on episode 64

Jason

Retailers truly embrace Omni-channel (Attribution/Inventory/promotion/pricing – YES
A/I – Bots for Customer Service but probably not for transactions, lots of buzz on big data AI but no game changing new experience – No
Personalization – to eliminate friction, not drive new demand. Data integration not some new product or touchpoint –No
Laggard categories will discover digital (Grocery, Luxury, QSR) – Yes
Microservices – 50% of new platform implementations will be cloud, and Micro-service based solutions will start to emerge – Partial

Jason 2017 Score 2.5/5

Scot

The IPO market is going to be open, but the e-commerce companies will get crowded out by the big tech unicorns like Uber, Snap, pinterest, airbnb, spotify and the like – Partial
Amazon will start to chip away at the Fedex and UPS’s of the world with a service like this in the US. – No
Machine learning is the new ‘network effect’ – everyone has caught onto the power and competitive moats available from ML and that’s going to be a big theme. Every vendor you work with from carts to images to upsells to recommendations to search engine results to whatever is going to HAVE to have a ML capability to stay current and keep YOU competitive. – Yes
We’re going to see e-commerce growth accelerate pretty materially in 2017. We’ve been in this 15% band and I think we will see there was a move up in 2H16 to high teens and we could see 20’s in 2017 – Yes
eBay – it’s a do or die year for ebay, they could potential partner with Alibaba. – No

Scot 2017 Score 2.5/5

2018 Predictions

Scot

Mallageddon 2.0 – We saw 7000 stores close in 2017, I think this accelerates in 2018 as the 30-40% of weak malls fail and we end up with 9000 closures.
Amazon will NOT buy another offline retailer, triples down on private label.
I’m going to re-up on my Amazon logistics prediction, I think I was just a bit too early on that one, but I’ll make it bolder, that Amazon will squarely get in the last mile business in 2018 and compete with FedEx and UPS.Amazon’s ad group will get so large that they have to break out details about it and everyone will be shocked at how large it has gotten so quickly
Walmart will make a big M+A – top candidates would be Instacart, postmates and eBay.
Somebody acquires magento, or they go public.

Bonus – Amazon comes out with alexa powered wireless earbuds – because I want them.

Jason

Grocery gets disrupted by digital (led by curbside pickup). Digital grocery doubles in US, at least one delivery firm peters out.
Drug gets disrupted by digital.
AI Gap – biggest trend of 2018
Voice – Huge but not for commerce.
Payments – Retail digital wallets die (except Starbucks/Walmart/Amazon). Bitcoin tanks.

Bonus – Amazon launches a wearable.

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Episode 112 of the Jason & Scot show was recorded on Wednesday, January 3rd, 2018.

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EP111- End of year news.

Holiday Recap

E-Commerce up approx 18%, total retail up 4.8%
UPS Woes

Amazon News

Amazon Holiday Recap
Amazon wins 50% of holiday sales !?!?
WPP, Publcis, Omnicom spend $800M on Amazon ads

Other News

Home Depot may buy XPO (large item logistics firm)
Stitchfix first quarter post-IPO
Michelle Gass takes over helm at Kolhs. (Episode 77 of the podcast featured outgoing CEO Kevin Mansell)

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Episode 111 of the Jason & Scot show was recorded on Friday, December 29th 2017. Last show of 2017, happy new year everyone! Tune in next week for our much anticipated annual predictions episode.

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EP110 - Holiday 17 Hot Take with Rob Garf of Salesforce.com

Rob Garf (@retailrobgarf), is the VP of Industry Strategy and insights at Salesforce Commerce Cloud. His team has access to insights from all the Salesforce Commerce Cloud clients (formerly Demandware). We have a broad ranging conversation about what he's seeing this holiday season and trends he expects for next year.

You can read more about his teams insights here:

Salesforce Reveals Black Friday Was the Busiest Digital Shopping Day of the Holiday Season

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Episode 110 of the Jason & Scot show was recorded on November 30th 2017.

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Tamara Gaffney is the Director of the Strategic Insights Engagement Group at Adobe. Tamera joins us to discuss the holiday e-commerce results from Black Friday through Cyber Monday (Cyber 5). Tamera has access to anonymous, and aggregated data from more than 5,000 companies worldwide that use the Adobe Digital Marketing Cloud (including Adobe Analytics formerly known as Omniture), which represents one of the largest samples of the overall e-commerce industry available. Her team publishes useful insights based on that data throughout the year.

   Adobe 2017 Holiday Forecast and Realtime Holiday Dashboard

Adobe Digital Insights

Adobe Digital Price Index

Long time listeners will remember that Tamara first appeared on Episode 60 with Holiday Predictions for 2016.

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Episode 107 of the Jason & Scot show was recorded on Thursday November 30, 2017.

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EP107- Listener Questions

Listener Questions

Q1: Brands selling direct on their own site

Shawn Cheng What do u think about a brand to run their own brand store, not through market place such as eBay, Amazon or Alibaba?

Jamie Dooley Hi Scot & Jason: Have you heard of any brands seeing true success building a D2C E-Comm business through their own websites? (On a path to do 10-20% of sales and/or 8-9 figures in annual sales?). D2C seems like D2C was a big trend a year ago but I am not hearing about success stories where sales justified significant spend.

Scott Silverman Do you think a new brand without an e-commerce site or digital presence could be built by selling on Amazon? Secondarily, should manufacturers selling on their own e-comm sites, shut them down and just sell via retailers?

Q2 Mobile Conversion Gap

Ari Nahmani Mobile conversion rate... retailers are getting more and more of their web traffic from mobile, but those users are half or a third as likely to convert. They don’t seem to be coming back on desktop. So what’s happening? We see across the board where YoY traffic is flat, revenue is down due to the device mix over-indexing on mobile YoY. How do we explain this behavior? Where are those users purchasing if ecommerce growth is up? I’m seeing his trend on several client sites and I recall one of your shows that this trend was discussed.

Q3: Omni-Channel Fulfillment

Alexandro Volakis order sourcing in an omnichannel network. how do you decide where its best to ship from?

Q4: Singles Day in the US

Julia Ptock How do you think about Singles Day (11.11.)? Are there some retailers who take part at this event in the USA? Amazon is focusing on Cyber Week (Cyber Monday & Black Friday) but doesn't show interest in Single Day. Do you have an idea why?

Q5: Toys R Us impact on Holiday Promotions

Melissa Burdick How will the bankruptcy of Toys R Us impact Amazon this Holiday? Is it going to be a bloodbath in pricing this Holiday with TRU stores cutting prices and Amazon price matching (and then closing stores shortly after holiday)? https://www.usatoday.com/.../toys-r-us-store.../683762001/

Amazon News

Amazon opening permanent device shops inside of some Chicago WholeFoods stores. Jason visited one under construction.
Amazon lowers prices on marketplace sellers products. It looks like primarily 3000 beauty SKU's at the moment.
More Amazon Private Label:
- Furniture:
  - Rivet - “stylish and versatile mid-century modern furniture and décor". Mid-century modern aesthetic, focus on small space solutions, 1 year warranty, prime exclusive
  - Stone & Beam - Higher end price points. modern farmhouse aesthetic, 3 year warranty.
- Athlesure
  - Rebel Canyon - Low price point, Men's and Woman's lounge clothing.
  - Peak Velocity - Higher price point active wear (Under Armor competitor), prime exclusive
  - GoodSport - Men's and Woman's moisture wicking apparel
- Baby
  - Mama-Bear - Relaunched diapers

Amazon Private Label articles:

Bloomberg piece on Amazon sportswear w/ L2
Glossy covers Amazon Gift Guide (which focuses on exclusive Amazon products)

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Episode 107 of the Jason & Scot show was recorded on Thursday November 9, 2017.

Amazon Brand - Mama Bear Best Fit Diapers Size 5, 124 Count, Bears Print (4 packs of 31) [Packaging May Vary]

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EP106 - Amazon's Q3 Results Hot Take

This episode is a hot take of the Amazon Q3 Results as well as a few misc pieces of news

Apple opened it's new midwest flagship "town square" store in Chicago
Amazon opened a new "Pickup and Return" retail concept in Chicago
For those interested in todays update who want more, we have deep dive episodes on three topics:
- EP024 – Amazon Deep Dive
- EP089 – Amazon Acquires Whole Foods Hot Take
- EP093 - Prime Day Hot Take
Breakdown of Q3 Results
- Core commerce/marketplace
- Forecast going forward
- International
- Prime membership
- Whole Foods
- Ad revenue
- Amazon Alexa/Echo
- Headcount
- AWS
Amazon received licenses to distribute pharmaceutical equipment in 12 states, which could be a precursor to Amazon entering the pharmacy business. The news immediately drove down stock prices of traditional pharmacy companies. In coincidental news, CVS announced a bid to acquire Aetna for $66B.

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Episode 106 of the Jason & Scot show was recorded on Sunday, October 29th 2017.

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EP0105 - Stitch Fix IPO Hot Take

This episode is a hot take of the Stitch Fix IPO Filing:

How IPO's Work / Jobs Act
$1B Exits in E-Commerce
- Zappos - $850m 2009
- Quidsi/diapers - $545m -2010
- Kiva - $775b 2012
- Trunk Club - $350m 2014
- Jet.com - $4b 8/16
- Dollar Shave club - $1b 7/16
- Chewy.com - $3b 4/17
- Zulily - went public with $2.7b
Stitch Fix Background
- Offering
- History
- Financing History
Stitch Fix financial performance
Stitch Fix Customer Value / Churn
Personalization and Machine Learning
Company size and roles
Conclusion

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Episode 105 of the Jason & Scot show was recorded on Sunday, October 22nd 2017.

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An interview with Bryon Colby (@bcolby6), SVP of Digital Commerce at Cornerstone Brands. Cornerstone Brands is a billion-dollar omni-channel retailer comprised of multiple leading home and apparel brands including Frontgate, Ballard Designs, Garnet Hill, Chasing Fireflies, Grandin Road, Improvements, and TravelSmith. Cornerstone is a business unit of HSN, Inc.

We spoke with Bryon about his background, where digital commerce sits in the Cornerstone organization structure, how Cornerstone benefits from it's catalog heritage, the challenges and opportunities of customized products, and the future of personalization.

Bryon mentioned a custom product configurator for furniture on Ballard Designs, which can be found here.

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Episode 104 of the Jason & Scot show was recorded on Wednesday, October 11th 2017.

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EP103 - Amazon Private Label Deep Dive

This episode is a deep dive into Amazon's Private Label activities:

Framework for Amazon Private Label Brands
Amazon's History in Private Label
- Amazonscape
Advice for Brands and Retailers
Update on Amazon Private Label Marketshare from 1010data
- Mary Meeker State of the Internet (slide 75 is the one discussed)

Special thanks to Samir Bhavnani and Tim Wilson from 1010data. for providing their data and insight for this episode.

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Episode 103 of the Jason & Scot show was recorded on Wednesday October 4, 2017.

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EP102 - Code Commerce, Shop.org, and News

Code Commerce

Code Commerce (the first stand alone commerce event from Recode) was Sept 13 and 14 in New York City.

Andy Dunn - CEO of Bonobos
Laura Albert - CEO of Williams Sonoma
NBA Commissioner Adam Silver and Fanatics Executive Chairman Michael Rubin
Pinterest President Tim Kendall
A Tour of an Amazon Prime Now facility in New York on West 34th

Shop.org

Shop.org was September 25-27 in Los Angeles, CA.

Marc Lore - President of Digital at Walmart
Adam Grant - Author of the Originals
Scott Galloway - NYC Professor, L2 Founder, and Author of "The Four"
Tech Lab

Amazon News

Amazon looking for a second HQ location. Scot thinks Austin, Jason suggested Houston or Detroit.
Amazon launched a new set of Alexa based devices
Amazon renewed - Certified pre-owned products
Amazon opening 6 new Fulfillment Centers in the US (and 40 in India):
- Oregon - Salem (8/28)
- Ohio - North Randall
- NY - Staten Island (9/6)
- Michigan (9/14)
- Oregon - Portland (9/18)
- Ohio - Euclid (9/18)
Alexa in BMW
Kohls taking Amazon Returns

Other News

Walmart buys Parcel - NY same day deliveries

Plated acquired by Albertsons - Meal Kits heat up

Ikea acquires TaskRabbit - Help deliver and assemble Ikea products

Jet launching private label "everyday essentials" line

Wish $30m NBA sponsorship

Holiday Forecasts - Ranging from 3.5% - 4% (Jason thinks that might be optimistic unless we get highly promotional)

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Episode 102 of the Jason & Scot show was recorded on Wednesday October 4th, 2017.

http://jasonandscot.com

The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google

Originals: How Non-Conformists Move the World

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EP101 - Indochino CEO, Drew Green

An interview with Drew Green (@Drew_Green), CEO and of Indochino. Indochino is one of the largest made to measure menswear brands globally with active customers in 50 countries. We spoke with Drew about his previous e-commerce startup Shop.CA as well as Indochino's business model, Amazon strategy, and the future of the indsutry.

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Episode 101 of the Jason & Scot show was recorded on Thursday, September 14th 2017.

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EP100 - Get to Know Our Listeners

To celebrate our 100th episode, we decided to put the focus on the most important element, the listeners. So we invited three of our most active listeners to be on the show.

Radz Mpofu @RadzMpofu

Kevin Harmon @imadness Facebook

Ted Fifelski @ted_gives

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Episode 100 of the Jason & Scot show was recorded on Thursday, September 7th 2017.

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EP099 - Tulip Retail CEO Ali Asaria and News

Amazon News

Wholefoods - Amazon Day 1 buzz
Amazon getting deeper into programmatic ads
Amazon building a FC on top of what was once the largest mall in the US, in Randall, OH
Amazon is #1 app with millennials via Comscore

Other news

CPG's face the threat of digital disruption
Warren Buffet - Retailers and Brands in an epic battle
Walmart partners with Google home (See Scot on the Today Show talking about it here)

Digital Retail Newsmaker

Our Digital Retail Newsmaker segment, features an interview with Ali Asaria (@aliasaria), CEO and Founder of Tulip Retail. Tulip Retail is a mobile application provider focused on empowering workers in retail stores. They recently raised $40M in venture capitol, lead by Kleiner Perkins.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 99 of the Jason & Scot show was recorded on Thursday, August 31th 2017.

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A weekly podcast with the latest e-commerce news and events.

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EP098 - Zola CEO/Co-Founder Shan-Lyn Ma

An interview with Shan Lyn Ma (@shanlynm), CEO and Co-Founder of Zola. Zola is re-inventing the Wedding Registry for the modern couple.

In this episode we discuss Shan Lyn's previous experience including Yahoo and Gilt Group. As well as Zola's business model and potential growth opportunities.

Shan mentioned a recent article written by Zola investor, Alex Taussig (@ataussig) of Lightspeed: Finding product/channel fit at Zola.

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Episode 98 of the Jason & Scot show was recorded on Tuesday, August 22nd 2017.

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EP097 - Industry News

Congratulations to friend of the show Billy May, on his new appointment as CEO of Sur La Table. Billy was a guest on episode 23.

Amazon News

Amazon Instant Pickup, allows pickup 2 minutes after ordering popular items, on 5 college campus's.
Amazon stock briefly went down after President Trump attacked them on Twitter.
Amazon Treasure Truck expanding to 5 new cities (Chicago, Dallas, Los Angeles, Houston, Atlanta).
Amazon ~~Private~~ Exclusive Labels taking off according to 1010Data.
Amazon is rumored to be entering the ticket sales business
Rumor of Amazon "Anytime" messaging App
Amazon was mentioned in 15% of the S&P500 earning calls this quarter

Other News

US Dept of Commerce reported that e-commerce grew 16.3% in Q2 - half of that was from amazon. Fastest growth since early 2012 - 12.1% of total sales.

TJX sales up 6%

Gap earnings slightly up; they announce new BOPIS test.

Dicks Sporting Goods, CEO, Ed Stack:

"There's a lot of people right now ... in retail and in this industry in panic mode," Stack added. "They seem to be in panic mode with how they're pricing, and we think it's going to continue to be promotional, and at times irrational, going forward."

Stack said he noticed heavier promotions and price cuts particularly on athletic apparel, electronics, and hunting, fishing and camping gear beginning around Father's Day this year. "And it continued to be very promotional — not only from retailers but also from some of the brands on a direct-to-consumer basis."

Walmart Online grew 60% y/y

Target acquired that same day delivery company Grand Junction

Alibaba 56% y/y growth vs 49% projected- Adj EBITDA margins of 50%. Jack Ma talks about New Retail concept (such as Hema Grocery store)

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Episode 97 of the Jason & Scot show was recorded on Saturday August 19, 2017.

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EP0096 - Listener Questions Part 2, and News

Amazon News

Amazon now showing pics of delivered packages in app
AU fulfilment center
Amazon hiring day (50k new jobs)
Lots of new FCs coming
Sears to sell Kenmore on Amazon and build Alexa into products
New Amazon Hub Lockers
Forcing Free Returns on 3p Sellers
New Amazon handbag private label launched - The Fix (Prime exclusive)
Stripe processing some Amazon orders

Listener Questions

Michelle Grant via Twitter:
Do you think Nike is one of the few brands that have the leverage to get Amazon to remove 3P inventory?

Steve White:
Hey guys, when I talk to brands they have this sense that they are going to be 'pushed out' or off the platform as Amazon develops products in their respective categories- my sense is that Amazon has never acted like a bully in that regard, just adds additional competition- thoughts?

Parker Block:
Who is right, @retailgeek ? Are disruptive forces going to drive retail consolidation (per @debweinswig) or fragmentation (per @klobaugh)?

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Episode 96 of the Jason & Scot show was recorded on Thursday August 3, 2017.

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EP095- Listener Questions and Amazon Earnings

http://jasonandscot.com

Amazon Q2 2017 Earnings Summary (PDF from Amazon)

Amazon reported a beat on revenue but a miss on earnings
Revenue came in at $37.96 billion, beating street estimates of $37.18 billion.
EPS was only 40 cents per share, missing street estimates of $1.42 per share.

Listener Questions

Kiri Masters:

I'd love to hear Jason and Scot talk about their global e-commerce outlook. Amazon in particular seems keen to expand aggressively in international markets. Does the growth opportunities match the regulatory / operational complexity for brands? Interested to get your take. * Josh Tarasoff:

Hi Jason and Scot--What is your take on Amazon's strategy behind buying products at full retail price from marketplace sellers? Here is an article: http://www.cnbc.com/.../amazon-new-fba-program-buys....

Thank you. I love the show. * Anup Gosavi

Hey guys... love your show. Would love to see your take on when/ if brands will be active on messaging platforms like Messenger, Kik. etc.

Is it actually a better channel than email? Is there a signal in all that noise? Opportunities/ risks etc. Thanks! * Lauren Quaile Tonkin:

I'd love your thoughts on autoreplenishment. Why have other retailers not adopted this tactic broadly (beyond Amazon and Target)? Do autoreplenishment models differ globally? What non-intuitive products/categories do you think can benefit from an autoreplenishment strategy? Thank you! Keep up the great work. * Ben Kates:
off-price retail offline and online * Gareth Hanes (in uk):
Hi Jason & Scott, enjoying your podcasts from "the other side of the pond" in the UK.

I would be interested in your take on the recent (in the UK anyway) growth of products sold on Amazon by Chinese 3P merchants (presumably manufacturers) using FBA.
I have noticed transformational changes in some product groups where new SKUs and brands have gained strong traction very quickly (propelled forward by a combination of agressive pricing, AMS & FBA).

There's been a lot of talk on your podcasts about Amazon "own label", but this "manufacturer to consumer" model would appear to be a much more of a imminent threat to incumbent domestic brand owners.

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Episode 95 of the Jason & Scot show was recorded on Thursday July 27, 2017.

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EP094 - News http://jasonandscot.com

Amazon News

Will regulators look at Amazon Whole Foods Acquisition? Scott Galloway says yes, Jason & Scot say no.
Real reason Nike began selling on Amazon
Amazon launches Spark visual discovery platform
Jeff Wilke, Amazon CEO Worldwide Consumer gave rare public comments at Fortune Brainstorm Tech Conference
Amazon Meal Kits
Rumor of Amazon "Anytime" messaging App
Amazon launches home installation service
Amazon launches New Brand Pages

Alibaba

Launches new physical Hema Supermarket concept in China

Other

Brandless raises $50M to launch new CPG "Brand"
ApplePay & SamsungPay on PayPal
Everlane to open permanent physical store in San Francisco
Newstore raises $50m for new E-Commerce Platform
Walmart opens 2.2m ft sq Fullfillment center in Florida

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Episode 94 of the Jason & Scot show was recorded on Wednesday July 19, 2017.

A weekly podcast with the latest e-commerce news and events. Episode 94 is a recap of the weeks news.

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EP093 - Amazon Prime Day Hot Take

Amazon Prime Day was July 11, 2017. In this episode we give our hot take on this Amazon created sales holiday.

Goals for Prime Day
History of the Holiday
Results for 2017 Prime Day
Jason & Scot's conclusions from this years event
Interview with Jamie Dooley Head of e-commerce at Dorel Juvenile Group to discuss their Prime Day experience

Amazon Prime Day Recap press release

Amazon Deep Dive EP24 Podcast

Full interview wth Dorel Juvenille Group, Jamie Dooley - EP86

A weekly podcast with the latest e-commerce news and events.

http://jasonandscot.com

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Episode 93 of the Jason & Scot show was recorded on Wednesday, July 12, 2017.

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EP092 - Artificial Intelligence Deep Dive

"We're in the middle of an obvious disruption right now: machine learning and artificial intelligence. It is a renaissance, it is a golden age. We are solving problems that were in the realm of science fiction for the last several decades." - Jeff Bezos

This episode is a deep dive into all the use-cases for Artificial Intelligence and machine learning in retail.

Insight Generation

Analytics - Google Automated Insights
Multi-Variable Regression Testing (Correlation)
Targeting - Best Audience / Next Best $
Social Listening / Sentiment
Campaign Attribution / ROI

Business Acceleration

Inventory Management/Forecasting
Merchandise Compliance
Checkout - such as Amazon Go
Product Design - such as Stichfix
Tagging/Unstructured Data
Fraud
Price/Promotion Optimization
Logistic Optimization
Drone Delivery

Customer Engagement

Natural Language Assistants
Virtual Agents
Guided Selling
Visual Search
Search
Recommendations
Fitment/Return Avoidance
Personalization
Loyalty/Retention

AI Vendors Discussed

General:

1. IBM Bluemix Watson
2. Google Cloud Platform
3. Microsoft Azure
4. Amazon AWS - including DSSTNE (pronounced “destiny”), the Amazon recommendation engine

Retail Specific Vendors:

Twiggle - Search
Sentient.ai - Visual Search/ Personalization/ Recommendations
Clarifai.com - Visual Search / Video
Simbe Robotics - “tally” Robot / Shelf Audit / Inventory
Focal Systems - Computer Vision / Inventory
Luminoso - Analytics

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Episode 92 of the Jason & Scot show was recorded on Monday July 10, 2017.

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EP091 - Boxed Wholesale Head of Reengagement Nitasha Mehta

An interview with Nitasha Mehta, Head of Reengagement and Boxed Wholesale. Boxed is bringing the wholesale club experience to e-commerce, is based out of Edison, NJ and has raised $132m in capital.

In this episode we discuss Amazon's Whole Foods acquisition, disruption of CPG, private label, mobile, customer acquisition tactics, and customer retention tactics.

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Episode 91 of the Jason & Scot show was recorded on Wednesday June 29, 2017.

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EP090 - Nordstrom.com Ken Worzel and Danny Ryder

http://retailgeek.com/podcast

An interview with Ken Worzel, President of Nordstrom.com and Danny Ryder, EVP, Online Merchandising & Experience. Nordstrom is the #17 retailer on the IR500 list. They are one of the most storied retailers in North America, founded in 1901. Today they have 354 stores in 40 states and Canada (including full-line stores, Nordstrom Rack, Jeffrey Boutiques, Truck Club, and HauteLook).

In this episode we discuss Mobile, Fashion Retail, Amazon, and Retail Disruption.

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Episode 90 of the Jason & Scot show was recorded on Tuesday May 23, 2017.

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EP089 - Amazon acquires Whole Foods Hot Take

Amazon agreed to spend $13.7 billion to buy the grocery store chain Whole Foods Market Inc., which has more than 450 stores. The grocery category is a $795B opportunity in the US that has largely been untouched by digital.

Terms of the deal
Wall Street reaction
Impact on the grocery category
Winners and Losers

Amazon-Scape that Scot mentions on the show

Amazon Deep Dive EP24 Podcast

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Episode 89 of the Jason & Scot show was recorded on Friday, June 16, 2017.

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EP088 - PwC Partners Steven Barr and Byron Carlock

Steve Barr (@Steven_J_Barr) is a partner in the Consumer Markets practice at PwC, and sits on the NRF Board of Trustees. Byron Carlock is a partner who leads the Real Estate practice at PwC. We sat down with Steve and Byron to talk about the current state of the US retail market and what the future may look like.

In this interview, we discuss, Mallageddon, Omnichannel, Grocery, Mobile, and of course Amazon.

PwC Consumer Markets Homepage

PwC Real Estate Homepage

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Episode 88 of the Jason & Scot show was recorded on Thursday, June 15, 2017.

http://jasonandscot.com

Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.

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EP087 - UBS Equity Research Analyst Michael Binetti

An interview with Michael Binetti, Equity Research Analyst at UBS, covering apparel and footwear brands, department stores and speciality retailers. His coverage universe includes: Abercrombie & Fitch Co,, American Eagle Outfitters Inc, Chico's, Coach, Express Finish Line, Foot Locker Inc, Gap, Hanesbrands, J. Jill Inc, JC Penney Co ,Kohl's Corp, L Brands , Lululemon, Macy's, NIKE, Nordstrom, PVH Corp, Ralph Lauren Corp, Ross Stores Inc, TJX ,Under Armour Inc, Urban Outfitters and VF Corp.

In this interview, we discuss Omnichannel, Mallageddon, Brands vs Retailers, and of course Amazon.

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Episode 87 of the Jason & Scot show was recorded on Tuesday, May 30, 2017.

http://jasonandscot.com

New beta feature - Amazon Automated Transcription of the show:

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EP086 - Dorel Juvenile Group Bob Land and Jamie Dooley

An interview with Bob Land is the VP Consumer Engagement and Jamie Dooley is the Head of E-Commerce at Dorel Juvenile Group. Dorel Juvenile is the world’s leading juvenile product company and has over 11k employees globally. They have a portfolio of 11 brands include Cosco and Safety 1st.

In this interview, we discuss Dorel's to to market strategy, including:

Wholesale
Direct to Consumer
Marketplaces
Physical/Popup DTC
B2B

In particular Dorel is a hybrid seller (1p and 3p) on both Walmart and Amazon's marketplaces.

Jamie will be one of the speakers at "Amazon & Me" an all day workshop on Tuesday June 6th at IRCE, hosted by Scot Wingo.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 86 of the Jason & Scot show was recorded on Wednesday May 24, 2017.

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EP085 - FutureCommerce Joint Podcast Part 2

Brian Lange (@brianjlangeand) Phillip Jackson (@philwinkle) are the hosts of futurecommerce podcast.

In this first of it's kind, Co-Podcast Jason & Scot team up with Phil & Brian to record a two-part podcast. Part 1 can be heard on futurecommerce. This is part 2.

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Episode 85 of the Jason & Scot show was recorded on Thursday May 11, 2017.

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EP084 - Amazon News, Walmart Earnings, RumorsAmazon News

Prime day - 30 hours long, sometime the week of July 10t
Amazon market cap crossed 2X Walmart
20yr anniversary of Amazon IPO - A $10K investment then would be worth $6,410,000 today
1 click patent expiring
Amazon expanding into Pharmacy and Furniture
Amazon B2B impacts Grainger (Now predict that 80% of the sales by 2021 will be online)
Brands moving ad dollars from Google to Amazon

Walmart

Strong Q1 earnings- Ecommerce up 63% (40% organic), GMV up 69%
Same Store Sales up 1.4%
Went from 10m SKUs a year ago to 50m SKUs today (Amazon has 355m)
ThisIsStory opens Jet.com Fresh themed story
Walmart files IOT Patents

Other News

As earning season wraps up, discount retailers, dollar stores, and warehouses are up, while department stores are down.
Samsonite purchases Ebags for $105m
Google IO - Google is all in on artificial intelligence
Target tried to buy Caspar and settled for an investment
Target may be trying to buy Boxed

Scot will be hosting "Amazon & Me" an all day workshop on Tuesday June 6th at IRCE, he can be found in the Channel Advisor booth #607 for some of the show.

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Episode 84 of the Jason & Scot show was recorded on on Friday May 19, 2017.

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EP083 - Andrea Leigh, selling on and negotiating with Amazon

Andrea Leigh is the owner at Andrea K. Leigh Consulting, which helps clients sell on and negotiate with Amazon. Andrea enjoyed a 10 year career at Amazon where she served in a number of Buying and Category Leadership roles. Andrea is a recognized expert on Amazon, who has written a number of helpful articles about Amazon on linkedin:

Amazon's New End Game is Likely Third Party Sellers. What Retail Brands Should Do About it
Why Your Brand Should Sell Hybrid (1P + 2P + 3P) on Amazon - Demystifying the Hybrid Selling Model Hype
Why Your Brand Should Care About Amazon’s Item-Level Economics (i.e, CRaP)

We spoke with Andrea about her background and experiences at Amazon, the digital grocery market and Amazon's efforts in the segment, and the best practices and common pitfalls in working with Amazon.

Andrea will be one of the speakers at "Amazon & Me" an all day workshop on Tuesday June 6th at IRCE, hosted by Scot Wingo.

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 83 of the Jason & Scot show was recorded on Thursday May 11, 2017.

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EP082 - Amazon Earnings, Walmart and Other News

Amazon News

Amazon earnings call was a clean "beat and raise" exceeding analyst estimates for revenue and earned income. That drove the stock up 4% (approx 960), putting Amazon in striking distance of the $1000 price (which would also make Jeff Bezos the most wealthy man in the world.
Jeff Bezos comments were primarily focused on progress in India.
Jeff Bezos 2016 Shareholder letter is another can't miss (and don't forget to reread the 1997 letter posted at the end if you haven't seen it before)
Amazon has been profitable for 8 consecutive quarter
3P Marketplace is over 50% of Amazon sales, putting total GMV for the Quarter around $60B
AWS continues to grow (47% this quarter) but rate of growth has continued to slow as they get larger
Prime estimates are now as high as 80M members
Amazon launched the new Echo Look device

Walmart News

Walmart has a new startup incubator "store 8" and Rent the Runway Founder Jenny Fleiss is the first project with a new personalized shopping concept
Walmart is offer new "Jet Style" discounts when you buy online and ship to store (vs. ship to home)
Walmart acquired Shoes.com url for $9M
Rumors that Walmart is in talks to acquire Bonobos

Petsmart buys Chewy.com for $3.35M (largest e-commerce acquisition ever)

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Episode 82 of the Jason & Scot show was recorded on Thursday April 6, 2017.

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EP081 - Retail veteran, and O Alliance Founder Andrea Weiss

Andrea Weiss has a storied career that has included operating stints at Disney, Ann Taylor, Guess, L brands, and Delia’s. She’s served on many boards including GSI Commerce, and Pep Boys and is currently on the board of Cracker Barrel, Nutrisystem and Chico’s. She also started The O Alliance and sits on the SAP NA advisory board.

We spoke with Andrea a variety of topics, including Cracker Barrel secret biscuit recipe, the current retail climate, retail concession model, and Amazon.

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Episode 81 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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EP080 - Accel Partners Brian O’Malley

Brian O'Malley, is a partner at Accel Partners. Accel is one of the top tier Venture Capital firms with offices in the Bay Area, London and Banglore. Some of the companies they have backed include Facebook, Dropbox, Jet.com, slack, flipkart and Spotify. Brian has been at Accel for over 3 years and focuses on marketplaces and next-generation consumer-oriented companies. He has led investments in Dollar Shave Club, Hotel Tonight, Bazaarvoice, and Skullcandy.

We spoke with Brian about his background, his portfolio at Accel, how Brian looks at the commerce landscape from a VC perspective, the current climate for commerce investments, and the technologies that have him excited.

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Episode 80 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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EP079 - Modcloth CEO, Matt Kaness

Matt Kaness is the CEO of Modcloth a digitally native vertically integrated apparel brand, that was recently acquired by Walmart. Our conversation covers Matt's background, the Modcloth business, their brick and mortar FitShop concept, the future of commerce, and the Walmart acquisition.

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Episode 79 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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EP078 - Amazon News

http://jasonandscot.com

In Episode 78, we catch up on a lot of the new Amazon news including:

Amazon Bookstore opens in Chicago (very near Jason's home)
A number of analyst raise their guidance on Amazon stock, which is now almost double Walmart's market cap
Amazon hosting a summit to help brands sell direct
Amazon Private Label update
Amazon Go store delayed
Amazon gets NFL Thursday night football
Amazon hiring work from home customer service people
New Product - Amazon Connect, AWS cloud SaaS callcenter application
New Product - Amazon Chime, AWS cloud SaaS video conferencing application
Amazon Opening 1m sq-ft FC facility in VA
Amazon acquired Souq.com - middle east marketplace - Dubai, Abu Dabi, UAE, Egypt, Saudi Arabia, Kuwait, Bahrain
Amazon shuts down Quidsi

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Episode 79 of the Jason & Scot show was recorded on Thursday April 6, 2017.

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EP077 - Kohls CEO Kevin Mansell

Kevin Mansell is the the Chief Executive Officer and President of Kohl's Corporation and Kohl's Department Stores Inc. He joined Kohl's Corporation in 1982 as Divisional Merchandise Manager.

Kevin sat down with us at Shoptalk to discuss a wide range of topics including the latest at Kohl's, the state of US Retail, Amazon, and the evolution of omni-channel.

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Episode 77 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Tuesday March 21st.

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EP076 - MercadoLibre, Head of Marketplaces Leandro Soares

Leandro Soares is the head of Marketplaces at MercadoLibre.com. MercardoLibre (or MercardoLivre in Portuguese) is the largest online marketplace in Latin America. Our conversation covers the basic of the Latin American e-commerce market, the significant differences from country to country, and the evolution of e-commerce and marketplaces.

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Episode 76 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Monday March 20th.

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Charlie Cole (@CharlieCole) is Global Chief Ecommerce Officer at Tumi, and Dan de Grandpre (@dan_degrandpre) is CEO of Dealnews. We caught up with both of them at a networking event hosted by Scot Silverman at ShopTalk.

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Episode 75 of the Jason & Scot show was recorded live from Shoptalk in Las Vegas on Monday March 20th.

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EP074 - Selling on Amazon with Melissa Burdick of The Mars Agency

Melissa Burdick is the VP of E-Commerce for The Mars Agency, and a former Amazonian who was involved in Amazon's entry into the CPG space.

We talked with Melissa about all things Amazon, including:

Her background at Amazon, and the early days of Amazon's relationship with CPGs.
How CPGs have evolved on the Amazon platform
The different selling platforms available to CPGs on Amazon (Prime Now, Fresh, Core, Pantry, SNS, Dash)
CRaP - Can't Realize a Profit stats on Amazon
Brands on Amazon 1p vs 3p selling
Hybrid accounts (selling both 1p and 3p)
Amazon Private Label
Amazon Advertising Platforms
- AMS - Amazon Marketing Services
- AMG - Amazon Media Group
- AAP - Amazon Advertising Platform
- ARA - Amazon Retail Analytics
Future of E-Commerce

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Episode 74 of the Jason & Scot show was recorded on Wednesday March 8th, 2017.

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EP073 - Evercore ISI Softlines Analyst Omar Saad

Omar Saad is a Senior Managing Director and heads Evercore ISI's Softlines, Luxury & Dept Stores team. In February 2017, he published a report "Softline Wholesale Channel Must Evolve or Die." (PDF Download).

In the report, Omar predicted that one of the most pronounced effects of the digital disruption we are currently living through will be the elimination of middlemen throughout the economy. He views department stores and other retailers of third party products as one form of middlemen (between the product manufacturer and the consumer) that is already being dramatically disrupted and will need to re-invent itself to survive. In the softlines category, he believes this disruption will also effect the products brands dependent on a middleman based supply chain, and it's economic model. As a result he downgraded the status of seven brands he follows. Shortly thereafter, many of those firms reported disappointing earnings and/or predicted significant headwinds in their businesses.

In this interview we cover:

Why the Middlemen are being eliminated:

a) consumers have instant visibility into price, selection, and value across retailers and brands;
b) celebrities, fashion bloggers, and YouTubers (not department store buyers) define style and synthesize trends;
c) brand building is achieved more through social than traditional media; and
d) the new standard of convenience is same-day delivery, not a shopping center with a bunch of stores in one place that requires a several-hour time commitment
What effect this will have on retailers

It's going to be hard surviving as a business selling other peoples stuff. Retailers may shift to more of a "Concession" model in which retailers charge brands for space, and the brands sell their own goods. This model is of course already very common online (Marketplaces) and is also common in Asia. Omar suggests that this element of Ron Johnson's JC Penny strategy may have been right.

What effect this will have on manufacturers

In the long run Brands that create innovative product, produce strong content, and are able to connect directly with consumers will thrive. However, Omar predicts severals years of significant challenges for brands as they wean themselves off their current supply chain model.

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Episode 73 of the Jason & Scot show was recorded on Tuesday February 28st, 2017.

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EP072 - RetailDIVE Editor Jason Ankeny

Jason Ankeny is the Editor at RetailDIVE. RetailDIVE is a daily e-newsletter focused on the retail industry, offering industry news and original analysis, and is one of Jason & Scots favorite industry news sources. Jason is on Twitter as @jankenydive and can be reached via e-mail at jankeny@industrydive.com. Jason sat down for an interview live from the NRF Big Show, and we covered a wide range of topics.

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Episode 72 of the Jason & Scot show was recorded on Monday January 16th, 2017.

http://retailgeek.com/podcast

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EP071 - News Update, Amazon, Walmart, & Dept Stores

Trip Reports

Razorfish Tech Summit - YouTube video

Seattle - Jason visits Amazon Go, and B8ta stores

Toronto - AdWeek FFWD 2017

Amazon News

Amazon Earning Call - Prime Estimates 60m subscriptions, First party sales grew 19%, Third Party Marketplace sales grew 43%, FBA is now 55% of all sales, Amazon Ad sales grew 73% to $2.95B.
Amazon video conferencing app (Chime)
Amazon in-home smart home consultations
Amazon denies NYPost story about Robot store
Prime Air Cameo in Echo Super Bowl spot
Amazon CFO - bookstores more about devices than books

Walmart News

2 day free shipping $35 (Amazon lowers threshold in response)
Ecomm grew 29%
Walmart aquires Moosejaw
New Walmart convenience store Pilot

Other

FedEx launches FBA competitor
E-Com was 42% of retail growth last year
Dept Store sales in decline for 10 years
Google Home Adds Commerce (Bezos says voice isn't really about commerce)
Target - same store sales down 3% in Nov/Dec, E-Com grows 30%, Target cuts back on innovation, RIP project goldfish
JJill IPO and Snap!

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Episode 71 of the Jason & Scot show was recorded on Tuesday February 21st 2017.

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EP070 - Bonobos, Chief Experience Officer Dominique Essig

Dominique Essig is the Chief Experience Officer at Bonobos. Bonobos is a men's apparel retailer that sells direct to consumer through their E-Commerce site, and a chain of company owned GuideShops that deliver an innovative retail experience but do not stock inventory. Bonobos Co-Founder Andy Dunn coined the phase Digitally Native Vertical Brands, to define businesses such as Bonobos. Dominique sat down for an interview live from the NRF Big Show, and we covered a wide range of topics including Guideshops, and their customer service Ninjas.

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Episode 70 of the Jason & Scot show was recorded on Monday January 16th, 2017.

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Jerry Hum is a Cofounder & CEO at Touch of Modern. Touch of Modern is a members-only ecommerce website and app focused on selling lifestyle products, fashion, and accessories to men. The company is based in San Francisco, California and was launched in March 2012.. Jerry sat down for an interview live from the NRF Big Show, and we covered a wide range of topics.

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Episode 69 of the Jason & Scot show was recorded on Monday January 16th, 2017.

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EP068 - Deloitte Chief Retail Innovation Officer, Kasey Lobaugh

Kasey Lobaugh is a Principal and Chief Retail Innovation Officer at Deloitte Consulting LLP. You can follow him on twitter at @klobaugh. Kasey and his team publish some of the most useful research in the industry including The New Digital Divide which helps quantify the effect of digital on in-store purchases, and the Deloitte Retail Volatility Index which measures disruption in the retail industry. Kasey sat down for a interview live from the NRF Big Show, and we covered a wide range of topics.

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Episode 68 of the Jason & Scot show was recorded on Monday January 16th, 2017.

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EP067 - Recode's Jason Del Rey

Jason Del Rey is the Senior Editor covering Commerce and Payments at Recode. You can follow him on twitter at @DelRey. He hosts the #CodeCommerce series of events, the next one of which is in Las Vegas on March 20th. He's always looking for new scoops in the commerce industry at jason@recode.net. Jason sat down for a interview live from the NRF Big Show, and we covered a wide range of topics.

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Episode 67 of the Jason & Scot show was recorded on Monday January 16th, 2017.

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EP066 - Scott Silverman

Scott Silverman is a principal at Scott Silverman Associates and Scott is also co-founder of the Global Ecommerce Leaders Forum. On top of that, he also advises several startups in the e-commerce arena. Scott is one of the inventors of the term CyberMonday. Scott is also a former Executive Director and board member of shop.org.

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Episode 66 of the Jason & Scot show was recorded on Monday January 16th, 2017.

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EP065 - CES 2017 Recap

CESis the largest trade show in the US with 175,000 attending in 2017. The show has become a major PR and Trend Spotting event for marketers across many industry. In this episode we recap the booths that are relevant to commerce practitioners including Intel, Qualcomm, Alibaba, Samsung and Mastercard). We discuss, Amazon Alexa, which won the show by being embedded in over 700 products at the show. And we discuss implications of cognitive computing and natural language processing more generally.

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Episode 65 of the Jason & Scot show was recorded on Thursday January 12th, 2017.

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EP064 - 2017 Predictions & 2016 Review

2017 Commerce Predictions

Jason

Retailers truly embrace Omni-channel (Attribution/Inventory/promotion/pricing)
A/I - Bots for Customer Service but probably not for transactions, lots of buzz on big data AI but no game changing new experiences
Personalization - to eliminate friction, not drive new demand. Data integration not some new product or touchpoint
Laggard categories will discover digital (Grocery, Luxury, QSR)
Microservices - 50% of new platform implementations will be cloud, and Micro-service based solutions will start to emerge

Bonus - Digital Wallets - Something other than Paypal/Amazon will achieve 10% of US e-commerce transitions (not occurring on Amazon). Potentially a mix of vendors wallets (Chase, Walmart, ApplePay in Safari, etc...), or the W3C Web Payments standard could gain traction.

Scot

The IPO market is going to be open, but the e-commerce companies will get crowded out by the big tech unicorns like Uber, Snap, pinterest, airbnb, spotify and the like
Amazon will start to chip away at the Fedex and UPS’s of the world with a service like this in the US. From there (potential 2018) Amazon could expand into p2p and reverse logistics, ie "we're already at your house, do you have any other stuff to ship?"
Machine learning is the new ‘network effect’ - everyone has caught onto the power and competitive moats available from ML and that’s going to be a big theme. Every vendor you work with from carts to images to upsells to recomendations to search engine results to whatever is going to HAVE to have a ML capability to stay current and keep YOU competitive
We’re going to see e-commerce growth accelerate pretty materially in 2017. We’ve been in this 15% band and I think we will see there was a move up in 2H16 to high teens and we could see 20’s in 2017
eBay - it’s a do or die year for ebay, they could potential partner with Alibaba.

Bonus - Amazon will release another phone.

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Episode 64 of the Jason & Scot show was recorded on Tuesday January 3rd, 2017.

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Scott Morey is the EVP of GGP, one of the largest mall operators in the US. We spoke with Scott about a Mallageddon, Omni-Channel, Millennial shoppers, and the future of Malls.

Selected links:

ICSC Mall Data
Recommended book: Experience Economy by Joe Pine
OpinionLabs survey of Millennial shoppers
Deliv on-demand delivery service that Scott mentioned

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Episode 63 of the Jason & Scot show was recorded on Wednesday December 7, 2016.

http://retailgeek.com/podcast

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EP062 - Deep Dive Amazon-Go Store concept

On Monday 12/5/16, Amazon surprised the industry by debuting a new retail concept called Amazon Go. The 1800 square foot brick and mortar convince store’s most notable feature is that it requires no checkout. Just put your items in your shopping bag and walk out of the store when you are done. Payment is handled implicitly (similar to paying for an Uber).

The store is for Amazon Prime members only (requires a mobile app to act as a key and let you in the store), and uses a combination of camera and sensors to track shoppers and the items they put in their bags. The store is open to Amazon employees only for this month, and will be open to all prime members “early next year.”

Amazon has a website for the store, and a demonstration video

Context and History
In the video and on the info site, they talk about having been working on the store for 4yrs
The store likely leverages image recognition technology Amazon acquired via Snaptell 2009
The store clearly leverages elements of two patents Amazon filed in 2013 and 2014

USPTO20150012396 TRANSITIONING ITEMS FROM A MATERIALS HANDLING FACILITY
USPTO20150019391 DETECTING ITEM INTERACTION AND MOVEMENT
This is one of several retail concepts Amazon is testing in the Seattle area this year.
- The store is located in downtown Seattle on the edge of the Amazon Biodome (their new HQ complex) at 2131 7th Ave
- Two other grocery pickup store concepts are under construction are in Balard and Sodo (north and south of downtown), and appear close to completion.
- Amazon has an open bookstore open in University Village, 4601 26th Avenue NE (North of downtown)
The store is offering a number of new (to Amazon) products including ready to make meal kits (similar to Blue Apron), made to order food, and freshly prepared food.

Technology

The video the explicitly call out computer vision, deep learning algorithms, sensor fusion, “just walk out technology” #JWOT
Computer vision is likely used for people tracking (patent even talks about using microphones to track peoples location and cell triangulation). This likely means the store has to be designed to have no blind spots for the camera. That would mean no restrooms for example, and may make the technology harder to retrofit into existing stores.
Sensor fusion using a combination of LIDAR (laser based radar) and cameras for detecting and tracking products
Deep learning for product recognition and training. One insider has said that they can see 30% of a product and accurately recognize it.
Amazon makes the analogy to self driving cars which use a similar combination of AI/Cameras/and Sensors for example.
The store may or may not use RFID. The patents reference RFID but the video (and unconfirmed reports from insiders) to give any indication of RFID use. This is a big deal, as requiring every product in the store to have an RFID tag adds significant operational costs. This store is a much bigger game changer, if RFID tags are not required.
Although Amazon emphasized the huge customer experience benefit of not having to checkout. The store would also offer other advantages such as inventory accuracy (which would assist BOPIS, Out of Stocks, etc…)
The store doesn’t appear to use any form of digital price tags. This is interesting as Amazon’s previous store concept (Bookstore) uses online prices in the store (which change frequently). If the prices are truly printed on paper on the shelf, it’s unlikely Amazon is offering the same prices as it’s website.

Open Questions:

How well does the technology work (what edge cases can trip it up)
How well will customers adopt the new use case and which elements will be most compelling
How will the store handle families shopping together, parents with kids, etc…
How will Amazon address all the privacy concerns and issues with tracking shoppers in the store
Will the store carry alcohol and/or tobacco, how will it handle age verification
Does the store in-fact depend on RFID

Implications for the Industry

This is not the first self-checkout concepts. Grocery stores have been experimenting with full cart scanners for years, Apple has self-service checkout, Walmart has scan and go checkout, and startup Twyst has a “smart bag” that adds up purchases as you put them in the bag. What’s unique here is they aren’t just making checkout easier/faster, they are eliminating it. In fairness, IBM made a concept video with the exact same checkout experience in 2009, but it was based on RFID and never went further than the vidmazon has made it real, and is letting customers experience it.

All the technologies Amazon is using have been around (and in the retail industry for a while) but no other retailer has built this store. This is largely due to Amazon’s unique culture… failure is encouraged and Amazon employees are free to experiment. Most legacy retailers would quickly make a list of reasons not to do the store and move on, Amazon did it anyway.

Regardless of the specific technology, operational issues, scalability etc… customers are likely going to love the experience. Once they have experienced it, they are going to want and expect it everywhere. For the busy Mom, lower friction experiences usually win, and taking checkout from something that has to be done explicitly to something that happens implicitly is going to be very popular with shoppers. Once again, Amazon is setting the customer experience expectations that the rest of the retail industry must try to live up to.

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Episode 62 of the Jason & Scot show was recorded on Tuesday December 7th, 2016.

http://jasonandscot.com Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, 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.

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EP061 - Cyber 5 Holiday Recap 2016

Thanksgiving:

Thanksgiving generated $1.93 billion in e-commerce sales (Adobe)
Thanksgiving e-commerce sales from Desktop was up 17% (Comscore)
Macys was open on Thanksgiving, and had 16,000 people waiting to get in to it's flagship Harrod Square store
Target & Kohls set e-commerce sales records for Thanksgiving day
BestBuy experienced stability problems with it's website and had to throttle traffic

Black Friday

Black Friday generated $3.34 billion in e-commerce sales , 21.6% YoY Growth (Adobe)
Black Friday generated $1.2B billion in mobile e-commerce sales, first $1B mobile day ever (Adobe)
Mobile was 36% of sales (33% y/y growth) and 55% of traffic (Adobe), Mobile conversion 2.4% vs Desktop 5.5%
70% of Walmart traffic was mobile, 60% of Targets revenue came from mobile.
Black Friday e-commerce sales from Desktop was up 19% (Comscore)
10 million more shopped online than in-store this Black Friday
Store traffic was down
- down 3-4% y/y (Cowen)
- down 1% (ShopperTrak)
- down 5% (RetailNext)
Is Black Friday even relevant anymore?
Black Friday shoppers trash Nike Outlet

Cyber Monday:

Cyber Monday set the all time US record for e-commerce sales at $3.45 billion , 12.1% YoY Growth (Adobe)
Mobile 56% visits / 37% sales. Mobile Conversion 1.9% vs Desktop Conversion 4.3% (Adobe)
Macy’s had a significant site outage for 8 hours. William Sonoma, Victoria’s Secret, Express and Pier 1 also had interruptions.

IBM Realtime e-commerce dashboard

Conclusion

Black Friday has become a major online shopping day (only $110M smaller than Cyber Monday) and growing much faster (likely to pass Cyber Monday next year). Black Friday is the busiest Mobile shopping day of the year. Cyber Monday set the all time US record for e-commerce sales. Mobile traffic is over 50% over the holiday but mobile conversion is close to half of desktop conversion, but the conversion gap is narrowing. Store Traffic is down which likely means a mediocre overall holiday.

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Episode 61 of the Jason & Scot show was recorded on Thursday November 28, 2016.

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EP060 - Holiday Preview w/ Adobe's Tamara Gaffney

Tamara Gaffney is the Principal Analyst and Director for Adobe Digital Insights (ADI). ADI aggregates data from all of adobe's products and customers, and is able to provide insight about various markets. In particular, Adobe Analytics (formerly Omniture) is used by over 5400 e-commerce sites, representing 55m skus, and tracking $7.50 out of every $10 spent on e-commerce in North America.

Adobe is forecasting that e-commerce will grow 11% this holiday season (November and December). This is a lower forecast than a number of other sources:

eMarketer: 17% e-commerce, 3.3% all retail
Deloitte: 17-19% e-commerce, 4% all retail
NRF: 3.6% all retail (no e-comm breakout)
Comscore: 16-19%
Forrester: 13%

Tamara attributes the lower forecast to slower spending coming out of the US election. In particular heavily populated states like New York and California that strongly supported Hillary Clinton (who ultimately lost the election), are spending at a much lower rate than the forecast models would predict. So far this represents over $800M in lost e-commerce spending (as of Nov 17th), that Adobe believes will negatively effect the overall holiday season.

We also discussed mobile, omni-channel, singles day, and a variety of other interesting topics.

You can follow the Adobe Digital Insights website, and subscribe to their newsletter for frequent updates throughout the holiday season.

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Episode 60 of the Jason & Scot show was recorded on Thursday November 17, 2016.

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EP059 - Double11 Recap with Andrea Wasserman

Double11 (aka 11.11 or Singles Day) is the largest online shopping day in the world. A shopping holiday largely invented by Alibaba. This year Double11 generated $17.8B US GMV in sales (32% YoY growth). 82% of that GMV was via mobile devices. It took 5 minutes to generate the first $1B in sales, with a peak order volume of 175,000 orders/second. Cainiao, the largest shipping network in China processed 657 million delivery orders. For comparison, CyberMonday (the largest online shopping day in the US) generated $2.3b US GMV, and UPS will ship 700m packages for the entire holiday season.

Andrea Wasserman is a retail veteran (Nordstrom, Sole Society, Hudson’s Bay and 9West), who was in a guest of Alibaba’s in Shenzhen, China for this years event. You can read more from Andrea on her blog, CaptainCustomer.com

Episode 59 is the one year anniversary for the Jason & Scot show. Scot and I would very much like to thank all our listeners for your support and feedback. We are both very grateful.

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Episode 59 of the Jason & Scot show was recorded on Thursday November 17, 2016.

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EP058 - Puma VP of E-commerce, Chris Hardisty

Chris Hardisty is the VP of E-Commerce for Puma. We spoke with Chris about the history of Puma, the challenges of being a sales Chanel and the Brand Ambassador, Amazon, Demandware, and their state of the art fulfillment center leveraging the Autostore picking system.

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Episode 58 of the Jason & Scot show was recorded on Thursday November 3, 2016.

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EP057 - CDW VP and GM of E-Commerce, John Seebeck

John Seebeck is the GM of E-Commerce for CDW. We spoke with John about his B2C e-commerce background (Crate & Barrel) and the unique B2B challenges and opportunities for a firm like CDW. We spoke at the Shop.org digital summit 2016.

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Episode 57 of the Jason & Scot show was recorded on Monday September 26, 2016.

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EP056 - Steve Madden, President of E-Commerce Mark Friedman

Mark Friedman is the President of E-Commerce for Steve Madden.  We spoke with Mark about challenges of being both a brand and a direct to consumer operation.

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Episode 56 of the Jason & Scot show was recorded on Thursday October 27, 2016..

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EP055 - Uncommon Goods, CEO David Bolotsky

David Bolotsky is the founder and CEO of Uncommon Goods. We spoke with David about being a pure-play e-commerce site, and balancing business objectives with social values from the Shop.org digital summit 2016.

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Episode 55 of the Jason & Scot show was recorded on Monday September 26, 2016.

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EP054 - Amazon Q3 Results, Money2020, IBM World of Watson

Episode 54 is a news update:

Amazon

Amazon Q3 Earnings Call
Rumor Amazon could open 2000 grocery stores
Amazon capturing lower income shoppers
Amazon Fresh expanded to Chicago and Dallas
Cowen and Company: 50% of US Households could have Amazon Prime

Trade Shows

Money2020
IBM World of Watson
- Replay of sessions
- Watson API's

Other News

Customer expectations for fast shipping getting faster
Piper Jaffray Millennial study
2016 Deloitte Holiday study

Episode 54 of the Jason & Scot show was recorded on Thursday October 27, 2016.

http://jasonandscot.com

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Episode 53 is a news update:

New York Retail

Harry’s Corner Barber Shop
Google Pop-Up
Apple Shop-in-Shop at Macy’s

Amazon

Prime study from Cowen (49m in US prime members, generating $143b in value)
Music Unlimited
Pocket-sized drone patent
20% increase in seasonal workers
Grocery drive-up
General Availability of Dash
Apple suit claims 90% “genuine” apple product on Amazon is counterfeit

EBay earnings

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Episode 53 of the Jason & Scot show was recorded on Thursday October 20, 2016.

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EP052 - Talbots, SVP Ecommerce Rob Schmults

Rob Schmults is the SVP of eCommerce and CRM at Talbots, Rob is also the chairman of the NRF Digital Council. We spoke with Rob about the state of e-commerce and omni-channel from the Shop.org digital summit 2016.

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Episode 52 of the Jason & Scot show was recorded on Wednesday September 28, 2016.

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EP051 - Facebook's retail team members Nicolas Franchet & Maz Sharafi

Nicolas Franchet is the Global Director of the E-Commerce and Retail at Facebook, and Maz Sharafi is the Director of Monetization at Facebook. We spoke with Nicolas and Moz about all thinks Facebook, including which products in the Facebook ecosystem offer the most benefit for retailers, and how Facebook is evolving to serve retail from the Shop.org digital summit 2016.

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Episode 51 of the Jason & Scot show was recorded on Wednesday September 28, 2016.

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EP050 - Guests Mark Lavelle CEO, and Peter Sheldon VP Strategy at Magento Commerce

Mark Lavelle, CEO, and Peter Sheldon VP Strategy at Magento Commerce. Magento is one of the most popular e-commerce platforms in the world, and after being owned by E-Bay for several years, was recently spun out as a separate entity. We spoke with Mark & Peter about the current status and future plans for Magento at the Shop.org digital summit 2016.

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Episode 50 of the Jason & Scot show was recorded on Tuesday September 27, 2016.

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EP049 - Guest Milton Pappas, SVP Digital Marketing at HBC Digital Digital

Milton Pappas, SVP Digital Marketing at HBC Digital. The Hudson Bay Company (HBC), founded in 1670, is the oldest continuously operating business in North America. Today their brands include Saks Fifth Ave, Hudson's Bay, Lord & Taylor, Galeria Kaufhof, Gilt Group, and others. We spoke with Milton from the trade show floor at the Shop.org digital summit 2016.

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Episode 49 of the Jason & Scot show was recorded on Tuesday September 27, 2016.

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EP048 - Guest Brad Brown, SVP Digital Retail at REI

Brad Brown is the SVP of Digital Retail at REI. We spoke with Brad from the trade show floor at the Shop.org digital summit 2016.

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Episode 48 of the Jason & Scot show was recorded on Tuesday September 27, 2016.

http://retailgeek.com/podcast Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, 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.

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EP047 - Shop.org 2016 Day 2 Recap

Recap of the day 2 keynote: Jacques Panis - President of Shinola. Trends from the trade show floor.

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Episode 47 of the Jason & Scot show was recorded on Wednesday, September 28th, 2016.

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EP046: Shop.org 2016 Day Recap w/ Matt Shay

Recap of the day 1 keynotes:

Dr. Michio Kaku - Renowned physicist and futurist w/ Marc Maron.
Mike Amend - EVP Omni-channel at JC Penny.
Reshma Saujani - Founder of Girls Who Code.

Interview with Matt Shay, President and CEO of the National Retail Federation.

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Episode 46 of the Jason & Scot show was recorded on Wednesday, September 28th, 2016.

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EP045 - Apple & Amazon News, Listener Questions

Listener Questions:

Q: Is Amazon's long term play to stock inventory 1P or is it 3P - Large amazon seller

A: Both, they won't abandon 3P but in the short run space is constrained and Amazon will maximize it's value with unfavorable 3p terms.

Q: Enough hinting at the differences of opinion about mobile between Jason and Scot. Can you please spend some time explaining your different POVs. - Scott Silverman (industry pioneer)

A: Jason things improvements in the mobile experience will get mobile conversion rates to parity with desktop... Scot thinks mobile web will never be easy enough and users will find new was to buy on mobile devices.

Q I'm a 20 year old with amazon and eBay experience. I'm interested in Ecommerce, specifically around disruptive technologies. If you were in my shoes and could go anywhere in the world, what company or business would you dream to be part of? - Danny S

A: Consider an emerging opportunity such as Augmented Reality, On Demand Economy, etc... Given that you already have great seller experience and entrepreneurial experience, consider trying a larger company that owns a platform or service (Facebook, Google, Razorfish, IBM, Microsoft).

Q: Perplexed - are malls dying because of Amazon or are Amazon investing in malls? - Kasia Roth

A: There are about 120 top malls in the US (so called "A Malls"), they are thriving and outperforming the market. This is almost certainly where Amazon is looking to open pop-ups. You can usually tell an A-Mall by the presence of an Apple store and/or a Tesla store. Amazon wants pop-up shops here because they need to build awareness and demand for their branded hardware products like the Echo and Fire.

There about 1100 other enclosed Malls in the US... they are struggling, traffic is down 50% over the past few years, the anchor tenants (Macys/ Sears / JCP) are struggling and closing. At least 15% of these malls will likely close in the next decade. Amazon (and e-commerce) is one of the factors hurting these malls, but also urban population shifts, a shift away from the apparel sold in the anchor and specialty stores, and the fact that we are fundamentally over-stored in the US are all contributing factors.

Apple News:

Demand for iphone 7 (and particularly the iphone 7 Plus) was higher than anticipated
Advantages and disadvantages to the Apple Upgrade program
iOS 10 is live with ApplePay support in Safari and an iMessenger App store

Amazon News:

Amazon Alexa Dots are on-site for $49.99
A major annoyance with multiple Alexia Echo's in one house all hearing the same commands is being address with "echo spatial perception" (ESP)
Amazon now has a fulfillment center less than 20 miles from 44% of the US population

Other News:

Facebooks adds payment abilities to messenger
Google expands it's Express delivery service
Google pilots drone delivery service for burritos
7-11 pilots drone delivery service for Slurpees

This episode is sponsored by the National Retail Federation. The Jason and Scot show will be live podcasting at the NRF/shop.org digital summit 2016 which is in Dallas September 26-28th this year. We have a custom discount code for our listeners. The code is JASON&SCOT, you will get a 10% discount on the full conference fee. Visit retailsdigitalsummit.nrf.com to enter the code when you register for the show and we’ll see you there!

Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.

Episode 45 of the Jason & Scot show was recorded on Wednesday, September 14th, 2016.

http://jasonandscot.com

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EP044 - Iphone 7, Amazon News, Shop.org Preview

Apple announced the iPhone 7 & iPhone 7 Plus. Key features for shopper marketing:

Felica NFC Support means Apple Pay in Japan
Improved imaging offers new Augmented Reality and Visual Search possibilities, and dual cameras on the iPhone 7 Plus may eventually allow steroscopic imaging for accurate measurements and 3D scanning.
iOS 10 - Supports ApplePay in web-browser
iOS 10 - Supports commerce capabilities for Siri
iMessage now has an app store for commercial chatbots

Amazon News:

Amazon implementing ‘brand gating’ (and offering some exemptions)
Amazon drone spotted in the wild
Amazon constraining quantities they accept in FBA, and delaying processing
Dash buttons launch in EU (may not be legal)
Amazon basics/private label landing page
Amazon Bloomberg article about logistics
Amazon lowering shipping times in China
Distressed Brands moving to Amazon - Land’s End, Gap. Birkenstock moving off.

Shop.org Preview:

Jason emceeing a number of the keynotes
Live news summary podcasts from the showfloor
- Tuesday 9/27 2pm CST
- Wed 9/28 10:30am CST
Live podcast interviews from the showfloor
- Tues 9/27 1pm CST Brad Brown, SVP Digital Retail at REI
- Wed 9/28 9am CST - Rob Schmults, SVP E-Commerce and CRM at Talbots
- Wed 9/28 9:45am - Facebook
Jason and Scot breakout session
- Tuesday 9/27 3:30pm CST
- Covering Mobile Gap, Amazon, and Brands going direct

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Episode 44 of the Jason & Scot show was recorded on Thursday, September 8th, 2016.

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EP043 - Seth Beal, SVP Global Marketplace at Walmart eCommerce

Seth Beal, is the Senior Vice President, Global Marketplace at Walmart eCommerce (4th largest e-commerce site on the IR500).

In this broad ranging interview, we cover:

Seth's background and how he came to lead Walmart's marketplace
Walmart Marketplace
Amazon competition
Jet Acquisition
Omni-Channel implications for a Marketplace
Innovation

Book Recomendation: Sam Walton, Made in America

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Episode 43 of the Jason & Scot show was recorded on Thursday, August 25th, 2016.

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EP042 - News, Amazon Grocery Pickup

Amazon News

Rumor: Sellers are saying they are being notified by amazon they are going to stop doing FBA off amazon.
Project X - a New Grocery Pickup Store from Amazon
Recap of Jason's visit to Amazon Bookstore
Rumor: Amazon to launch spotify killer for echo

Other News

US Commerce dept said e-commerce grew 15.8%,
BestBuy beat expectations in Q2 thanks to online which spiked 24% y/y
Walmart beat expectations in Q2 - SSS up 1.6%, 7 straight quarters of traffic growth, e-com up 11.8%
At the same time Target struggled in Q2 with SSS declining 1.1% and e-commerce grew 16%
One Kings Lane sold for $30m, after being valued at $900m
Has Pokemon Go peaked?
Lily Pulitzer sale problems

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Episode 42 of the Jason & Scot show was recorded on Wednesday, August 24th, 2016.

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EP041 - Digital Payments Deep Dive

Key considerations when looking at Digital Payment Options:

Ability to support all the payment types your customers want to use (brands of cards, store cards, debit, ACH)
Size of vendors current user base and overlap with your customer base (will you be accessing an installed base of users from your vendor, or will you be onboarding your customers to the vendors platform).
Ability to integrate digital receipts and post purchase experience
Ability to integrate coupons, offers, promotions, and loyalty programs

Note: Jason incorrectly referred to Merchant Customer Exchange ("MCX"), the joint retail consortium creating it's own payment method, as "WMX". They have canceled their plans to launch their own mobile payment system and have reduced their staff, but they are still operating and pursuing other partnerships.

Google Handsfree - Payment pilot in San Francisco Bay Area, currently a separate effort from Android Pay

Checkout the @retailgeek instagram feed for a library of images showing the (confused) state of chip & signature in the US.

Money 2020 Tradeshow - October 23-26th in Las Vegas

PYMNTS.com website - Great source for payment industry news

Disclosure: Samsung provided the Galaxy S7 Edge smartphone that was used to test Samsung Pay and Android Pay.

This episode is sponsored by the National Retail Federation. The Jason and Scot show will be live podcasting at the NRF/shop.org digital summit 2016 which is in Dallas September 26-28th this year. We have a custom discount code for our listeners. The code is *JASON&SCOT*, you will get a 10% discount on the full conference fee. Visit retailsdigitalsummit.nrf.com to enter the code when you register for the show and we’ll see you there!

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Episode 41 of the Jason & Scot show was recorded on Tuesday, August 17th, 2016.

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EP040 - Jet.com and Dollar Shave Club Acquisitions

We've seen two major e-commerce acquisitions in the past 30 days.

Dollar Shave Club was acquired by Unilever for a reported $1B.

Jet.com was acquired by Walmart for a reported $3.3B.

We discuss both acquisitions, with their implications for the involved parties and the industry as a whole.

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Episode 40 of the Jason & Scot show was recorded on Monday, August 8th, 2016.

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EP039 - Interview Faisal Masud, CDO of Staples

Faisal Masud is the Chief Digital Officer at Staples. His career includes many of the marquee e-commerce companies in North America including eBay, Groupon and Amazon. In the interview, we cover:

His background, and e-commerce experience
His love of Cricket
Competing with Amazon
Role of stores
Marketplaces
Innovation

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Episode 39 of the Jason & Scot show was recorded on Monday, July 25th, 2016.

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EP038 - Pokémon GO DeepDive

Pokémon GO is a new mobile game sweeping the globe. It launched in the US on July 6th, and has already become the biggest mobile game in U.S. history, and has surpassed Twitter in active daily users.

This episode is a deep dive in what retailers and shopper marketers need to now about Pokémon GO. Including:

Background of the game
Overview of game concepts
How it impacts retailers
Advanced Concepts

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Episode 38 of the Jason & Scot show was recorded on Monday, July 25th, 2016.

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EP037 - Amazon Prime Day Recap

Amazon held it's second annual Prime Day on July 12th 2016. Scot and I break-down the good, the bad, and the ugly from this Amazon invented shopping holiday.

Amazon claimed it was it's biggest day ever (but was a bit vague about what that meant). Amazon claimed US orders were up 50% this year over last year (up 60% internationally). Last year Amazon said they sold $400M on PrimeDay deals, so assuming a similar AOV this year, that's $600M in sales.

Third party sales on Amazon were up 30%, reflecting the fact that it was still difficult for third parties to get in on the prime deals act.

Amazon did particularly well selling it's own hardware, such as the Kindle and Echo.

There were some early technical problems for some users, prompting the #Primefail hashtag.

Amazon didn't disclose numbers, but Prime Day was probably a major driver of new Prime subscriptions. Expect Amazon to promote all the other prime benefits hard over the next month (shipping deals, prime exclusives, music, video content, Prime Now, etc...) to help retain those new Prime members.

Several other retailers tried to piggy back on the Prime Day by offering their own "Black Friday in July" sales. Some evidence suggests that it was a higher volume than normal day for many other retailers.

Amazon is also eliminating many list (or MSRP) prices from it's site. A number of articles suggest that Amazon may be doing this to enable it to raise it's own pricing, but that's almost certainly NOT what Amazon is doing. More likely they are eliminating list prices in categories where sellers have artificially inflated list price, and to help Amazon avoid deceptive pricing practice law suits.

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Episode 37 of the Jason & Scot show was recorded on Wednesday, July 13th, 2016.

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EP036 - Interview with Neil Ackerman, Global E-Commerce Director at Mondelez

Neil Ackerman is the GM and Global eCommerce Director at Mondelez. He joined Mondelez from Amazon where he spent 3 years in the Fulfillment Buy Amazon (FBA) program. Our conversation covered a wide range of topics including: * Neil’s background * An overview of Mondelez and their e-commerce challenges and opportunities * How Mondelez works with Amazon * How Mondelez thinks about channel conflict * The evolution of grocery e-commerce and impulse purchases * Neil’s experience at Amazon, including the development of the “Small and Light” program.

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Episode 36 of the Jason & Scot show was recorded on Tuesday, July 12th, 2016.

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EP035 - E-Commerce Deadly Sins

A list of the 15 common mistakes we see in digital commerce:

Requiring the user to create an account to checkout (See $300M button, now known to be Best Buy)
Spending too much on Adwords vs PLA's
Not offering Free shipping
Not having a fully developed channel strategy
Not telling the shopper “when they will get it”
Overfocus on customer acquisition, not enough on retention
Not having a prominent Search box
Over emphasis on mobile app vs mobile website
Lack of social proof (rating & reviews, question & answer, user generated content
Omni-channel failures (not having accurate inventory)
Poor product photography
Too much checkout friction (too many fields, leaving header/footer on)
Pricing surprises in the checkout
Prominent Promo field in the checkout (See: Promo field is costing Sears $16M/mo)
Poor Pageload Speed (too many 3rd party tags, especially on mobile)

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Episode 35 of the Jason & Scot show was recorded on Wednesday, July 6th, 2016.

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EP34 - Interview with Michelle Grant, Head of Retailing at Euromonitor International

Michelle Grant is the Head of Retailing at Euromonitor International, a leading strategy research firm with a highly regarded retail practice. Her twitter feed, @EMI_MichelleG is a must follow for anyone interesting in retail.

We cover three broad topics in the interview:

Amazon internation expansion strategies and tactics
Cross-border Commerce
Mobile

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Episode 34 of the Jason & Scot show was recorded on Monday, May 16th, 2016, and published on June 10th, 2016.

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EP033 - On Demand Economy (ODE) Deep Dive

What is the on demand economy (ODE)?

Consumer behavior that is driving the adoption of on-demand economy

Mobile
Social
Bifurcation of Value vs Convenience
Zero friction

ODE Industry

GDP
ODE TAM
How big today
Investments
Sample co’s
1. Marketplace
2. 1. Homejoy
  2. Handy
  3. Amazon
  4. Referral - thumbtack
3. Referral
  1. 1099
  2. W2
4. Owned and operated
Business models

ODE meets retail - where and why do they intersect

Delivery
1. Instacart
2. Postmates
3. Deliv
4. Uber Rush
5. Curbside
6. Google Express
7. Blue Apron (ingredients)
  1. Doordash/orderup
  2. Postmates
  3. Uber Eats
  4. APN
8. Food delivery
Food/grocery
1. Enjoy
2. Michelin Onsite
Products that rely on services
1. Target - Instacart (but stopped curbside
  1. Etsy ASAP
  2. Everlane
2. 1hr delivery in metros:
Ecommerce/Retail + ODE Examples

Takeaways for retailers

Watch closely and don’t be blindsided
Test partnerships - 1hr delivery good example
If you have a product that naturally requires a service, self-disrupt
ODE will change consumer expectations and ‘feedback’ into retail

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Episode 33 of the Jason & Scot show was recorded on Wednesday, June 22, 2016.

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An interview with Greg Pulsifer of VF Corporation. VF Corporation is one of the largest apparel companies in the world, with over 25 brands including North Face, Vans, Timberland, and many others.

The conversation covers a wide range of topics including Greg's background, Amazon Strategy, Channel Conflicts, MAP pricing, Counterfeit products, and innovating new technologies including IBM Watson, and ApplePay.

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Episode 32 of the Jason & Scot show was recorded on Thursday, June 16, 2016.

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EP031 - Sid Jatia VP Digital at Under Armour

An interview with Sid Jatia, VP of Omni-Channel Digital at Under Armour.

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Episode 31 of the Jason & Scot show was recorded on Monday, May 16, 2016 at the ShopTalk tradeshow in Las Vegas. The episode was published on Monday June 13th.

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EP030 - Mary Meeker, Comscore, Demandware and Amazon News

Scot & Jason will both be at the IRCE trade show in Chicago this week. Scot will be leading a pre-conference workshop on Amazon, entitled "Amazon & Me" on Tuesday. Jason will be in the Razorfish booth #548, Scot will be in the ChannelAdvisor both #803 on Wednesday morning. Razorfish is hosting a cocktail party Wednesday night June 8th, from 9pm - 12pm at the rooftop LondonHouse on the Chicago river, please pre-register here if you'd like to join us.

Mary Meeker gave her annual "Internet Trends" presentation at the recode conference this week.

Comscore gave there "State of the U.S. Online Retail Economy in Q1 2016" presentation.

Jeff Bezos gave an interview at the code conference.

Amazon is also dominating Mobile E-commerce per an article in Business Insider.

Salesforce.com bought Demandware for $2.8B.

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Episode 30 of the Jason & Scot show was recorded on Thursday, June 2nd, 2016.

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EP029 - Interview with Amanda Greenberg of Ferrara Candy

We have a new facebook page!

Amanda Greenberg, Sr. Director, eCommerce of Ferrara Candy Company and former head of E-Commerce at Kind.

Topics discussed included:

Brand Lifecycle
Channel conflict
Pricing strategy / Map pricing
Amazon
Digital Impulse Purchases
The future

Episode 29 of the Jason & Scot show was recorded on Thursday, May 26th, 2016.

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Episode 28 – ShopTalk Recap

We have a new facebook page!

ShopTalk hosted if inaugural trade show May 15-18 in Las Vegas at the Aria hotel. Scot and I were both on hand to moderate panels, and share our feedback on the show this week.

Scot’s Panel: Brands Taking Control

Jason’s Panel: Virtual and Augmented Reaility Experiences for Retail

Five key themes from the show:

Role of the store going forward
Brands and where they fit into this new commerce world
Mobile transforming the shopping experience
Venture funding, startups, and innovation
How to survive in a world with Amazon

Links:

Andy Dunn Article mentioned: Digitally Native Vertically Integrated Brands (DNVBs)

Andy Dunn Encyclopedia of DNVBs

Episode 28 of the Jason & Scot show was recorded on Tuesday, May 24th, 2016.

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EP027 - Guest Jon Nordmark, Co-Founder of Iterate Studios

We have a new facebook page!

Jon Nordmark is one of the pioneers of the e-commerce industry. A former marketer at Samsonite Luggage, Jon left when his boss told him "no one will ever buy bags on the internet." Jon proved him wrong by founding eBags, one of the oldest pure play retailers. While at eBags, Jon launched 6pm.com (later purchased by Zappos). Most recently Jon is one of the co-founders of iterate.ai an innovation lab that helps match retailers up with innovative start-ups, which currently tracks over 130,000 startups.

Links:

Book Jon mentioned: Blur: The Speed of Change in the Connected Economy by Stan Davis

Episode 27 of the Jason & Scot show was recorded on Tuesday, May 17th, 2016.

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Blur: The Speed of Change in the Connected Economy

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EP026 - Augmented Reality and Virtual Reality Deep Dive

We have a new facebook page!

Augmented Reality and Virtual Reality Deep Dive:

A. Background - A look at what is driving AR/VR, what the differences between AR/VR are

B. The hardware players

Microsoft Hololens
Magic Leap
Oculus Rift
Samsung Gear VR
HTC Vive
Sony Playstation VR
Google Cardboard
- Matel ViewMaster VR
- Android VR
- New Google VR Exec - Amit Singh
Apple
- Rumors
- Patents
Amazon
- Job Postings
- Patents

C. Our take on the players and experiences

D. AR/VR and retail

Vendors
- Blippar
- Cimagine
- Marxent
Use Cases
- Store Design - TMobile
- VR In-Store / Out of Home
  - Google Project Tango / Aisle411 / Walgreens (Video)
  - Modiface - Sephora
  - Modsy - Home visualization
- AR In Home
- AR & VR Branding/Marketing
  - Toms Shoes
- VR In Home
- VR In-Store
  - TopShop Fashion Show
  - Lowes Holoroom

Misc Links:

Jason's Retail AR concept from 2010
Stanford Virtual Human Interaction Lab

Episode 26 of the Jason & Scot show was recorded on Thursday, May 11th, 2016.

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Episode 25 - Retail Apocalypse, NY Store Visits, and Other News

NY Store Visits:

Ralph Lauren - Magic Mirror (Oak Labs)
Barney’s - Chelsea
Macy’s One Below (and Etsy)
Samsung 837 \
LuluLemon Lab

Retail Apocalypse

TSA filed bankruptcy and is liquidating
Aeropostale filed for bankruptcy, closing 5 stores asap
WSJ Article: Retail is overbuilt
WSJ Article: Free shipping crowding out small businesses
Mall traffic is down
Promotions driving a race to the bottom

Misc News:

eBay Enterprise rebrands as Radial
Paypal onetouch working well
Target inventory tracking robot, Tally
Target and lancome first snapchat ecommerce ads
Bonobos - guideshop is working!

Upcoming events:

We’ll be both be at shoptalk May 15-18 in Vegas

Episode 25 of the Jason & Scot show was recorded on Thursday, May 5th, 2016.

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Episode 24 is a single topic podcast offer a deep dive into Amazon.

Details about Amazon most retailers don't know
Secrets to Amazon's success
Common Amazon misperceptions
Advice for competing (or at least surviving) in an Amazon world.

Episode 24 of the Jason & Scot show was recorded on Thursday, April 28th, 2016.

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EP023 - Billy May SVP Digital & E-Commerce at Abercrombie and Fitch

A weekly podcast with the latest e-commerce news and events. Episode 23 is an interview with Billy May, Senior Vice President and General Manager of Digital, eCommerce, and Corporate Development at Abercrombie and Fitch.

Billy is a 4th generation retailer and a pioneer in retail digital transformation. Today he is responsible for digital and e-commerce for one of the worlds most recognized brands.

Our conversation covers a wide range of topics including:

Billy's career matriculation, and current responsibilities
Some of the key strategic initiatives that A&F is focused on
What some of the key challenges and opportunities that brands face today
How A&F balances the healthy tension of brand goals and commerce goals
A&F Mobile strategy and philosophy
How A&F things about omni-channel
International Expansion
Social strategy and perspective on ROI

Episode 23 of the Jason & Scot show was recorded on Tuesday, April 19th, 2016.

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EP022 - Facebook F8, Channel Advisor Catalyst, Magento Imagine, and Echo Dot review

Facebook F8:

Announced the messenger bot platform, included several early e-commerce examples. Most reviews of the early shopping bot experiences were poor, but Jason remains optimistic about the platform. Danny Sullivan sends Mark Zuckerberg flowers via Chatbot.
Open-source 360 VR camera
VR selfie-stick social VR

ChannelAdvisor Catalyst:

Launched ChannelAdvisor Product Intelligence for Brands which gives brands actionable insights about online assortment, merchandising and pricing across multiple online channels to ensure a consistent customer experience.
Expanded Where to Buy product to include new Buy Local functionality for brands allows consumers to find your products on retailer websites and nearby stores.
ChannelAdvisor CEO, David Spitz, predicted that "Amazon GMV will surpass Walmart's GMV (w/o grocery) this year."
eBay's Hal Lawton announced that eBay is returning to TV advertising which will be based on seasonal marketing campaigns.
Googles Vineet Buch announced that "Purchase on Google" (Googles BUY button) is current deployed with 25 merchants, and that is likely to grow throughout the year, and open to all retailers by the end of 2016.
Walmart partners with ChannelAdvisor to enhance it's marketplace.

Magento Imagine

Magento enterprise cloud edition - running on AWS
2.0 app store - Magento Marketplace
committed to quarterly releases

General News:

General
SpaceX falcon lands on drone ship
Scot reviews the Echo Dot and likes it
Poshmark raised $25m
Alibaba investment in Zalada to enter South Asia
Gene Munster - Piper Jaffray - Amazon survey showed that 70% of high income ($120k+) households are Prime subs
Victoria's secret cancels catalog
Amazon focus on grocery they may become a top 10 grocer by 2019Staples to turn stores into co-working space w/ Workbar
Bestbuy testing deliv for same day delivery

Upcoming events:

Alphabet/google earnings - April 21
eBay earnings - April 26
Amazon earnings - April 28
Shoptalk May 15-18
Google I/O - May 18

Episode 22 of the Jason & Scot show was recorded on Thursday, April 14th, 2016.

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EP021 - Local SEO, Amazon Shareholder Letter and eBay Seller Release

ChannelAdvisor March Same Store Sales Data:
It was another good month for Google with Google Shopping/Product Listing Ads showing strong growth at 41.8%, which seems to have come at the expense of eBay which was flat.

Scot has noticed very aggressive placement of PLAs and a number of experiments with new ad units, such as a new 12 pack PLA.

Amazon News:

Prime Now is coming to Web – Something we suggested should happen in Episode 18.
Amazon Adding External Payment Partner program
Amazon Acquires Image Analysis Startup Orbeus
2015 Amazon Shareholder Letter is out (and is a must read). This year, Amazon became the fastest company ever to reach $100 billion in annual sales. Also this year, Amazon Web Services is reaching $10 billion in annual sales. Prime Now took only 111 days to launch it’s first market from the inception of the idea.

eBay announced their first Seller Release of the year – Spring 2016 seller release

Upcoming events:

Catalyst (April 11-13) in Las Vegas – Jason will be presenting.
Magento Imagine (April 11-13) also in Las Vegas
Facebook F8 – April 12/13
Shoptalk May 15-18
Google I/O – May 18

Episode 21 of the Jason & Scot show was recorded on Wednesday, April 6th, 2016.

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EP020 - Guest Kevin Ertell, SVP Sur La Table

News:

Amazon Dash buttons get an update
Next Generation Apple Store opens in Memphis, TN
Lululemon new pants wall
Facebook Messenger Getting a Wallet

Upcoming Events

F8 - Facebook Developer Conference April 12+13
Google I/O Developer Conference May 18-20

Guest

Kevin Ertell, SVP Digital Sur La Table
@kevinertell

Cart Talk - a great example of social proof being employed by Sur La Table, getting feedback immediately after purchase.
Sur La Table is working on new store detail pages with Brickworks Software.
Sur La Table is about to launch a new visual configurator for Table Top products, using Mix & Match from Fluid. You can can be one of the first to try the new experience here.

Episode 20 of the Jason & Scot show was recorded on Thursday, March 31st, 2016.

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Adobe Summit:

Jason attended the Adobe summit.

Adobe announced a Cross Device Attribution “Device Co-op”
From the retail supersession, Sucherita Mulpuru shared the Forrester mobile forecast,$35B in mobile sales, $977B mobile influenced sales. So for every dollar purchased on a mobile device, another $28 are influenced.
Adobe demoed an entirely unrealistic retail use case "REI Shopping Bag" based on technology from Twyst.
Razorfish debuted a new set of tools for creating B2B commerce experiences using the Adobe stack, called Razorshop B2B

Bronto Summit

Scot attended the Bronto conference, and gave a talk on "E-Commerce and the On-Demand Economy"

Other News

Alibaba Group Holding Ltd. announced Monday that it sold 3 trillion yuan ($463 billion) of goods through its online shopping websites in the past year ending in March, a milestone for the company. When their fiscal year ends on March 31, they likely will surpass Walmart as the largest retailer in the world
Macys thinks amazon can’t compete
Microsoft Chatbot “Tay” - taken down after abuse
Apple Pay is coming to the mobile web

Online Grocery - there is some conflicting opinions about the future of online grocery.

HSBC Analysts were bearish - "We remain unconvinced of long-term viability of home deliveries for grocery” David McCarthy
While a Morgan Stanley study predicts online grocery is growing fast.

Episode 19 of the Jason & Scot show was recorded on Thursday, March 24th, 2016.

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EP018 - Target "Goldfish", Instacart, and Amazon Peeves

Amazon News:

This week is the 10th anniversary of AWS. Stratechery has a great piece about how Amazon leverages AWS with it's novel strategy for scale
Journalists touring Amazon Fulfillment centers, noticed that Amazon uses video shaming to discourage theft. You can take your own tour of an Amazon FC by signing up here.
Dropbox announced that they are (mostly) moving off of AWS and developing their own storage.
Walmart has released OneOps, their platform for deploying cloud based infrastructure apps, such as Walmarts own e-commerce platform. Apps can be agnostically deployed across Microsoft Azure, Amazon AWS, Rackspace, and OpenStack.
Amazon has VR guru Avi Bar-Zeev, and filed for a patent on room based headset-less VR. Amazon also filed for a patent around using selfies for payment.
Amazon private label suits have been favorably reviewed by business insider.:

Jason & Scot discuss our Amazon peeves:

Prime now not well integrated website
Amazon Echo App Store (Skills) is just a 37 page list of apps.
Delivery drivers, pantry GUI, and customer service edge cases could all use improvement.

Non-Amazon news:

Ultra announced surprisingly strong earnings, and plans to open 100 new stores, and dramatically expand brand boutiques.
US Dept of Commerce released it's February retail sales data.
Brands are now paying instacart for deliveries.

Target project "goldfish"

Target is running ads for engineers for a mysterious new project, codenamed "Goldfish". The job listings specify "You must have a deep understanding of the fundamentals of retail marketplaces, social commerce and influencer networks," which caused Jason & Scot to speculate about what the project might be.

Scot is in Florida this week for the Bronto conference, giving a talk on "E-Commerce and the On-Demand Economy"

Episode 18 of the Jason & Scot show was recorded on Tuesday, March 15th, 2016.

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EP017 - JCP, Gap, CostCo, URBN News, February Same Store Sales, Search & Category Page Usability, and Upcoming Events

JCP does not plan to close stores

Marvin Ellison, JCP CEO:

“What’s more, Penney has noticed that when it closes a store, online sales in the surrounding area also fall because awareness of the J.C. Penney brand falters”

“Ellison last month told investors that shoppers coming in to pick up an online order typically end up spending another 35% on that trip”

Was Ron Johnson right? Scot thinks he didn't have enough time, but that his experiential strategy was right on. Jason thinks trying to transition from promotional pricing to everyday low prices too quickly was a big mistake.

Dicks Sporting Goods Earnings

Dicks is finally transitioning from their outsourced e-commerce site to their own site. They previously outsourced it to GSI (now E-Bay Enterprises) with a very long contract. Jason mentioned that most GSI clients are finally bringing their web experiences in house.

There is a funny easter egg in the last GSI sites. They all have a few "Test SKUs" which are actually for sale on the site, such as the “Norm M TEST PID - DO NOT TOUCH EVER!!!” T-Shirt. You can do a google search, and see all the sites that have this particular test product.

Costco Earnings

What's keeping Costco CFO Richard Galanti up at night:

"Everybody in the world never wanting to leave their house and only typing stuff to order and get it at the front door”

He went on to say:

"We want to do everything possible to get them in the store and not just come and pick something up," Galanti told analysts, explaining why he didn't expect to roll out in-store pickup anytime soon. About e-commerce is general, he said, "some out there would argue it's about time. But we're getting to it."

Jason and Scot agree that Costco is way behind on omni-channel e-commerce and it's likely to catch up with them.

Urban Outfitters Earnings

Gap Earnings

Gap same store sales were down 4%, but E-Commerce was only up 1%!?!?! (vs an industry average 15%). Gap CEO Art Peck ran e-commerce until February of 2015, but now they seem to really be struggling.

February ChannelAdvisor Same Store Sales

Amazon “Style Code Live” is a new daily 30 minute fashion/style show distributed via the web featuring shoppable products. Is this a threat to QVC/HSN?

Scot and Jason have a discussion about usability on e-commerce search result pages and category pages. How many results should you show per page for search and category pages?

Upcoming Events:

Bronto Summit, Miami 3/16 - Scot will be speaking
Adobe Summit, Las Vegas 3/21-3/24 - Jason will be attending
ConversionXL Live, Austin 3/30-4/1 - Jason will be attending
Demandware XChange,Hollywood FL, April 4 - Jason will be attending
Channel Advisor Catalyst Las Vegas, April 11 - Jason will be speaking
ShopTalk, Las Vegas, May 16 - Scot and Jason will both be speaking
IRCE Chicago, June 6 - Scot will be speaking

Episode 17 of the Jason & Scot show was recorded on Wednesday, March 9th, 2016.

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EP016 - Mobile World Congress, Target Earnings, Sports Authority Chapter 11, and Book Recommendations

Mobile World Congress recap:
Mobile Connect - http://www.gsma.com/personaldata/personal-data-programme
Echoss - http://www.12cm.co.kr/en/12cm
Viewport fragmentation

Q4 results continue to come in:
Target
Comp sales up 1.9 vs Walmart 0.6%
Signature Categories up 6%
Traffic up 5 consecutive quarters
Q4 E-Com Up 34% vs Walmart 8%
30% of orders fulfilled from stores (40% OOS in FC)
E-commerce up 31% for Full Year (vs 30% last year)
Free Shipping vs. Walmart $50 threshold
Further reading:
http://fortune.com/2016/02/24/target-walmart-holiday-shopping
http://fortune.com/2016/03/02/target-ecommerce-2
http://www.wsj.com/articles/target-says-online-sales-surge-tied-to-store-inventories-1456348233

MercadoLibre:
Gross Merchandise Volume rose 86% in local currencies, mainly driven by Argentina and Brazil. Marketplace revenues grew 63% and non-Marketplace 79%. Total revenues accelerated to 69%, all in local currencies.
Total payment transactions grew 79% to 25.4 million, while Total payment volume grew close to 100% in local currencies, reaching $1.5 billion. MecardoEnvios (MercardoLibre's payment platform) penetration close to 70% in Brazil, and 50% considering only the countries where the shipping solution is available. 2016 forecast - 23% GMV growth, caused by headwinds in BR - transition to next blurb.

Sports Authority Files chapter 11
Closing 140 stores (1/3 of total)
Expect / trying to come out the other side in better shape
$1b in liabilities $50k in assets http://money.cnn.com/2016/03/02/news/companies/sports-authority-bankruptcy/index.html

Amazon

Brita filter with self-replenish via Dash
Amazon Prime Now reaches 48% of the US population

This week we want to introduce a new segment called Jason and Scot recommends:

Originals is by Adam Grant with a foreword by Sheryl Sandberg

The Amazon Marketplace Seller That Says It Has "the Colombian Cocaine" of Algorithms
By Burt Helm on Slate
http://www.slate.com/blogs/moneybox/2016/02/26/pharmapacks_makes_over_70_million_selling_miscellaneous_items_on_amazon.html

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future
by Ashlee Vance

Extraordinary Experiences: What Great Retail and Restaurant Brands Do
by Denise Lee Yohn

http://retailgeek.com/podcast

View Details

EP015 - eBags co-founder Peter Cobb, Google SERPs and Amazon

Peter Cobb, co-founder of eBags and e-commerce pioneer shares his insight and learnings from 17 years of growing a profitable pure-play e-commerce site

Our discussion includes, the founding of ebags, shop.org, the future of pure-plays e-commerce sites, brands going direct, private label and the evolution of mobile.

Google has made changes to it's SERPs which will effect many e-commerce sites.

Amazon opened it's 11 fulfillment center in the UK / Amazon increased FBA prices

Amazon raises shipping threshold for non-prime to $49

Amazon private label apparel is already live (Franklin & Freeman, Franklin Tailored, James & Erin, Lark & Ro, North Eleven, Scout + Ro and Society New York)

http://retailgeek.com/podcast

Full Transcript:

| Announcer: | Welcome to the Jason and Scot Show, your source for the latest news and trends in the ecommerce industry, featuring host Jason Retail Geek Goldberg, SVP of Commerce at Razorfish, and Scot Wingo, founder and Executive Chairman of Channel Advisor. | | Here is Jason and Scot. | | Jason Goldberg: | Welcome to the Jason and Scot Show! This is episode 15, being recorded on February 23rd, 2016. I'm your host, Jason Retail Geek Goldberg, and as always, I'm here with your cohost, Scot Wingo. | | Scot Wingo: | Hey Jason, how are you doing? | | Jason Goldberg: | I am doing terrific. I am out here in beautiful Palm Desert for the eTail West trade show. | | Scot Wingo: | Awesome! I could not make it. We have a lot of folks at Channel Advisor out there. Give me some highlights. | | Jason Goldberg: | Yeah. A bunch of interesting speakers. The CEO from Barnes and Noble, CEO from US Auto, there's a great presentation from Lane Bryant. One trend that we've talked about a little bit on this show that kind of rubbed me the wrong way is always the case in these shows. There's a lot of conversation about Amazon as the great enemy and how folks can compete with Amazon. There's guys up on stage suggesting that we all move off of AWS, because that's somehow going to make them less competitive with us. | | Frankly, I felt like I heard from multiple CEOs at this show that tried to put Amazon in this pigeonhole of primarily being a dominant price competitor and their only competitive advantage is price. Therefore, their solution to competing with Amazon is to compete on customer experience or customer satisfaction or curation, or all these other things. As I'm hearing those things, I want to throw something at the stage because I feel like that's way oversimplifying how significant a competitor Amazon is. I feel like they're excellent at a lot of categories of business that the CEOs are taking for granted. | | Scot Wingo: | Yeah. Yeah, I run into that a lot. A lot of people feel like, sure, Amazon does compete on price, but what about the shipping infrastructure? The other one I don't think people bring up enough is selection. Amazon has over 400 million items available. I would challenge any of those CEOs to kind of think about that, and how do you deal with that level of selection, because if you want it, pretty much Amazon's going to have it. | | Jason Goldberg: | Yep. Frankly, I don't think they do exclusively compete on price. I think they're very strategic about price, and they compete on price when it's in their economic interest to do so. They recapture margin when the opportunity presents itself, and I think we have a couple news items this week that sort of highlight that. | | Scot Wingo: | Yeah, absolutely. What else is new at eTail? | | Jason Goldberg: | One thing I did want to mention, not necessarily eTail news, getting a bunch of buzz this week is that Google has made some pretty fundamental changes to the search results. This will probably not come as a surprise to any of our listeners, but Google is still a very significant source of traffic to most ecommerce sites. Most ecommerce sites are getting in the ... Mid-20% of all their revenue is coming from organic search results in Google. | | This week, they announced that they would stop showing ads on the right hand side of the search results. Superficially, you'd read that and go, "Oh, they're decluttering the page, they already didn't have ads on their mobile page. That's not necessarily a bad thing." By the way, we're also going to add a fourth ad on top of the search results for highly commercial terms. Traditionally, they would put up to three ads on top, and then they'd put a few ads beside. Now what they're saying is, they'll have three or four ads on top, they'll have no traditional pay-per-click ads on the side, but they will still have the Google product listing ads, which we've talked about on the show are kind of the fundamental ads unit of ecommerce. | | You add all that up, and essentially what they're saying is, "We're adding more ads and we're making them more prominent on the page," and on many popular browser resolutions, four ads on top means you actually won't see an organic result above the fold. This is potentially alarming news for some folks that rely on organic traffic. I'm not sure it's an earth-changing thing in and of itself, but it's definitely something to be aware of. | | The one-two punch is that Google also gave us a hint last week that they really don't like cluttering up the search results with too many what we call "rich snippets." Rich snippets are another super important feature to ecommerce sites. That's the visual stars that you might see on a product result that shows you what your rating is or pricing information or inventory information. Some of these extra pieces of information that you can embed in your product detail pages and then Google shows in the search results, when those extra bits of information show up, the click-through rate on that search result is much higher, so ecommerce sites are really careful to take advantage of all those rich snip features. Google has always decided how frequently to show it. It seems like they're turning down the amount of rich snippets they show quite a bit. | | Most alarmingly, the review, the number of stars, has disappeared off a very significant number of organic search results in Google. Some people are frankly speculating that it's a mistake or a bug, and that Google didn't intend to be so drastic, because it is so prominent, but at the moment, the organic search results are getting pushed further down the page and the rich snippets are coming off of the page, which means that a lot of ecommerce sites are going to see a meaningful decrease in their organic search traffic. | | Scot Wingo: | Just so listeners understand, how much do you think this really kind of is going to impact? Because we've kind of crossed over the 50% mobile. Mobile didn't already have, doesn't do four ads to the right. Is it more just the snippets will be on mobile? | | Jason Goldberg: | Yep. The snippets absolutely fit both. The rating snippets are huge. Traditionally, you'd see, like, 70% of all the click-through are going to be on that first organic result, and then it exponentially goes down after each additional result. If the second result has rich snippets and the first result doesn't, the second result can actually get more click-through than the first. That's a significant driver of click-through, and if they're going to permanently turn off those stars, that's going to be a game changer, especially for sites that really rely on organic traffic. The site you immediately think of that this would have a prominent derogatory effect on is someone like an eBay. | | Scot Wingo: | Yeah. Yeah, they've been in this kind of battle with eBay for a while, so it would not surprise me. | | I know you always love to hear Amazon news, so I have a couple things there to share. If you're Retail Geek, I'm the Amazon Fulfillment Center Geek, and they slipped in a little announcement this week that they're building a smallish, only a million square foot fulfillment center in the UK. It's in Colville and Leicestershire. Along this lines where they're talking about job creations around fulfillment centers, they announced they're going to have 500 jobs over three years there. A fun fact, this is the 11th fulfillment center in the UK, which is about the same number of fulfillment centers that Walmart has in the US. They're very dense in the UK with fulfillment centers. | | What's interesting is most of the things they've done in the UK recently have been kind of for deploying into London. Some of its Prime Now type stuff, or same-day delivery. This is a big new footprint for the UK. | | Also in fulfillment center news, and this didn't get a lot of press, so I don't know how well this is known out there. The only area I am aware of where Amazon raises prices, everything else Amazon does lowers prices, especially if you do Amazon web services and that kind of thing, is Fulfillment by Amazon. Even in the marketplace, they haven't really changed the prices since the beginning of time, I think. With FBA, what they constantly do is kind of tweak the economics. There's a couple pieces in there. One of them is the per-package fee that they charge for FBA. It's going to have an increase from, I think it's $0.30 to $1.07, and on average, it looks like, from a model I've seen, it'll be about $0.45 an item increase. | | That's one of the fees. The other one is called a storage fee. If you have inventory at FBA, it doesn't sell after x days, I think it's 30, then you get kind of the stump where they take the dimension of the volume of what they're storing for you and have a fee. That's going up. It's pennies, it's like $0.02 to $0.04, but that's kind of times the volume that you have. That's another one where they're constantly working the economic model to incent sellers to have the right behavior of focusing on faster-moving items that are in FBA. That's interesting. | | As a result of that and some comments that have kind of come out in management meetings, what I've seen a couple Wall Street analysts do is raise their fulfillment center buildout this year from kind of middle single digits like seven to kind of mid-double digits like 15. It's going to be interesting to see how that comes out. We already have ... This UK one, I believe, is the first one that's been announced this year, so it'll be interesting to see what that looks like. | | Another thing I'm sure you probably saw is, for those people that aren't on Prime, you can still get the free shipping. It's not two-day shipping, but the free Super Saver five-day shipping. They raised that from $39 to $99, now. Then, the last- | | Jason Goldberg: | You mean $49? | | Scot Wingo: | Yeah, sorry. $49. | | The last piece was, we had talked about this last week, actually. This is kind of how fast Amazon moves, where there was news that Amazon may be considering doing private label in fashion. It turns out they are actually out with it. They have some fashion private label brands out there, and they're kind of a mouthful. Let me see if I can do this without stumbling through it. Franklin and Freeman, Franklin Tailored, James & Erin, Lark & Ro, North Eleven, Scout + Row, and Society New York. What is that? One, two, three, four, five, six, seven. Seven different private label brands. Some of these are men's apparel, some women's apparel. Very interesting that there was rumors they were going to do this, and now it's actually out there. You can search, we'll put it in the tidbits on the website. You can actually go search these brands and see what's available there, which I thought was pretty interesting. | | Jason Goldberg: | Yeah. I think that was a pretty big revelation to a lot of folks that were following the rumors that they might do it, and then, you know, bam, surprise, there's already a ton of skews on the site a lot. I look across all that Amazon news, and my two big takeaways are number one, raising the shipping threshold is interesting. Amazon shipping costs are a very meaningful portion of their business, they're like 12% of their revenue, and so it certainly looks like they're trying to make a profitability move by recovering a little more shipping fees. The big thing is, this just seems like another very overt effort to push more people to Prime, and I suspect it's going to be effective in doing that. | | Raising the rates on the FBA is interesting. To me, that's inevitable, that as Amazon grows its business and has more strain on those fulfillment centers, that shelf space becomes more valuable. They just need to charge more to maximize it. I think if you're a seller, you probably shouldn't expect this to be the last increase that you see there. | | Scot Wingo: | Yet when I talk to customers, it's still very, very competitive to any other 3PL. Even when you kind of look at a multi-year model, you have to kind of look at it over two or three years because of the accounting. It ends up being relatively cheap compared to having your own fulfillment center. | | Jason Goldberg: | Yep, and you get the huge kiss of being Amazon Prime-eligible. | | Scot Wingo: | Yeah, and as they do Prime now and whatever else they're going to do around all these things, you ride along with all that investment, which is ... I don't know how you quantify that, but it's a pretty good value. | | Jason Goldberg: | Yeah. I think the one exception I've heard there is if you're in a category that's predominantly oversized or unusual-sized items, that the economics get a little more challenging on FBA because they've really optimized the pricing model for their typical package size. | | Scot Wingo: | Yeah, that drayage fee, because it's volumetric, really hits you hard with oversized items. Yeah, absolutely. | | Jason Goldberg: | Did Etsy have their earnings call this week? | | Scot Wingo: | They did. It was actually today. A couple highlights out of the call ... Etsy went public and had a great public offering, and then has really struggled since then. A lot of it was mobile. They had a huge challenge when mobile kind of accelerated right around their IPO. It was kind of like Facebook had the same problem, but Facebook recovered pretty quickly. It looks like Etsy is seeing the light in the tunnel. They had pretty strong results. They exceeded expectations. Then they actually came out and said, "For the next three years, we're going to have 20-25% growth," so kind of pounding their chest, feeling pretty good about the future. I think a lot of it is around ... I think they feel like they've solved some of their mobile challenges. | | A couple of other interesting metrics: 1.6 million sellers. I think that's interesting, because Amazon reports 2 million sellers. Etsy definitely has more seller density than in Amazon, but because it's handmade, you would need that, right, because you can only handmake so many things. I thought that was interesting. 24 million active buyers. The Amazon question did come up on the call, and the CEO said that, "We" ... By this, I mean Amazon has launched a competing category and seems to have Etsy in their crosshairs. The CEO at Etsy said, "We have no reason to believe that any of the competitors are having an impact on us." For the 4th quarter, Etsy had $750 million in GMV, which, when you look at the run rate, that was a Q4, so it's not pretty fair to really do this, it's not going to be their run rate forever, but it's interesting to think that they're at about a $3 billion run rate. | | I remember in the early days of Etsy, everyone in ecommerce was kind of like, "God, what a niche. This handmade stuff, maybe that gets to be $50 million." It really kind of shows ... I think what's interesting about Etsy is, some of these things that seem like niches and they're going to be really small, when you look at them on a global basis, they can be pretty big. $3 billion in homemade items, that blows me away, and they're anticipating it growing 20-25% for the next three years. They see a path to $4 billion or $5 billion, which I think's pretty fascinating. | | Jason Goldberg: | It's almost like pure play is not really in fact dead. | | Scot Wingo: | Yeah, yeah, yeah. That's a good little kind of teaser for what's coming next. | | Jason Goldberg: | Well, let's get to the really exciting news. We have a guest today. | | Scot Wingo: | That is true. It's episode 15, we're really settled in here at the Jason and Scot Show, so we thought we'd do something you and I had talked about way before episode 1, which was have a special guest. I think it's going to be a new tradition here on the Jason and Scot Show if it goes well, and I'm sure it will. I'm thinking every third show or so, we'll have a special guest to kind of help mix it up. | | Today, we're really excited to have as our first guest ... I don't want to put it out there yet, I'm going to build some suspense. This is someone I've known probably for at least 12 if not 14 years. He's one of the founding fathers of ecommerce. If there was a Thomas Jefferson or maybe Alexander Hamilton of ecommerce, that's who we have on the show today. It's kind of a privilege to have someone that has been in the industry for so long but is still right on the cutting edge. He started a company back in '98 that is one of the successful pure plays that's out there. | | If you haven't guessed yet, it is Peter Cobb from eBags. Welcome, Peter. | | Peter Cobb: | Hey Scot, hey Jason. Thanks for inviting me. You guys are doing a great job. | | Scot Wingo: | Thanks. We're super excited to have you here. I tried to keep your intro kind of brief. To start out with, maybe tell us a little bit about how you got into ecommerce. You're at eBags still and you've had an interesting journey there, so maybe a little highlight of that. Let's just start with that, just to orient everyone that hasn't known you for 15 years, on how you got into the industry and what you do on a daily basis. | | Peter Cobb: | Yeah. Back in 1998, well, prior to that, there were a couple of us that worked at Samsonite. I led the marketing for Samsonite, and a couple of us execs at Samsonite saw what was going on with people buying books online, music, gardening equipment, toys, etc. We just said somebody is going to own and pioneer the category that we knew so much and love, and that's luggage and handbags and backpacks, business cases, etc. We peeled off from Samsonite in 1998. | | Actually, kind of took the idea of my cofounder, John Nordmark. John took the idea to the president of Samsonite and said, "Hey, why don't we buy some domains, discountluggage.com, and so forth?" Back then, you could just make up a domain and you could buy it. We owned about 25, actually. The president of Samsonite said, "I get email, I can't imagine anybody buying luggage from an email. Go back to your cubicle." John called me up and said, "Let's do this. I think it's ripe," and both of us were into the internet and watching what was going on. That was in 1998. | | We pulled it together. It was our own money for the first six months or so, and then we actually went the traditional route with angels and to friends and family, and raised some money from Silicon Valley and raised $30 million in 1999. That's the last time that we've raised money. We haven't had any down rounds since then. It's been cashflow positive, really, since 2002. | | Scot Wingo: | Cool. That's around the time when Amazon did their IPO. They were in '97, if I recall. Was that kind of an impetus for you? Was that kind of the wake-up where you said, "Hey, we need to do something. There's this bookstore going public. This is kind of going to be a thing." | | Peter Cobb: | Well, you know, I was just explaining to somebody at eBags today about the early days. There was cooking.com, garden.com, mothernature.com, and Amazon was there. Amazon's really the only one that's alive today. eToys. Really just kind of across the board, we just looked at it. Back then, Amazon was just books. We felt like in our space, right out of the gate ... Our model is somewhat unique from a lot of these guys in that we don't want to own product. Our model is drop ship. We knew at Samsonite, who's the global luggage leader, at Samsonite, 75% of our orders out the door were three pieces or less. Somebody owns a piece of luggage at Aspen Luggage, they sell a garment bag. We were selling them one piece at a time from Samsonite. | | We convinced Samsonite and many other brands to ship directly to our customers. Took a little bit of time and some arm-twisting, but here we are today with 70,000 different bags and accessory items from 700 brands. Obviously, from a cashflow model, and that's primary to why we're alive today, is somebody buys on eBags.com, we get the cash immediately from the credit card, and pay our brands. It could be 45 days, 60 days, 90 days, whatever's negotiated. You get positive flow versus having a warehouse, and you imagine a warehouse with 70,000 individual units, but then you need to go 105, 100,000 deep on each. It would be $100 million of inventory we'd have to keep, and we wouldn't be alive today. That was really one of the key decisions early on. We were one of the first to drop ship, and actually, it isn't that common. You have marketplaces today which accomplish the same thing. | | Scot Wingo: | You guys start a company, you raise money, it's all exciting, you're driving into the future, and then the dotcom bubble burst. What was that like? I lived through it, and it was quite painful. I can only imagine what it was like for you guys. What I recall is people are going out of business left and right. Pets.com and all these other things were just flaming out. You guys not only survived but thrived. What was that like, getting through that nuclear winter? | | Peter Cobb: | It was brutal. It was really tough, because one side of you is saying we're homesteading, we need to claim our territory. Back then, portals were so big, and somebody like AOL could commit $1 million for something the size of a postage stamp, but you would own luggage or handbags on AOL and you just had to occupy that space because so many people came through some of those old portals. You did burn through cash. | | Not only was it dotbomb, but for us, what really hurt, I think even more than dotbomb or as much, was the 9/11 tragedy. Just didn't have a lot of people traveling after that. We all were cocooning. Of course, they shut down airlines, and people just said, "You know what? I'm just going to stay home for a while." That really hurt our sales. From a positive standpoint, it really highlighted the fact that we need to diversify. We cannot survive by just being a luggage or even travel goods company. That got us into backpacks for school, women's handbags, fashion accessories, and watches is a big category for us now ... Branch out in business cases and business accessories. | | In a way, it kind of poked us a little bit to say, "Okay, you're thinking too narrowly here." It's been an amazing 17 years, and in fact, just last week, we announced we passed 25 million bags sold, which is really a nice accomplishment. We're really proud of that, because if that was a chain of stores, it'd be hundreds of stores nationwide that do that kind of business. | | Scot Wingo: | For our listeners, can you give us a little idea of the scale of eBags? I don't want you to divulge any confidential information, but maybe your IR rank or whatever you're comfortable letting us know. How big is the scale of eBags at this point? | | Peter Cobb: | Yeah. We're 110 people, and as I said, 25 million bags. I mean, something that I'm just as proud of is that we have 3.2 million customer reviews, so it's a big part of the DNA of eBags.com, of leaving that virtual Post-It note. From the IR, we're in that kind of 100-150 range, kind of depending on the year, but we are a pure play, which is a critical part of this. We don't have stores to get that PR and help offset some of the expenses. We don't get traffic in the door, we don't eat. It's a constant survival for us. | | We just had a meeting today with our executive team, and the primary message was, "We need to stay hungry, we need to be paranoid." This thing can change. You mentioned it, Scot, early. There are things that can happen that are out of our control that can pop up. Cash for us, cash is king. We have no debt. We don't plan on raising any more money. We've got to really live within our means. There's a lot of people out there doing some crazy things from a marketing standpoint, or willing to lose tens, if not hundreds, of millions of dollars. That's an area where we're just ... I actually love it, and we bring people on that accept that challenge and relish it. It's pretty competitive right now. | | Like you mentioned, I could have said that in any of the past 18 years. | | Jason Goldberg: | Peter, I wanted to ask you a question. You mentioned that you're a pure play, and you've been a pure play for more than 15 years. It's interesting, because a lot of the talk today is pretty negative on pure plays. I mean, you've got Scott Gallaway at L2, and he's got a whole campaign around "Rest in Peace, Pure Play," and you've got a bunch of these buzzy new companies like Warby Parker or Bonobos or Nasty Gal or, even I think Blue Nile now is opening some stores. It's a big trend that these pure plays are now shifting to stores. Then, of course, you have a couple of huge pure plays that flamed out. You have the fab.com and Gilt just sold for a disappointing valuation. | | I think there's this buzz that, "Hey, pure play isn't a long term sustainable model, or maybe it used to be, and its time has come." It always drives me nuts when I hear that, because I feel like you're the best example, but there's a bunch of people in your class that are long time pure plays that have been able to grow based on their own revenues. I'm just curious, what's your take on the whole viability of the pure play model? | | Peter Cobb: | Well, obviously with what we do, it depends ... Honestly, it depends on the category, it depends on products, it depends on factors such as ... We're fortunate in that for the most part, people don't need to try it on. It's a piece of luggage, it's a kid's backpack, it's a soccer bag, on and on and on. Our return rate is very low. Really, I think it lays out well for us to be a pure play in that we really feel like we want to be ... I mean, to have 70,000 bags and accessories on our site, and we'll probably pass 100,000 products in the next 120 days, and venture out into even doubling that in the next year or two. We really feel like we want to be a house of brands, as well as something ... For us, it's travel and fashion. If you want a bag or something related to travel and the travel experience, go to eBags. | | No store can have the assortment and selection that we have. Picking a brand, one of our better brands is Tumi. It's a premium luggage and business case line. We'll carry 500-plus pieces of Tumi, and a typical store, because a physical space in luggage or business cases, they may carry ten pieces of Tumi, maybe 15, if they're lucky, and we have over 500. That's where we love where we are in the space. It lines up quite well, I think, for long-term viability. There's really no store out there ... I mean, obviously you've got the bookseller in Seattle that does a great job. They've got a broad and vast assortment, but for what we do in our category, there's a lot of brands, actually, that don't want to go down that path, let's just say the marketplace path. We demonstrate to them that we're a specialty store interested in travel and fashion, and that really resonates, especially with brick and mortar having some challenging times right now. | | The last thing I'll say is, within our space, retail is still around 10% online, so 90% brick and mortar, and yet, you have stores closing every month in our category. I think it's only going to accelerate. We really love where we're positioned, and I think a lot of categories can say the same thing. To your point, Jason, on a brick and mortar, it just isn't ... You have to really focus on something, and focus on something that you're excellent at. I don't think brick and mortar is an area for us today that we should be venturing into. I think there's so many other opportunities out there within the ecosystem of what we're already working on. | | Scot Wingo: | Cool. One follow-up on the pure play thing. Amazon's invested hundreds of millions of dollars, if not billions of dollars, in their fulfillment center, and you guys don't have a fulfillment center. Does it ever feel like doing the drop ship thing, that you don't have control over that customer experience, and that's a negative? | | Peter Cobb: | You know, I think it gets down to are you getting products to people in a timely manner. With our, we have 700 brands, as I mentioned, the average product leaves that door in 0.7 days. Within a day, our goods are out the door. We actually spent some time ... One of our board members did a tour of Zappos, and came back ... At the time, it was 17 football fields, 800 employees, and came back and said, "It's unbelievable what they have. We should move to that model." I remember in the board meeting saying, "What would we gain? It already goes out the door in six hours. Okay, so, we would gain maybe two hours, if we're really, really good." | | For us, that part of it ... I think that's the primary part of this. The other part of it is, a lot of our products, they actually are shipped from Asia in the boxes that gets delivered to the customer. In a lot of cases, just thinking in a piece of luggage, we just put a label on it, our brands do, and then ship it to the customer. It's in a box that may say Tumi, Samsonite, or Delsey. That experience is ... It probably could be better to your point, Scot, but I think we just have to make some choices and go that route. | | Now, that being said, I will say our number one brand on our site is actually our own private label brand at eBags. It's 24% of units and 20% of revenue. It's unbelievable. I mean, we're product guys when we started eBags. That's what we did at Samsonite, and we just love product and we just have really told the team, "Make product that you would want to carry." Actually, right as we started the business, we got into it, so it's not like it's the last couple years. In a lot of ways, it's really built out this competitive mode. That's a big reason why we're as profitable as we are and that we have some kind of staying power within the space. | | Scot Wingo: | That's good to hear, because Jason and I both get asked by a lot of what I would call multi-brand retailers, in other words, like a Macy's or something that doesn't really have their own brands, what one of the best strategies they can do. I always go back to private label. Earlier in the show, in the news segment, we talked about some of the stuff Amazon's doing there. It's interesting to hear that that's such a large part of what you guys are doing. | | Unsponsored ad here. I love the cubes, the packing cubes you guys do. My wife loves to organize, and she's a huge fan of the eBags packing system there. | | One other thing I just wanted to kind of introduce. You introduced me to shop.org. I had been going to the summit, and really enjoying the summit. When I was earlier in ecommerce, though, I didn't really kind of understand that there's an organization behind the summit that we all go to in the fall. You introduced me to that, and you were one of the early folks there. All three of us are on the board there. We'd love to hear how you got involved with shop.org, and how you describe it to folks. | | Peter Cobb: | Yeah. It's ... You know, this industry that we're in, online retail and digital retail and so forth, it is made up of some amazing people, of some amazingly bright people. It's also, we're undergoing so many challenges, and it's changing so fast. You were talking about chat commerce and even now with what's going on with Facebook Messenger and Snapchat and so forth. Sometimes you need a network of people that you can reach out to to compare notes and share stories and really pick their brain. We're really good at drop shipping, so I'll field some calls from people interested in getting into drop shipping. Other people maybe have more expertise in social media marketing or some other areas. | | The thing about shop.org, it's really a trade association made up of a community of people within the digital retail space that gets together several times a year, but also shop.org provides thought leadership pieces, whether it's a think tank, white papers, research, several conferences ... Also works on behalf of retail as part of National Retail Federation, NRF, as a team in Washington DC, working on issues important to all of retail, not only digital, with things like trying to promote legislation to limit patent trolls and things like that. | | The big part of it is providing a space where you can learn from others but also network, and, as always happens, you end up developing pretty strong friendships as well, which makes it even more enjoyable. | | Jason Goldberg: | I'm the new guy amongst the three of us, I think, at shop.org, but I would just absolutely echo that one of my favorite parts is the camaraderie and the opportunity to network and share in an adult beverage with folks that face a lot of the same challenges and opportunities every day that we do. Inevitably, when you get together with other ecommerce folks and you start having conversations, the topics pretty quickly turn to the things that are keeping you up at night or the new trends that you're most excited about in terms of upcoming opportunities. I wanted to ask what was kind of front and foremost in your mind right now, in terms of new trends or new challenges in the ecommerce space? | | Peter Cobb: | Well, I think a challenge that all of us are facing, and I know we're all getting our arms around it, but it is a challenge, and that's the move towards mobile and smartphones. It's not a surprise. We all use them in our personal life. I think retail, frankly, was caught flatfooted. You have OpenTable and Uber and so many other apps that were built for the smartphone, and I think with retail ... I mean, two years ago, our traffic would have been single digits coming in on smartphones. You knew it was coming, the wave was coming, but there's just so many other things popping that you need to put your resources towards. We're really actually really happy with our mobile experience, but it's kind of one of those ... You just need to continue to invest and spend the resources, and when you think you've got it figured out, something else comes along. | | Right now, a great example is, the big obstacle in mobile is payments. Credit card and so forth. Obviously, Paypal is a great provider helping with mobile. It's a big part of our mobile efforts, but there's other wallets popping up, Chase Pay and Masterpass and Visa, etc. I know you guys have talked about that in the past. That's a big challenge, of, okay, who do you partner with, where do you play on a mobile device, how does that all work when you only have so much space and so much real estate? | | I think with mobile is, I know in the past, you guys have talked about average conversion rates, and if you just said a PC is 3% or 4%, and tablets 2.5-3%, and mobile is 1%, if not 1.5% ... You know, as your traffic continues to grow towards mobile, and it could be up 50%, 60% year over year, well, that means your weighted average conversion rates are under some pressure. A lot of times, you think about 100 people come into your site and only one or two purchasing. Well, with whether that's Google or Facebook or whatever affiliate partner you have, that's pretty expensive traffic, if you're only getting a 2% conversion. That's a huge challenge that I think a lot of people are facing. | | The other part of that that people don't talk about is that usually, you know, on a PC, we'll get 1.5 units per order, and on mobile, it's really kind of one and done. It's about 1.1. You have your average basket size lower, so conversion rate's lower, basket size lower. You really need to just kind of think through how to optimize mobile. I think we're all slowly figuring it out. Our mobile sales ... Actually, our traffic last month up 40%, but our mobile sales are up 70%, so we're going in the right direction, really feel good about it. We always are thinking if we're redesigning parts of the site, it's mobile first, because then PC will all fall behind. | | Then, I think another trend that I think is interesting is, you've got brick and mortar as well as brands developing websites, and those are obviously competitors, but I'm going to focus just on the brands. I think an interesting trend is that the brands are realizing, hey, building and maintaining and keeping a website up to speed is not for the faint of heart. It's super-expensive. You need expensive personnel. The whole resource requirements of a brand. I mean, it's one thing for a retailer, they're kind of familiar with the direct marketing model, but for brands that went into it maybe two, three, five, eight years ago, and now are realizing what I was just talking about with mobile and all the resources required, it's really a challenge. Then, they're under pressure for their own brick and mortar stores that many brands bid off. Now they're looking at us and, "Gosh, I got my website, should I update that? Should I send people into my stores? Should I have returns into stores?" I think a lot of retailers as well as brands are really being challenged right now. Those are some key challenges and opportunities I think we all face. | | Jason Goldberg: | Yeah. Peter, the brands going direct is really interesting, because frankly, a lot of my clients are those brands that either already went direct, or maybe they're in a category of retail that's kind of a digital laggard, and they're just now talking or thinking about going direct. | | It's funny, because my opening line is usually, "Hey, you're always going to be the worst place to buy your product. You're not going to have any of the third party accessories or add-on sales that consumers want. You're going to be the only retailer on the planet that perfectly complies with [MAP 00:43:33]. In general, there's a small subset of users that want to buy direct from you, and it certainly makes sense to capitalize on those users, but that you're not going to materially hurt your wholesale partners' business." I'm just curious, from your perspective, is that how you feel? When Tumi goes live and starts selling bags from their own site, which I think they did a couple years ago, did you look at that as, "Oh, a cute effort from Tumi," and maybe it taught Tumi to be a little more sensitive to some of the content issues that make them a better partner for you, or did you feel like that was a material threat to your business? | | Peter Cobb: | Well, we actually ran Tumi's website for them globally, US, UK, Germany, and Japan, between 2002 and 2010. We had a great eight-year run with Tumi, and then they said, you know, as it was growing, they said, "You know what? It's time for us to take it on our own." I think even ... it's been a challenge. It really has been a challenge, like a lot of brands. They have to decide, does the website exhibit the brand essence, or are we in this to have ecommerce and generate revenue? There's that continuum they have to decide, and I think for a long time, Tumi kind of came out of the chute and said, "We need to promote the brand Tumi. This is part of going public," and so forth, but then realized, "Gosh, our sales are not nearly as strong as we thought they could be." Plus, building out a global ecommerce effort, multiple countries, and then you've got changing marketing messages in 15 or ten or 20 different sites, languages, marketing messages, all the same night, it's pretty challenging to do that for somebody like a brand like Tumi. | | To your original question, we just think of that as, "Hey. Tumi's going to get into it," or Samsonite, or so forth. Sure enough, I know they're great partners of ours, and we actually talked to them about some of the challenges. I know they're scratching their heads just like some others say. By the way, this was something, especially when you're talking about global websites, it's something that's pretty challenging for them. I think in a lot of cases, they end up, somebody at the top ends up saying, "You know what? We need to go back to making great product and not pretend we're a technology company." Then they call you, Jason. | | Jason Goldberg: | We're more than happy to pretend to be a technology company on their behalf! | | Peter Cobb: | Exactly. | | Scot Wingo: | Cool. We're up against time, but I have two kind of lightning round questions to ask you. One of the things that's fun about ecommerce is there's always some weird thing that you would have never guessed. For example, when we look at our data, we always see these weird correlations between people buying things that you would never think those would go together. Any insights like that, like from your time at eBags, of strange insights that you've found of consumer behavior? | | Peter Cobb: | You know, I think ... There's something happening now which is, I think, pretty interesting, in that the power brands are not doing as well as one might think. What I mean by that is, think about anchor store brands, brands you would find in a Macy's, Nordstrom, Bloomingdale's, etc., are really, I think, undergoing some pressure. You've seen it in the designer handbag category with Michael Kors and Coach posting some numbers which were pretty challenging over the last three to five years. What happens, then, is you've got ... The thing that I love about it is, you've got kind of these small brands that, given the light of day, actually do really well. On our site, it could be Osprey backpacks, Fall Raven backpacks. Very cool products that now then we can show to the world of, "Hey, you probably wouldn't know where to find this in Chicago or LA or San Francisco, but you can click a button and have this sent directly to you." | | Scot Wingo: | Cool. We call it, on the Jason and Scot Show, we call it "the hoverboard effect," kind of the disimportanting of brands. One last one, and I know this is hard to answer quickly. You don't survive 17 years in business without really investing a lot in the culture of your business. I've been to eBags and seen ... You invest personally a lot of your time as a founder into the culture of the company. If there's listeners out there, and maybe they're an entrepreneur or an intrapreneur, any quick tips on how you keep that culture and calcify it and all that kind of thing? | | Peter Cobb: | Well, I think it starts with once you lock into a solid business model, then you hire great people, don't skimp on people. It's all about getting people that have a history of success, and then letting them run with, of course, guidelines. I think on our end, we were super transparent, we reveal all P and L, we reveal cash on a monthly basis and say, "Look, we're all in this together." Every employee gets stock ownership in the company, so we're all owners, and we think in terms of, "Treat the customer as you would want to be treated." You know, we just have things, too, I mean, a lot of people do, with dogs in the office and things like that, but just really making it a great place to work and making it fun. We're there for ten, 12 hours a day in a lot of cases, and just having it be ... Have it be a place that is fun. Not so serious, but people that are willing to work hard and have fantastic teamwork. You just have to make it fun for people, otherwise there's a lot of other options out there in the world. | | Jason Goldberg: | Very cool, Peter. I know you're based in Denver, Colorado. Is it safe to say you're always on the lookout for great ecommerce talent? | | Peter Cobb: | Absolutely. It's really challenging, I think, finding over-the-top talent. I think it's one of the biggest challenges. It is not necessarily somebody that gets straight A's in school. It's why I even talked about a history of success, of doing things that maybe are not right down the fairway all the time. It's okay to be a little bit quirky, because we're doing things that people have never done before in this space. You need people willing to take risks. You can't slap the wrists if they fail. They fail a second, third, fourth time, yeah, absolutely you need to sit people down, but you want people that are willing to get out there and make a calculated risk. | | Jason Goldberg: | That makes perfect sense, Peter. Listen, that is all the time we have for today, but I want to remind everyone that our guest today has been Peter Cobb, who is one of the co-founders of eBags. You can follow him on Twitter. I think your Twitter handle is @PeterCobb, C-O-B-B. | | With that, I will say until next week, happy shopping and thanks very much to all our listeners. | | Scot Wingo: | Thanks Peter. Thanks, everyone. | | Announcer: | You've been listening to the Jason and Scot Show. For all the latest news and trends on ecommerce and shopper marketing, subscribe to us in iTunes and please leave a review. |

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EP0014 - Walmart E-Com, NYC Retail, Amazon Apparel, and Amazon Flex

Walmart Earnings

Nordstorm Earnings - Rack cannibalizing Mainline stores?

New Neiman Marcus Long Island Flagship

New Barney's NYC Flagship

SnapChat Commerce

Shopify Chat Commerce - Shopify Shopkey

Amazon Apparel / Amazon Diapers - Mama Bear

Amazon Flex - An uber killer?

Microsoft Hololens Ted Demo

Metavision.com Ted Demo

http://retailgeek.com/podcast / / Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, 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.

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EP013 - SuperBowl, VR, Future of Malls, and why responsive design is a bad idea

Recap of Superbowl Ads. Including ads from Amazon, Paypal, and Dollar Shave Club. Digital Calls to action in ads. And mobile engagement with those ads.

Are stale fashion trends curtailing woman's apparel sales, or is it another example of Amazon eating the world?

Google, Apple, and Alibaba all make new investments in VR.

January Same Store Sales data from Channel Advisor looks encouraging.

Amazon rumors about logistics services continue "Project Dragon Boat". Amazon Prime Now comes to Raleigh, North Carolina and Scot is their first customer.

Michael Kors expresses concern that Mall Traffic is likely to continue declining. Jason shares that the US is way "over-stored" and that the US has 5X the amount of retail space per capita as UK.

We talk about why Responsive Design is a bad idea for e-commerce and mobile apps are a lower priority than the mobile web.

http://retailgeek.com/podcast

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EP012 - Amazon Retail Stores, Google Earnings, Subscriptions, and Marketplaces.

http://retailgeek.com/podcast

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Episode 11 covers a recap of numerous Q4 earnings calls including E-Bay, Facebook, Alibaba, Amazon, Starbucks and Microsoft. Also Uber, Macy's, Walmart news.

The Jason & Scot Show. Podcast about e-commerce and digital shopper marketing.

http://retailgeek.com/podcast

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EP010 - NRF Big Show Recap, Amazon Updates, and new Google PLA format

Robots!

Smartshelfs

What's the future for beacons?

AR/VR

Electronic Shelf Labels and Dynamic Pricing

NRF Whispers - Was this a tough holiday season for Brick & Mortar?

Are shipping rates going up (even though gas prices are at historic lows)?

Amazon assortment is growing dramatically.

Amazon is the top brand in the US (per YouGov study)

Amazon launches it's new replenishment service

Google tests a new PLA format

http://retailgeek.com/podcast

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EP009 - recap of CES, a preview of NRF, L2 #RIPPurePlay event, Amazon fulfillment and tax news, and Holiday wrap-up.

/ / http://retailgeek.com/podcast

/ / Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, 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.

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EP008 - Chat Commerce, Gen Z, New Retail, and Walmart Payments.

Scots top 5 predictions for 2016:

2016 will be the year of Chat Commerce
Amazon will make some big moves in logistics
Jet will prove the naysayers wrong, and get acquired
Google will make a bold move this year in e-commerce that surprises everyone
Alibaba’s attempts to bring Singles day to the US will fail

Jason top 5 predictions for 2016:

CPG’s and grocery will make major moves into DTC e-commerce
Re-Orgs. Retailers will get rid of stand alone e-commerce departments and integrate e-commerce into core business functions; brands will do the opposite and establish new e-commerce departments.
Mobile gap will narrow to be at lest half of desktop conversion and some retailers will see 50% of their e-commerce revenue come from mobile devices
A major retailer will get sold in distress (Macy’s/Sears/9 West/J Crew/Bon Ton/Neiman Marcus)
2016 will be the year of the cloud for E-Com platforms, Cloud products like Shopify and Big Commerce will continue to grow and even get more enterprise clients. Niche solutions like Cloud Craze (running on force.com) will get traction, and SAP, IBM, and Oracle will work hard to solidify their e-commerce cloud offerings.

Things that (sadly) aren't likely to happen in 2016:

Buy buttons from social networks won't catch on. Social commerce will continue to struggle.
E-Commerce sites won't get much better at personalization (and most suck now).
We won't see many great examples of truely integrating content and commerce
Omni-Channel retailers won't close the gap with Amazon
No single new Payment technology will gain major traction.

Scot got to visit the Amazon store, and check out how Amazon's merchandising translates to brick and mortar.

Jason is at CES. There are many more products supporting interoperability this year, such as Ford integrating with Amazon Echo, Toyota supporting IFTTT, Roku and Apple set-top boxes offering universal search integrating multiple content sources.

/ / http://retailgeek.com/podcast

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Episode 7 covers an update on brick and mortar holiday sales. The top 5 online shopping days. Shipping woes for UPS, Fedex, and Jet. Is e-commerce at a tipping point in-terms of overtaking brick and mortar sales? And a discussion about how large Amazon really is.

http://retailgeek.com/podcast

oin your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, 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.

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Episode 6 covers Commerce in Korea, a Holiday Update including the shape of holiday peaks and the risk for holiday shipments, Gilts potential sale and the overall state of Daily Deal Sites, Nordstrom E-commerce investment strategy, Hoverboard fire problems, and a few Amazon and Alibaba tidbits..

http://retailgeek.com/podcast

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EP05 - Chat Commerce, Gen Z, New Retail, and Walmart Payments. Episode 5 covers Chat Commerce including consumer behaviors in Eastern & Western markets, a discussion about Generation Z, new retail concepts including Birch Box store, Target Wonderland Popup, and B8ta store, and the announcement of Walmart's new mobile payments system.

http://retailgeek.com/podcast

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Complete show notes are available at http://retailgeek.com/podcast

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Episode 3 - The Holiday Edition covers:

Comscore State of the U.S. Online Retail Economy Q3 w/ Holiday Forecast

Channel Advisor Same Store Sales, 3rd week of November results

Adobe Holiday Forecast

Other Holiday Benchmarks

IBM, Google, Deloitte, Forrester, Custora, Demandware, Monetate

Amazon

NY times article sales the long game is working, as retail turns profitable

Will Amazon becoming a shipping company?

News

Forrester Analyst Peter Sheldon joins Magento

Walgreens Digital Head Sona Chawla joins Kohls

Dollar Share Club raises a new round

Jet.com raises a new round

Links:

Visit http://retailgeek.com/podcast for a complete list of links.

Hosts:

Scot Wingo, Founder & Executive Chairman Channel Advisor / @ScotWingo

Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish / @retailgeek

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Episode 2 covers the Merrill Lynch Bank of America Internet/E-commerce 10th Annual Holiday Pricing Survey, a discussion about the future of retail, and how robots are improving the retail experience.

Links:

http://www.bloomberg.com/gadfly/articles/2015-11-16/retail-earnings-slowing-internet-sales-aren-t-helping

http://www.with.me/retail/shopwithme-store

http://www.lowesinnovationlabs.com/innovation-robots/

http://www.simberobotics.com/

http://amazorobotics.com

http://amazonfctours.com

Hosts:

Scot Wingo, Founder & Executive Chairman Channel Advisor / @ScotWingo

Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish / @retailgeek

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Episode 1 covers singles day, the personalization paradox, Channel Advisor same store sales report (SSS), holiday promotions trends, and digital wallet news.

Links:

11.11 Day http://www.alizila.com/alibabas-shopping-festival-rakes-in-14-3-billion/

Forrester digital business forum https://www.forrester.com/DIGITAL+BUSINESS+2015/-/E-EVE6702

Channel Advisor SSS - http://www.channeladvisor.com/blog/?pn=scot/holiday-2015-same-store-sales-first-week-of-november-results

Money2020 - http://www.money2020.com/

ShopTalk - http://www.shoptalk.com/

Hosts:

Scot Wingo, Founder & Executive Chairman Channel Advisor

@ScotWingo

Scot's Channel Advisor Blog

Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish

@retailgeek

Jason's Retailgeek.com Blog

The Jason & Scot Show - E-Commerce And Retail News: Recent Episodes

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