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
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 151 of the Jason & Scot show was recorded on Monday, October 29th, 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.
[0:25] Welcome to the Jason and Scott show this episode is being recorded live from the grocery shop trade show in Las Vegas on Monday October 29th 2018 I'm your host Jason retailgeek Goldberg,
unfortunately Scott is unavailable for this episode so you get twice the Jason for half the usual cost but to make up for it
we have some great news we have two great guest for this episode returning to the show
third timer Samir bhavani is the vice president of consumer insights at 10:10 data welcome back to the show Samir.
[0:58] Thanks for having me Jason it's good to be back for the third time.
[1:01] It's a it's a rare full of people that have made it three times so we expect you to continue to be a,
bassador for the shows you've been and then joining us is a first-time guest Tim Madigan is the vice president of e-commerce Commerce at Tyson Foods.
[1:19] Thanks for.
books that are not listening to every episode of the show and shame on the three of you that are doing that Sammy was on show 103 which was our Amazon private label show and then you came back for one,
talk shows if I'm not mistaken which I think was episode 125 and so folks would probably hurt a little bit,
background but remind everyone exactly what it is that 1010data.
[1:48] Yeah sure so I think many of you guys are familiar with tents and we've been around for over 20 years now what we do is,
we help companies take big data and turn them into basically smart insights using a very powerful cloud-based analytical platform.
[2:05] They go in like more specifically you have visibility into like how consumers make purchases consumers make on some of the big platforms that are not very open themselves.
[2:18] ESO a great way to kind of distill things down is that we have a very nice lens into how consumers are spending their discretionary income so it's things like you are people buying Huggies or Pampers right Fiji or hints are they taking Uber or Lyft.
[2:33] Very cool and so we will hear more about that throughout the show and then Tim of 1 ways we always like to start the show is share a little bit of background about how you how you sort of matriculated in your career to this current role.
[2:46] Sure yeah I started my career with Procter & Gamble and kind of came up with your traditional sales marketing and did that for about 12 years and while at P&G I done had the opportunity to,
work with Walmart as they were trying to figure out consumables e-commerce they wanted to sell diapers and beauty products online diapers.com was becoming a thing Amazon was getting into the space so Walmart realize they needed to,
going to start selling products and I was tasked with the opportunity to leave that relationship for Procter & Gamble and so over the course of five years,
and we built the team I built a business from United basically zero to a hundred million dollars and just really learned,
from the very early stages and consumers e-commerce what the effective ways to do e-commerce online wear for consumables then had the opportunity to go to SC Johnson.
[3:43] And work with us in Johnson and creating an overall strategy build out a team going to put the foundational elements in place to,
do e-commerce across a company it was a really great learning experience for me and also really help icj kind of take that first step into digital income,
in about 2 years ago had the opportunity to come to Tyson at that time grocery e-commerce was just beginning to be a thing,
and I'm Krogers in Walmart and Amazon Raw,
looking to Tyson as a major food supplier to understand you know how to how is the space going to evolve unfold online and expected Tyson to really have a seat at the table to be as strong,
partner in that and so I was asked to come Tyson to help create that capability for the company.
[4:32] Very cool,
so am I'm so jealous I feel like every place you've ever worked at Super familiar you never have to explain what your company does,
the people in an elevator when you work for a goofy agency that changes his name every week you don't necessarily have that luxury,
in your P&G days was that sort of like that,
business units or was it like winning a particular product family.
[5:14] So gay a straight question so it was very early and that,
we had an amazon.com team which was probably to three people and Seattle and then we had one e-commerce person that was sitting in Cincinnati banging on the brand managers door saying there's a thing called e-commerce coming we better figure out how to do it,
so I was one of the very first teams outside of that we didn't really have a corporate approach yet,
I'm so very early days I was sitting on the couch typing out content forms and really figure out merchandising marketing strategies cuz we just didn't have a Playbook yet,
within about 2 years though doesn't take PNG long they very quickly created at centralized capability and brought in the central team,
created at corporate strategy and capabilities so that other folks like myself out in the field we're working with retailers had that sort of enabling Center of expertise that were supporting.
[6:15] It is funny one of the things I have observed in a lot of companies is like that initial Amazon team like they almost always they started out as the interns right.
[6:27] Let you know most Junior people in the organization got assigned to this like relatively meaning less account and then obviously like as it's it's grown in prominence it's now,
like one of the most significant roles in all these companies and so it's a it's an interesting Evolution to see those interns grow up to rule the world and then,
sort of fun I want to dive into your rolling your scope at Tyson but before I do that I want to jump back to Sammy and I know you guys just published this
size of digital grocery report and not I think you can download it for me website so I'll put a link to that in the notes but I'm wondering if you can tell us a little bit,
like what that report was an and maybe share some of the cool insights.
[7:07] Yes sir so I'll finish for some of the insides as we're talking and says to bring some things up but,
one of our one of our analysts her name is Julia Mello author author the report and it's just Fantastic look into will work on the rise of online grocery and it's very time we obviously right being here at 8,
grocery shop talk to grocery shop show and some of the things that that we looked at were,
how successful are places like Peapod or Walmart grocery right versus some of the other more traditional players and you know some of the stats that popped out one is like just the growth of it is,
outlandish Rye were seeing over 30% year-on-year growth and in specifically in the online grocery space,
and we Define that is in a different than buying something from you know Amazon.com or target.com you know it has a lot to do with,
cooking class with places like instacart Etc and one of the findings that was kind of unique is that people who do shop,
online grocery 10:10 to spend a lot more money than the general populace,
which is certainly good news I found some of those like as the touchpoint changes the behavior change.
[8:22] Changes the behavior changes.
[8:25] So fascinating just around Orlando but it's been really into.
[8:30] Interesting to me to see you like foods that don't sell as well in store.
[8:33] Yeah it was not obvious.
[8:38] Up to me but like sometimes these in.
[8:39] Is there a shopping cart around the store with a giant.
[8:46] And be seen by their neighbors but that but when it comes to having nothing loaded right in your trunk.
[8:51] It's get.
[8:52] Get the big thing I've been in,
so that point is very important right the ice cream thing and dodging items the other thing to is the ability for people to discover items if they wouldn't ordinarily purchase,
partially for the same reasons also because online gives you an opportunity to be marketed to write whether it's like a vegan burger for example,
yeah I think there's dent above a challenge and an opportunity in the different marketing vehicles that are available.
[9:17] Digital Lake but let's.
[9:18] Zoom in a little bit on.
[9:21] I want to think I was interesting to me.
[9:23] Ecommerce in your title which is very near and dear to my heart so I was like that but I thought you can have very different scope a different company.
[9:32] So can you talk maybe a little bit about what what it means in texting.
[9:35] Yeah so are primary go to market is through retailers and so the key for us is you know we've spent,
decades in creating category management and Shopper Marketing in all of these other,
analytics and skills on how do we optimize the in-store experience in a what are those right tactics and tools to to really make our business performance.
[10:01] I look at my job and my team's job is doing the same thing but for online,
through those retailer so it's now it's no longer and I all but it's now a screen that we've got to figure out how to optimize our portfolio for,
so that's everything from the basic content to merchandising marketing to understanding you know what's working and optimizing across those three on a letter,
and then you know I think Sam made a great Point around the the portfolio in understanding the portfolio that performs well and store isn't necessarily the same one at the forms while I'm lying so,
as a company we need to send to rethink and reprioritize what we're focused on,
I'm at work think about online that said we are also considering the drive to Consumer and we have several brands in our portfolio that do some direct-to-consumer today Adele's premium sausages one,
where there's a really big fan following for it and it's not available everywhere,
and so that's a great product that you know is pretty pretty Nick pretty Gourmet,
we want to make sure all call the consumers who want to have access to the brain can find it.
[11:10] Very cool and send me a little bit earlier to like this notion of hey you have different tools for digital marketing than we did in traditional Shopper marketing.
[11:19] Shopper marketing once one of the two.
[11:22] It was weird I allowed on Shopper marketing is like Shelf adjacency.
[11:26] Want to launch a new product one of the best ways to get eyeballs in from the new product is that new brother.
[11:31] On the Shelf next to a popular existing.
[11:32] Will pop your existing product.
[11:35] Use all the traditional instrument in vehicles to drive tension to it in.
[11:39] In digital it like I feel like we have a lot more spearfishing people are searching then go you no right to.
[11:42] Fishing people are searching then go you no right to a search result and then do a product listing page.
[11:49] Or you know God forbid there.
[11:50] Lowe's customer they start shopping off a recurring list.
[11:54] It's a one of the things I always worry a little bit about is we lose some of the Opera.
[11:55] The things I always worry a little bit about is we lose some of the opportunities for those impulse sales and for what I like to call serendipitous Discovery just cuz it's super fun to say Serendip.
[12:06] I mean you at now that later in the hall when you're just saying.
[12:10] I'm just saying serendipitous you're going to think of me so.
[12:14] Like is like part of that challenge.
[12:15] Part of that challenges the onus is going to be on the Retailer's to figure out but is that a conversation you have with retailers and is that something you guys think about or worried.
[12:24] An app for sure special on new innovation right and that's our company's life like it is you know we want a significant amount of our growth and our sales every year to come from new innovation so,
definitely something we spend a lot of time thinking about your point,
where sometimes a limited to the tools and capabilities of the Retailer's platforms,
so it's starting there and also bringing ideas and I'll right now especially in grocery the shopping experience is different you're very much at a shelf view versus you know item-by-item at like you having a. Com you so,
the platforms involving for sure in a different way so we've got a partner on intestinal are no way there little bit,
but I will say you don't know the area that we're really trying to think through is what are the,
opportunities we can bring outside of the retailer platforms that enable that Discovery so we are spending any time we launched a new Initiative for spending money on driving awareness,
Across the Universe online digital in other other kind of places and so that that question is how do we connect,
I'm not point of awareness or inspiration directly to the cart and saw things like recipe to car is a great example,
have a capability that you know is it's pretty new but really unlocks that opportunity to say,
I found us they are interested in us let's just kind of try to close the deal and put a ride into the car.
[13:52] That one is fascinated by that use case tell me if I'm wrong but this is the first year of grocery shopping show dedicated to digital.
[13:53] Fascinated by dad use case tell me if I'm wrong but this is the first year grocery shopping show dedicated to digital online.
[14:01] And regular listeners will know I spent a lot of time in line and Starbucks I'm pretty sure.
[14:06] Second person in that Starbucks online.
[14:07] Second person in that Starbucks online is somehow involved in a recipe to carts business.
[14:14] Like that I ran into to today.
[14:20] When people are are at experimenting and pilot.
[14:24] Absolutely it's funny you say that but you're right and it and it went within a year,
it's it happen like that and I think you know it's in there are several different approaches they're taking everything from you know I'll be a widget within your media to know know I'm going to be the media platform and you got to work through me,
which puts and calls for each of those I think you know the more you can I think that's this is true across most of what we're dealing with,
you got to be able to play within an ecosystem,
and so if you're going to be a supplier in a survey new piece of innovation you've got to be able to work with an existing Partnerships and and relationships that are out there,
I'm guessing it's too hard to just come in and sort of kick out an existing agency relationship and partnership media investment it's been really challenging.
[15:14] So when you have a lot more experience and cpg than I do but in my observation it like traditional mod.
[15:21] There were two Big Marketing budgets in in.
[15:24] It's in in most most I mean probably more.
[15:26] That I mean probably more marketing budget that earmarked for specific retail accounts right.
[15:31] For specific retail accounts right and get spent on various activities that are mutually beneficial and then there is a brand marketing function usually what you know run by some see him know that's famous for going to South by Southwest in.
[15:40] Usually what you know run by some zmo that's famous for going to South by Southwest and and doing some of those.
[15:47] Does Advanced Khan and Davos and all that crazy stuff as we moved to digital I feel like,
to me is sort of digital Shopper marketing like summer.
[15:59] Shopper marketing,
Sears on the Shelf in front of content but in a way that's analogous to the original account Bay Shopper marketing but then some of those other activities you just mentioned like the the recipe.
[16:15] 2p stuffing and some of those other activities.
[16:19] Digital versions of traditional.
[16:20] Digital versions of traditional brand marketing.
[16:24] Do you feel like digit by it sounds like something booked.
[16:25] Do you feel like digit like it sounds like something booked of some of those functions are in your scope and that maybe wouldn't have been true in the old world.
[16:32] Shopper Market.
[16:34] Stars and brand marketers.
[16:35] No it's really interesting so I'd say neither one of my scope
and that's been the challenging part right we we grew up in the silos and we're going to figure it out over the course of decades this is how I play this is where you play and we wrote the rules so that nobody would,
you know step on each others toes and,
budgets could be really clearly defined and blame could be a sign when things didn't go so well but this is absolutely disrupted that and I think,
going to be a,
we've got to figure out new ways of working together and so literally at Tyson in the last six months we've created a digital Innovation group,
which is the combination of a brand marketing organization going to lead our Shopper marketing myself and our technology guys and so we've created so this,
that's really focused on understanding and what are those emerging spaces recipe to cart being one voice being another and how we are going to go play in those spaces and who's going to take point,
but it's much more of a collaborative effort and we were going to do this in conjunction with one another versus lots of one-offs you're doing this over here and I'm not aware of it because unless unless we coordinate we're not going to do this. Going to go swell.
[17:55] Interesting so am I.
[17:56] So he my mind like you guys are evolving to sort of in a boat organizationally figure out the right up.
[17:59] Going to sort of in a boat organizationally figure out the right approach and then we have to figure out what the right digital tactics are.
[18:06] At the same time.
[18:07] Most of these activations require some partnership with a retailer and it feels.
[18:10] Partnership with a retailer and it feels probably like.
[18:13] The retailer silos are also involved.
[18:16] And I think it's sort of.
[18:19] Early days at Walmart.
[18:19] Walmart labs in San Bruno or still is in and most most of the merchants are in Bensenville in,
yeah you did yesterday had a lot of collaboration between the digital arm and and traditional arm of the retailers are you.
[18:36] Of the retailers are you seeing the functions at various retailers.
[18:43] With you on these more integrated programs or is that still a challenge.
[18:48] What's funny because I I started and cpg and shelf-stable world through that, I felt like,
it was definitely that Dynamic you were talking about but over the course of several years especially as diapers as an example some of these categories became meaningful businesses that really impacted the store Merchants bottom line they,
forced that collaboration between the two and integrates between the two groceries back to where that was 8 years ago,
so it still feels very much like you have a lot of digital teams,
responsible for the interface and then the merchants who you know because he's our store pick models by and large,
their decisions for what's happening in the store is reflected online but there's really no coordination between the two around you know I'm going to choose this assortment because,
you know it could work in both our I'm going to add this item that may not be a big store seller but could be bigger there's none of those types of conversations happening right now and it's much more you know I'm going to focus on my store I know it's going to do something over here online,
adult digital guys that are part of my company are going to go figure that out.
[19:59] So for sure.
[20:02] It seems funny.
[20:03] You're jumping from as as Industries material you're jumping to the last mature markets that are having to reinvent the Roundup.
[20:07] Two less mature markets that are having to reinvent their own approaches and stuff which is week we talked about before the show there's there's no play but for that it's kind of fun cuz you get to.
[20:17] It's kind of fun cuz you get that to figure it out.
[20:21] The it was my thoughts I'm just going to put enough.
[20:31] The awkward pause 2009.
[20:36] Everybody doing alright,
[20:47] Retailer is also evolving.
[20:48] Evolving I just want to work with you like in this New World by any.
[20:54] Any particular best practices or tips you.
[20:59] Have a branch of you thinking about.
[21:00] How Branch should be thinking about partnering with retailers in in this sort of new integrated digital world.
[21:07] The first the first thing we had to do was reassessed the landscape,
one when I got to Tyson we had decided that we were going to make a big investment in Amazon,
what course you did right Amazon's the underground gorilla that dynamic in our world is in grocery specifically online is there not quite there yet,
Sammy I don't know if you want to come to speak to who is there right now.
[21:39] Yeah I mean that's that is that is such a big piece because like if you look at what the general consumers going to think you think Amazon is winning,
everything and the reality is is that Amazon is still very much in its infancy and just finding its feet in grocery right so,
if you look at online grocery on Amazon's not even the fastest growing right so Walmart's the fastest growing right instacart one of the fastest-growing,
and while Amazon is growing it's nowhere near the,
for the scale of of what some of these others so that Walmart has that over a third of a share of online,
and amazonfresh is under 10.
[22:22] And says so is we reimagine our structure you know that the structure that a lot of cpg companies started with was we're going to build this little e-commerce team,
that's going to fix own care play build the capabilities to enable pure clay and then eventually those capabilities will sort of,
go out to these in a brick-and-mortar brick and click stores as they start to accelerate,
we've almost got a flip it a little bit and grocery because of that point RR Walmart team is feeling the impact already of grocery,
online and some of those stores are doing between 5 and 10% of their business through online grocery and Walmarts in wow and that's really changing then that Walmart customer team that grew up and built all there,
skill sets and functionality around in-store execution,
they need some support now they need capacity expertise now to focus on line and so that really part of what we've had to Pivot on over the last year too,
it's a-okay yep it was important we're going to work on instacart so that's part of the eye space that we own Cuoco pure-play,
big enabler for us now is how do we go and really focus on the Krogers in the Walmart because that's really where the size of the businesses today and a growth is happening.
[23:43] I don't know what the data is.
[23:43] Is granular nuts about this or not but in my mind.
[23:49] Part of the secret to Walmart success in and also.
[23:52] Kroger is curbside pickup.
[23:55] And in.
[23:56] That's one of the like differentiators between Walmart and Kroger and Amazon.
[24:00] Amazon is like Walmart has 4,000 store.
[24:02] Walmart has 4,000 stores over 2,000 of them are now in.
[24:06] Free pick up Kroger I think has like 800.
[24:08] Flag store and you know Amazon wasn't in the pickup game at all until they bought Whole Foods.
[24:15] And to their credit I feel like they've.
[24:16] If you've all of that I've been very quickly but it's in.
[24:21] 400 stores and it's in the.
[24:22] Stores in it in the stores in the markets that are most friendly to delivery versus pick up in a half of them so Whole Foods is a really fun little sandbox that Amazon's experiment thinking today,
and it gets a lot of new lot of press a lot of people talk about it the Whole Foods is not a very big retailer right that's the fact of the matter,
and when you look at scale when you look across the country right it's the Kroger's and the Walmarts were people are shopping and which have the ability to do,
curbside pickup right at a much broader scale so let's change topics a little bit from.
[25:01] Thinking about the retail side to.
[25:03] Decide to evolution of bran.
[25:07] Nights are you you are now sitting at.
[25:08] Sitting at top of the dream well-established brand is trying to figure out.
[25:13] It feels like increasingly your competition are these new startup brands that don't have near you.
[25:15] Play your competition are these new startup brands that don't have near your scale but they also don't have any of.
[25:25] Impediments are infested,
they have to carry three ways,
circassian like shelf-stable cpg are you are you seeing that in in food as well.
[25:36] Yeah you know I'm reminded of when I was down on the Walmart team with Procter & Gamble we were looking at our shave business and it started to decline pretty quickly,
and we couldn't see where it was going typically are,
reports would say while we're seeing some Camel shift it's going to Dollar General or you know it's moving over to Target and then,
the but we didn't see we just saw the category declining and we saw our brand declining,
I couldn't understand why we look around the office and we saw some scruffy looking guys and so maybe they just not shaving is much in this mode ever November thing is really,
well know we were listening every morning on our ESPN Drive in hearing about this company called Dollar Shave Club and how funny they were great.
[26:25] And all the sudden they took 300 million out of the category and out of the stores but are classic data and Analysis didn't have any way to account for that anyway to show us that shifting and so as far as we were concerned,
it wasn't happening we just until we were caught very flat-footed that's my fear an obsession right now in food,
there's a lot of these companies you're talking about the grass wet grass pads in the locals in the Organics that are you know they're 10:50 million dollar type companies but they're all live,
and there's some of them that are scaling pretty quickly,
and so the dishes we just don't have the visibility the data and to how fast or how many of them are are out there and so,
absolutely an area that we've just got to get better at and it's actually we worked a little bit with Sammy and Tenten and that's one of the challenges I put forth to him is how do we understand where,
these new up and comers that we just don't have on our radar where it where are they who are they and how fast do they run.
[27:30] So I will turn the question like are you.
[27:32] Like are you starting to see some of those like new brands Emergen captures and market share online and.
[27:40] Yes and that's the that's the challenge right where everyone's been dealing with this weather your Nielsen or NPD or iri or 1010data Rakuten or never is,
catching hold of of one of these companies that's all the sudden going to start hockey stick me in becoming a really big company and what what Tim brought up is a really good point is,
is when you're looking at the data sometimes on an individual on one DTC,
it that individuals you to see maybe maybe just too small to report on and maybe insignificance report on,
but if there's 80 or 90 of them right that are that are growing very quickly all of a sudden you've got this thing and,
right in the last thing you want to do is to be Dollar Shave Club again right live through it once you don't want that to happen again and so what we do from the,
in the day the world is were constantly working with our data providers to ensure that we have visibility to anything new that comes forth,
I'm in a great example of that is we very recently were able to split out the Walmart grocery piece from the Walmart piece once it got to a point where the scale is big enough,
that we had sufficient sample to make Market estimates,
that's going to become increasingly important a lot of retailers in Walmart so perfect example in in grocery is a hundred percent,
I can tell you different.
[29:05] They're trying to promote skus that are available in the store.
[29:07] Use that are available in the store and the capability gets drones for by store so I've been talking a little bit I feel like something I should be thinking about,
sales metric for online.
[29:19] Because Walmart.
[29:21] Walmart reporting this huge e-commerce,
is there a tracking more more customers to the website and whatnot but a lot this because they just added the grocery capability to a bunch of more stores than they had the year before.
[29:35] So you know in some ways you almost have to think of it like a.
[29:39] Storm Atronach Forge a merchandising I might argue that Walmart has sort of the opposite merchandising strategy that they're really trying to focus on having a long day.
[29:49] They put a lot of emphasis on the marketplace.
[29:50] If a lot of emphasis on the marketplace and you know they're trying to get,
use most of which are getting fulfilled by third-party providers or from a fulfillment center in so I do really need to think about them as,
different business that's another good example so with Amazon right people look at Amazon 1 p.m. Amazon 3 p.m.
sufficient data to split those in to see what's happening Amazon direct and what's happening with the marketplace,
Walmart even though they're making this push towards Marketplace,
candidly just doesn't have the volume in those traditional Goods to Warrant us breaking that out at this point in time it might be another couple of years before we able to see what's Walmart third-party doing compared to Walmart first party,
a side note one thing that is different from the Heyday of Dollar Shave Club you you mentioned what they have would like.
[30:41] You mentioned you would have had would like all those ESPN ads.
[30:46] Today of course if people are driving a word.
[31:01] So one of the things.
[31:02] One of the thing that's interesting to me thinking of.
[31:05] About the emerging Brands and did you need a brand purses.
[31:08] And did you need a Brands versus a new products and Innovations in existing companies as they.
[31:16] Exact opposite so if I start a new come.
[31:17] Opposite problems so if I start a new company today the world is made it much easier right.
[31:22] Made it much easier right I can go,
Shopify side and you know I can hire you know 99designs to do my marketing and I can do all these things with my credit card on the weekend.
[31:30] Things to do my marketing and I can do all these things with my credit card on the weekend.
[31:35] Company pretty quickly find a group of loyal customers wants a product to them and get real-time feedback and so I can innovate and iterate really quickly in it.
[31:44] Expensively which is.
[31:45] Great most of this man's are really struggling to hit some peeps kale and in your organization I suspect when there's a new idea.
[31:50] And in your organization I suspect when there's a new idea.
[31:55] What can this idea be big enough to be financially,
why I'm always curious how big companies that are the Cavs Gail think about.
[32:03] Bunnies that already have scale think about Innovation and how do you sort of you know instill some of those advantages of the little company in your big company.
[32:12] Yeah it's a it's a really great question and you know it as a company I think we several years ago came to that conclusion that you know Innovation gets washed if it's,
you know if it feels cortical too small of an idea,
yeah we just still wouldn't let it play out if you would see a trend and it might be too early,
by the time you react it's also going to be little bit late so as a company what we've done is created a couple different entities internally,
we have one or innovation team which we've had for a while is really focused on call 12 to 18 months out.
[32:49] Fairly close in animation new flavors new forms some adjacent categories and so that there's that group focused though but we also then recently created a new products the lab,
which is really kind of taking off the,
Elders of this is what we do today to where are some interesting protein spaces coming from so where can we innovate in a great example that is our God,
that is essentially comes in a tennis ball kind of a can and instead of being a potato chip or like a pringle chip it so it's a protein shake,
so it's brand new initiative brand new idea,
and we're launching it in a very sort of small pilot but scale up kind of way that would not have happened before this team.
[33:42] And then the other area that we brought on is our new Ventures team,
and so that is allowing us to find a new companies that are,
testing kind of smaller nitty spaces and I'll give an example of going to be on me,
vegetable proteins Memphis meat is another company that we've invested in which is sort of lab-grown protein,
and these are early days for the four especially Memphis meat but what we're seeing is this is an opportunity space,
and as a company we want to be able to be the world's best producer of protein and we're raising the world's expectation for what good food can do,
and that means we're going to have to go beyond just land-based animal proteins,
and so by investing early on and some of these companies we get to learn a lot and we get to see them scale,
and then you know continue to think through down the line how do we integrate you know they're there Prada.
[34:47] Oh so you can actually also help them scale right that's a really big deal to cuz a lot of these companies have no idea how to get on a store a store shelf,
I want to follow up on that a little bit but you I had one.
[35:02] Not a little bit but you I had one terrifying thought while you were saying that but I just want you to make me comfortable about.
[35:06] About we're not all.
[35:09] Just drinking Soylent to Prairie me.
[35:11] It's pretty tasty I never have one,
not you know and I think you look as we look out just eating 20 years the challenges of feeding the world they're pretty daunting,
and Tyson we believe is one of the handful of entities out there that can help find a solution,
and that's going to require a range of offerings so hopefully we can still have our steak dinners when you come to Vegas,
yeah there's going to be new forms of protein that will have to be you know brought in in order to see the world.
[35:48] Personally I'm banking on us all dying of dehydration before we run out of protein but I know it's a it's a race so well.
[35:54] See how that plays out going going back to the investment side of innovation like what.
[36:00] Nations like what's the out the best outcome for you there like would you ultimate.
[36:06] Taken like a.
[36:08] A hundred percent ownership position in some of those like his are you investing primarily with the hope of getting a financial return is it to incubate companies where you didn't have an exclusive like what it what is.
[36:20] I think it's all the above I mean the intent really right now is to learn is the weather is against some of these new product spaces at Armor,
or even capabilities so companies that do things particularly well that we want to learn more about,
it's an interesting way to go do that is by becoming part of,
owner of that company and then hopefully ingest that learning a 10in skillet across organization.
[36:53] And are you finding that it's difficult,
you know at a company with Good Financial rigor that used to sort of focusing on quarter-to-quarter results to think like a longer-term investor on some of the light you know BC's think about a very different pay back her eyes and.
[37:04] I think like a longer-term investor on some of the Viking BC's think about a very different pay back her eyes and then you know I would come.
[37:12] Companies that are trying to keep shareholders have.
[37:14] Yeah I know it's right and it's so this company this group was purpose-built to pretty much avoid that so they've been given an investment,
amount and how to ring-fence that amount and so they act very much like a VC company and then we're going to go,
we're going to look for this portfolio of companies that either from a product or capability Sandpoint look interesting and then you diligence up through our leadership team with the recommendation.
[37:45] Very cool.
[37:46] Well we're at work.
[37:47] Coming up against time I want to do one last question I know we're halfway through this show and I know.
[37:51] We're halfway through the show and I know we don't have.
[37:54] Navigation so I don't think anyone's got a chance to sort of absorb everything going on.
[37:57] Everything going on in the show but.
[37:59] Do I get there any trender theme or vendor that like has emerged in that you know that was interesting to you that you either came here looking for or maybe surprised you.
[38:11] It's interesting for me that the conversations that happened seem to be where for me a lot of the value starts to come out a meeting with peers were having some more challenges and brainstorming together I think one of the biggest themes though,
is wow this is happening really fast 2 years ago this wasn't a thing you know and so,
that speed in Pace that's happened I think even our leadership at back at home and Company,
don't necessarily appreciate it it's a part of you know what I have you as my job is still going to bring that urgency back with a bit of a game plan as well for what we need to be doing.
[38:51] For sure. Could you imagine trying to talk more more senior leadership into coming.
[38:53] Trying to talk more more senior leadership into coming to an event like.
[38:56] I think that's a great idea you know again it's it's kind of palpable you walk the floor you see some of these speakers,
you really do get a sense for the Earth the pace and urgency that's out there and so I think it's a great suggestion of bringing in some more high-profile execs and not just having them send their econ guy out to this conference.
[39:17] I'm sure an ant as a me and in all your conversations anyting jump out of.
[39:20] Jump out at you or surprised by the new data competitors or anything like that.
[39:24] Got the data competitors are great I love seeing you did it competitors right and it's just it's it's great the more the better,
the one thing that I've noticed and I've noticed since the last the last shop talk show in March I'm coming into this one is,
it appears to me that the companies that,
are sort of weathering the storm or taking the most advantage of this shift to online grocery are actually indeed those companies that have formed or in the process of forming Innovation teams are there in Seattle near Amazon,
and the ones that have not are the ones that clearly in the data show up as kind of ligers,
so you know kind of the advice is if you will if you are a grocer or a traditional brand,
if you don't have some kind of innovation team together that has its own budget and actually has a seat at the table you're going to be in big trouble.
[40:23] Very cool that is an interesting insight and that's going to be a great place to leave it because it's.
[40:26] Because it happen again weave.
[40:29] Used up all our a lot of time but before we go Sammy of those aren't real.
[40:31] But before we go Sammy of those are intrigued by the rise of grocery report or just want to.
[40:37] I just want to get in touch with you what's where do you hang out in the intern.
[40:40] You can reach me on LinkedIn or on Twitter music to find them both of those places.
[40:44] Links to both of those in the show notes and Tim.
[40:48] Are you an active guy on LinkedIn can I.
[40:52] Yeah that's fine.
[40:53] Cool again again PlayStation Network with Tim and soul.
[40:54] Tim and so you know thanks to both you guys for taking time out of their busy show to come speak with our listeners as all.
[40:59] Busy show to come speak with our listeners as always listeners if you have any questions or you.
[41:04] Want to follow up on any of the topic.
[41:06] Play some the show you can join us on our Facebook page and leave a question.
[41:10] As always if this was the.
[41:11] Please if this was the the show that you know was finally worth it to you do with the big favor of jumping over to iTunes and getting us.
[41:16] I'm getting us at 5.
[41:19] And until next time happy commercing.
Amazon plans to split HQ2 to two cities
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.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 150 of the Jason & Scot show was recorded on Monday, November 5th, 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.
[0:25] Welcome to the Jason and Scott show this is episode 150 being recorded on Monday November 5th 2018 I'm your host Jason retailgeek host Scott Wingo.
[0:41] Jason welcome back Jason Scott show listeners.
Jason you just recently got back from sunny and blazing hot Las Vegas Nevada for the first annual grocery store.
And that's what really to see what today show is going to be is a grocery shop recap but before we jump into that we did want to cover some breaking.
[1:03] Amazon news your margin is there a opportunity alright well we've been talking about this on the chauffeur
about a year ago Amazon announced that they are going to look for a second headquarters that would has 50000 employees.
I am if it was kind of this huge process and we're coming down to the end of it and there's two I'm confirmed reports out today,
one from the Washington Post one from your times and it looks like Amazon is first of all going to split this is also not confirmed us the Wall Street Journal says Amazon's actually going to do two cities instead of one
so it's kind of like HQ one and a half and hq2 and they're splitting the jobs pretty even Lisa 25,000 jobs in to eat City.
The two cities that seem to be most rumored are Crystal City which is a suburb of the DC area and Northern Virginia.
The other one is a suburb of New York City called Long Island City Jason what do you think about this result if it's true and how true do you think it is.
[2:17] Yeah well it does sound pretty true there's a lot of rumors earlier in the week and it seem like Amazon was actively.
In some cases refuting them and or scolding the leakers and they they seem completely silent about this which makes me feel like.
It is on the markings pretty credible news organizations that are setting multiple sources so seems pretty credible and if it's true it.
It reaffirms a lot of people's hypothesis that this was,
sort of largely a marketing stunt in it it makes me feel like Seattle is actually the big winner because.
Like these this would definitely would not be co-equal headquarters now that they're dividing up the jobs and I'm going to assume that that the center of gravity and most of the senior leadership are going to continue to put on in Italy live in the,
in the Seattle area in this scenario.
[3:18] Yeah yeah it's my Logic on this was.
It never made sense to me that they could hire 50,000 people cuz to my logic is the retail part of Amazon is pretty stacked up in packs you know robots replacing humans a lot of times in the,
Commerce part of Amazon so this feels like largely AWS engineers and you know it's very hard to go find
much less 2000 50,000 folks that can work on AWS so so I think they started kind of come to that same conclusion the dust splitting them up and I imagine those 25,000 10 years or something.
You could possibly hired that mud many AWS qualified people even in those dense text cities to to work on stuff so it'll be interesting to see how this lands.
So we just wanted to cover that really quickly because it's been the source of so much speculation but we want to spend the bulk of our time tonight on grocery shop
so it's Jason. I was not able to go but you went on for so how was House Las Vegas did you end up making money losing money.
[4:31] I go to Las Vegas too often so I am no longer much of a wager or so I I did lose some money but I lost it spending a week in Las Vegas not at the table.
[4:43] Visit your favorite Starbucks.
[4:46] I did not so
dedicated listeners or remember I spent like 18 days in a row in Las Vegas at the Venetian earlier this year which I wouldn't wish on my worst enemy this show was at the Aria so
I did not make it to the Venetian Starbucks but I I did get to reacquaint myself with a several Starbucks in the vicinity of the Aria.
[5:10] Awesome so so for the the grocery shop show maybe Orient for listeners you know how this show came to be who puts it on and how did this compare to kind of shot Talk Money 20/20.
[5:25] So that the show did the first year of the show is put on by the same folks.
It started shoptalk and money 20/20 as you mention money 20/20 was their first show and it started at the Aria as well.
And then it eventually it it felt like the show doubled in size every year and it eventually outgrew the Aria Convention Center and then had to move to the Venetian.
I'm in after 3 years of growth.
They actually sold the show to another event company and they started simultaneously they started the second show shop talk and Shop talk also started.
At the Aria and it also doubled every year last year it outgrew the Aria and moved to the Venetian.
And they this year they started to new shows or show I don't know a lot about this in the healthcare ligori and they started this show grocery shop which is all about digital grocery.
[6:19] And the show started the Aria it.
It felt very similar to the first year of money 20/20 or shoptalk and I mean that in a good way I feel like these guys have.
Have built a pretty good template for an event so they they do a really good job of recruiting.
Interesting speakers that people want to hear from and they're great digital marketers and they Market the heck out of their speakers which causes other people to want to go in network with those folks.
And you know at this point kind of three or four shows into their their progression.
I feel like they have a a really solid template eyes execution,
did they run and you know they invite me to speak at all of them because they use caricatures of you and I feel like I'm just cost-effective because they already paid to have my character children.
[7:10] I'm sure that's what it is.
[7:12] Yeah I think that's my main value-add a fun fact for speakers is that they.
Send you a coffee mugs with your charger on it so I have a complete collection of shop talk,
money 20/20 and now grocery shop mugs that my mother-in-law has claimed so if you ever get coffee at my mother-in-law's house be prepared for the jarring image of my face and this year they upped the ante they sent us a
cookie with my my characterture on the front of the cookie in frosting.
[7:48] I remember I had jokingly asked one of the folks at shoptalk who does the character in the show that's her that's her most closely held Secret.
[7:58] Yeah so you know what's funny about that I I believe they did say that to you if you went to an early money2020 that guy was working in a a shop a money 20/20 booth and you could stand in line to get your own character children.
And eventually apparently he became so so popular and beneficial to them that they they hit him behind the scenes but like there were attendees from those first money2020 is that actually got there,
their characters are drawn while they were attending the show but the big controversy among the speakers on Twitter earlier this year when the cookies went out was.
Can you infect eat your own face like is that is that weird.
And you know there was a lot of talk about that and I defended we solve the The Dilemma when I tweeted out a picture of my three-year-old gleefully.
Diving into my face to eat it.
[8:48] Eaton Trinidad face.
[8:53] So more than listeners want to know about the logistics from the show
but I feel like at a high level they picked a really good topic for a show I think they were hoping like a thousand people would attend in the show and they sold out the show
at 2200 people which is the capacity for the the convention center they had so already.
Don't be surprised if you see the show move from the Aria to the Venetian next year or I guess there is a rumor that the Aria is expanding their.
Their facility so maybe maybe I'll stay in this expanded facility but it definitely felt like there there was unmet demand
for folks in this industry to be able to get together and share some ideas and best practices and I feel like,
a lot of people were we're excited to come people are super engaged and all the feedback I got from people on the way out of town or from
from my own team after we got back was was super favorable that it was a good event and everyone wants to have a,
a bigger participation next year so congratulations to the the folks at grocery shop on on doing a great job for the first year.
[10:02] Awesome. Let's dig into some content first of all as mentioned you were quite busy so that I kind of thought they should have called it Jason talk
so you gave the keynote and you led to panel so it was kind of go through those and sequencing and not good to some highlights of what you learned there
I'll start with a keynote I saw on Twitter that a lot of people took this one picture where it looks like you were putting some lipstick on tell us about that one.
[10:29] Yeah I'm a very Metropolitan dude what can I say
so I feel like you're being slightly generous and calling into keynote so that it it it it was a keynote but I'm not sure I gave it so what this was a fireside chat format so I was interviewing,
gentleman named Sanjeev who was one of the founders,
I have this cool company that that listeners are probably familiar with that may not know called EOS products and it cos it actually is a acronym for the evolution of smooth.
little over 10 years ago they invented a new lip balm for women that was in this sort of round egg-shaped format in there now ubiquitous in super popular,
but anyways go sort of,
invented or was an early Pioneer in influencer marketing they they started out with her than affiliate program where you could earn credit and free product by getting your friends,
to share EOS products on social media and back then sponsored social media was not a thing,
and a bunch of celebrities sort of got in on the ACT in organically started promoting this product and so you know today the the the sort of early
eye doctors of this product it was like Miley Cyrus and Kim Kardashian and and all these
these people that would today would cost millions of dollars that they got to sort of endorse the product early which caused this product to,
completely take off in Skyrocket so one of the the very first sort of.
[12:15] Influencer viral product out there so it's interesting to talk to sanjiv about his.
His experiences with that and you know I just got a chance to interview him and I I did in fact apply some some EOS lip balm during during the talk so I think that's maybe the tweet that you saw.
[12:33] I can't right now in Las Vegas I never really need like chapstick type stuff but in Vegas I do the kisses so during dry out there.
[12:41] I'm 100% with you I normally would not use lip balm but I do always bring ChapStick and like to Saint jeans credit like.
Part of the genius of this product is whip-whip Bomb is predominately bought by women and all of the products were
not very women-centric right and so they're all convenient form factors for you and I to put in our pocket but a lot of women's apparel doesn't have pockets and so these things go in purses and so they designed
a product that was very well intentioned
to live in a woman's purse which ironically makes it super inconvenient for guys until I had to smuggle it onto the stage because it would have look silly in my pocket.
[13:20] Now that's kind of a healthcare item not something you'd find in a grocery store symbol surprise that's so
am I done for this kind of had also kind of the drug stores in the whole thing and the healthcare are the the beauty category as well.
[13:37] Yes I think they would characterize this is more Beauty than then Healthcare and it's it's sort of.
Affordable impulse Beauty and so it is so like actually at the cash wrap and a lot of grocery stores and also drug stores and convenience stores and I do think there was some overlap I think
that the show is primarily targeted at grocery which meant,
a lot of the retailers that attended where Grocers but then equal or more attendees were brands that View Grocery as a super important Channel,
and it just so happens that a lot of those brands also sell in,
mass and and the convenience and Drug so you had a lot of the the Wakulla food and non-food cpgs
and so yeah I definitely think that that many of the conversations and takeaways expanded Beyond pure grocery but grocery was sort of the epicenter.
[14:42] Cool and then you're so you let that keynote you Fireside chatted that up and then you had a panel called a balding cpg retailer relationships that sounds pretty intense.
[14:53] And so that panel was we had three panelists and they're talking all about the Dynamics of retailers and Brands and how they work together in a lot of the challenges in in the new world of digital marketing.
You know how there's there's a lot of frustration on both sides retailers generally feel like.
The brands are behind and aren't really ready to partner with the retailers digitally and retailers are asking for like a lot of support for e-commerce initiatives that Brands aren't always.
Well prepared to meet so there was a lot of talk from the retail side about Heather they expire for the brands to sort of catch up.
And on the brand side there's a lot of talk about like the lack of.
Of data and transparency and and you know it it not feeling like an equal partnership on the part of retailers to this panel was a lot about best practices and started making that relationship work and so we had.
Wingo on who's the VP of e-commerce at constellation Brands which is a well-known alcohol.
[16:00] Manufacturer with a bunch of popular brands.
The Wayne also had formerly been on the e-commerce team at Walgreens so he kind of talked about his experience at both places.
We had that the VP of brand from Elf Cosmetics which is another affordable Beauty brand that kind of represented the brands perspective in this.
In this a dynamic and elf 10 years ago started out as a direct-to-consumer brand then they they sort of got really popular and became like 90%.
Wholesale and now they're starting to shift the balance again and then we had a retailer whose.
A well-known Market in New York City called Fairway Market.
Well known local chain with a bunch of like really high-end Gourmet products as well as a full.
Call grocery store and so Jason is work there long time and talk about their overall perspective but today the portfolio he mainly owns is.
Private brands for Fairway and so he talked about some of the unique Dynamics with partnering with brands on on exclusive products so that was.
A good set of conversation in the audience that seem engaged and we got some nice feedback about that panel.
[17:18] Did you get to the so we talked up private label then you started using the term owned products have to have you as a cut on what's what's what's the difference between the two.
[17:31] Yeah they question if it's definitely one one of the themes at the show maybe we'll talk a little bit more about later but.
[17:38] In general I call private label sort of this hundred-year-old practice of a retailer offering a a,
more value oriented version of a national Brand Products what has the exact same product attributes as the national brand it just sold at a lower price point without the brand name on it,
generally a hundred percent of the marketing for the product is simply the fact that it's on the Shelf next to the National brand so you get a headache you go to Walgreens to get Advil and on the Shelf next to Advil as well bupropion.
[18:11] And it says right on the package compared to the active ingredient in Advil and it's a little cheaper right so to me that's private label and there's this show there's a lot of talk about private label and it's an important part of the mix for retailers in it obviously
has an impact on profitability and there's there's a bunch of good reasons why private label is important but to me,
the thing is getting more traction is this evolution of that idea,
where retailers actually wants their own unique products that are different from the national brands
in most cases the retailers using their intimacy with the customer to design a product that's in a gap that's not well met by the national Brands and in most cases retailers,
have to learn all of the skills that the brands have in terms of building a brand and marketing and advertising it and so to me owned brands are these,
all brands that just happened to be owned by a retailer versus private label are these sort of value-oriented alternatives to the National brand and there's a lot of talk about both of those at the show.
[19:13] And then your last panel was called using product content to build brands.
what you're not getting a lot of practitioners at the show so there a lot of like directors and VPS that are trying to learn best practices and I'm both sides of the fence like one of the primary areas were Brands and retailers really have to work together is on this digital Shelf.
[19:37] And so you know one of the ways this comes up most often is oh my god Amazon didn't used to be relevant in this category and now it's super relevant and.
You know increasingly searches are shifting from Google the Amazon and so how are we going to get our products to show up in the Amazon search engine like they used to show up in the Google search engine.
And once people find our products how are we going to get them to learn enough to decide to buy a product and send it alternative instead of the the that what we in e-commerce called that product detail page.
You know brands are thinking of is the digital equivalent of their retail shelf and so there's a lot of conversation amongst friends about what the best practices are in content.
For that digital shelf in the overwhelming majority of cases Brands create that content and then they syndicated to the retailer.
To show up on all these various e-commerce sites and so there's.
[20:32] Different retailers have different request and criterias and preferences about how to execute that content different brands have different philosophies about how much to invest in and what the best practices are so we had a really good rub us conversation about.
Like what what some of the the best practices are and what some of the new ideas are and what some of the pros and cons are tough.
The various approaches in investing in.
This content to you notes or to build a brand in a in a world in which a lot of purchase decisions are are substantially digitally influence.
[21:09] Are these guys struggle with just basic digital assets cuz you know in the traditional grocery store model them really had to provide much chaga tea or short long title or,
all that kind of stuff.
[21:24] Almost all of them have followed this way great like slow progression of maturity so when you're selling Oreos to Walmart like you you if it
at the base level needed to provide about six attributes about the about the Oreos bike how many cookies were in the bag with the net weight of the bag was like what you know a basic description that could show up in ER P&B printing on the on the Shelf label in the store,
it's always super simple and every brand new how to provide the six attributes that Walmart wanted as e-commerce really took off.
You know Amazon Walmart ask for for 60 and increasingly more attributes about the product is a gluten-free is it you know does it have any allergens in it.
You know what's all the nutrition information in the in the old world they just provided a picture of Ninja trition label to the store,
now they have to provide all this data and is you alluded to a super important attribute is images and how many to take and what should they be pictures of,
and is there any rich media going with that and you know any any comparison copy and they're off all of these.
[22:29] Evolutions of best practices and so you know his you kind of alluded to,
early on you know that's a Walmart sales guy like you know filling out an Excel spreadsheet and emailing it to his buyer at Walmart.
And frankly in the early days not caring very much because.
99.9% of sales were happening through the the Walmart by owner in Bentonville and only you know .1% of the sales were happening on walmart.com and so you know.
It's in the walmart.com guy with what he needs to go away.
You know that rapidly evolved and you became a very meaningful part of sales very quickly and eventually retailers you know sort of used the,
their store volume is leverage and said hey we're going to give you a shelf face in the store if you're not complying with all the the new digital content requirements we have and we want you to send the Kate ratings and reviews and want you to do all these other things inside of the kind of like.
Sales guy hiring some company to fill out a spreadsheet turned into.
These internal teams and centers of expertise creating all that content and and you know,
buying or building the kind of tools that they would use for product information management in
content syndication in all that and if I'm not mistaken I think Channel advisor plays this pretty significant role in in parts of that echo system for a lot of Brands as well.
[23:51] Yep yep you know we talked about the capability to take your eCommerce products and,
push me around and under the hood it's very similar to a set of capabilities
so those were the things you got to speak about and then did you tell if you were super busy between Starbucks runs applying lip balm and in all the stuff
did you get a chance to go to any other talks or can you summarize some other things that we should know about.
[24:26] I did I think I made it to all the Keynotes and I made it to as many of the other breakout sessions as I could and then of course there
we're a couple of friends of the show former guess that were also with the show by tweeting a lot of the sessions and so is pretty funny a lot of times I was in one session
you know trying to consume the content myself and I'm following
like Michelle who's been on the show from euromonitor who is doing a fabulous job of what I've tweeting the.
The session she was at and so so I feel like I got a pretty good feel for the overall show despite the fact that that.
There and she'll like this there is a fair amount of fear of missing out that you're going to go to one session and it's going to.
Not be what you hoped and and you'll miss some really good content in another.
[25:14] Yeah, so what were the highlights.
[25:17] So high level I kind of broke the show up into these for big themes and the biggest Theme by far is this overall digital disruption of grocery.
That essentially you know grocery ad in pretty stagnant for.
For a long time and that now digital shopping for groceries digital influencer sales in grocery and increasingly.
Delivery and curbside pickup of grocery is gaining huge traction it's going to be a meaningful part of grocery I think emarketer publishing data that it's like.
1.3% of grocery sales right now or digital the grocery same stories e-commerce groceries growing at like 2%.
But digital grocery is growing at like a 20% K Garceau.
You in the next five years that 1.3% is going to be more like 3 or 4% of all Grocery and it's
the overwhelming majority about growth in the grocery category so you know all the other themes and most of the content in the show is all about how Brands and retailers and consumers are responding to this,
this digital disruption of the traditional grocery model.
[26:34] So then the three sub themes under that that I felt like came up a lot is there's a lot of conversation and opinion and evolution of,
the idea of how you get all the groceries into the grocery bag right so there's a lot of traditional grocers that own a bunch of stores.
That you know feel like.
[26:59] Sending professional employees to pick groceries off the shelf and put them in the bag is the most cost-effective model because it leverages all this fixed assets that the retail already have it leverages all their existing inventory it shares the inventory between,
in-store customers and digital customers you know it's it's the Leverage is all these fixed assets that that that retailer already has
and so you think about like what Walmart curbside pickup and Kroger curbside pickup are both.
[27:30] Are both sort of in store picking models and you know most notably instacart which is now past like 3 billion dollars in sales is all
sort of in-store picking in so a lot of traditional grocery all feel like that's the preferred model but then there's a lot of digital startups that have said actually
that's super inefficient in the unit economics are really challenging there because
in a traditional general merchandise e-commerce site you know an average you're lucky if you sell two or three items per order and so the amount of picking
her order is pretty small but a typical grocery order might have 30 to 60 items in it and so the cost per item to pick is is a much bigger part of the overall cost.
[28:19] Of an e-commerce order and paying people to walk around stores that are not
efficiently assorted for Pickers but instead are designed for Discovery and browsing is really inefficient and so
you you have dedicated digital Grocers like Fresh Direct or Peapod or a super successful digital Grocer in the UK called or Colorado
that all have this model where they use dedicated automated.
Grocery up fulfillment centers that are much more optimized for picking costs and in one interesting case ocado which is based in the UK is partnered with Kroger and they're there.
[29:03] Opening fulfillment center using okada's technology and software in the US so Kroger is both doing store picking and there now piloting these microfilaments centers Albertsons which is like the second largest.
Dedicated Grocer in the u.s. made a big announcement that they were launching micro fulfillment centers and they felt that that was a superior more cost-effective model in the long run so they're like,
it's still early days but there's a lot of pros and cons on both sides in this whole whole conundrum of what's the efficient supply chain.
You know when you're dealing with perishables and fresh and and you know cold chain and all these these products that have to be kept at.
A particular temperature so that it was an interesting pros and cons from various practitioners around those picking models.
So that was kind of something one sub theme to is this whole debate about.
[30:02] New start-up Brands versus new products from existing brands in so you think about like a Harrys Razor which would be appear startup brand.
Or a new product being launched by Kraft.
And you know a lot of the buzz in the industry is all about these new digital native startup Brands we talked about a lot of them in general but there are also a lot of them that are in the grocery space.
And get a lot of buzz but also in the grocery space are more products.
That our new products that are either launched by big companies or.
New products that are launched by companies that are intended to be sold through wholesale versus.
Direct-to-consumer so you think about like Chobani yogurt for example like that emerged in quickly disrupted the industry and took a huge chunk of Dan and sales because,
Dan and didn't you know jump on the Greek yogurt trans quick enough in Chobani like became a very big company.
Shivani doesn't really focus on selling yogurt direct they sell it through all these grocery wholesalers.
It's a lot of interesting discussions about the pros and cons there and like my big takeaway is.
[31:16] All of these dedicated startups that are focused on direct to Consumer are making more Innovative products and they're iterating them faster and they're getting them out in the market and getting initial customer adoption much quicker.
Then that the big brands are or than the wholesale distributed products are but all of them seem to hit this plateau and really struggled the scale.
So I'm calling the the direct to Consumer startups really good at Innovation and product development and early launches,
but the really challenging to scale in on the big side the products that they get to Market are doing much better and scaling and becoming much more significant in the marketplace,
but in general are there's far fewer of them in there they're much slower to come to Market and there's in general that's innovation in them and so there's kind of this interesting thing that you had these two models that he.
Each have their pros and cons and you know how do you kind of get the best of both worlds and is is that.
Harry's launching is a direct-to-consumer brand and once they hit that plateau.
You know they they shifted to today the majority of their sales are now wholesale then and so you know there's kind of some of those those conversations.
Internet the third big trend is this whole private label owned Brands thing that we discussed earlier.
[32:40] But I would say both of those Trends are becoming increasingly prominent in so you think about like all the Keynotes at the show and like Kroger,
I have a huge private label it's the most successful,
organic food brand in the US called Simple Truth and Kroger's grocery store in the US but in China Kroger's a brand because they're selling simple truth on Alibaba,
in China we've talked a lot about boxed on this show which is an Innovative a retailer that started out selling wholesale Goods today a big chunk of all their sales are own products that they're developing.
One of the founders of Thrive Market which is sort of a online version of Whole Foods in a way talked about.
The overwhelming success of their own products and how you know they were differentiated in the marketplace so that that was a big Trend in those.
You know I think of you up there all the key notes in a lot of the breakouts you did see them like pretty neatly fall into those three big trim.
[33:43] How how do you nod out on jobs pick one so we talked a lot about delivery versus curbside was there any conclusive evidence on either of those.
[33:55] No I think the jury is still out I will say like I have in a pretty flippantly run around saying hey the big winner is going to be curbside that the unit economics really don't work.
For for home delivery for grocery in perishable and kind of the Reader's Digest on my Logic for that is.
[34:16] General merchandise e-commerce is generally what we call a route based delivery like you get 300 orders you put them all in the UPS truck the guy drives to 300 addresses,
and deliver them all and so you know each one of those delivery is paying for one 300 that trip.
And the UPS driver could show up at your house or work any place within kind of a 10 hour window and deliver the goods and it would be no problem.
And fresh and perishable if you order milk or you order ice cream.
You need to be home exactly when that delivery arrive so that you can put those products in a refrigerator or freezer.
And generally the way that that retailers have to do that for most of the country is that to do a point-based delivery which means a guy drive straight from the store or fulfillment center to your house,
and now that delivery has to pay for 100% of that trip instead of one 300th and so,
in general because of that the unit economics are much more favorable to curbside pickup.
And curbside pickup is good enough from a convenient standpoint like a lot of families fine,
super convenient to order their groceries digitally pick them up at their convenience maybe on the way home from soccer practice and they're stored in a climate controlled storage facility and they they get put in your trunk really efficiently.
And that's a really high customer satisfaction experience for most consumers so.
[35:40] Put all that together and curbside pickup is the big win and I still believe that's true but I got to express that point of you do some really smart operators that a bunch of these grocery stores,
and and they're kind of feedback which I do take the heart is hey Jason you're probably mostly right,
but you're actually under estimating the fact that the picking is way more expensive than the delivery and so you know that the unit economic problem is more around,
if you if you have a really expensive pic of 30 or 60 items you then can't afford to do a point delivery,
but that if you have a really efficient fulfillment center and you can get the picking cost down a low enough.
You can put those deliveries on a refrigerated truck and you may not be able to do the
the 300 deliveries that a UPS driver can make in a day but you still can make multiple deliveries,
guarantee tight delivery windows in a climate control truck from a dedicated fulfillment center and so they were arguing that that you know maybe there's more.
[36:47] Communities that have enough density to support delivery than I was originally thinking so I'm I'm starting to amend my thought process I think the clear answer is,
that the world is going to have all of these delivery modalities sometimes you're going to want to go to the store and pick the stuff out yourself and that's going to be your preference sometimes you're going to want to leverage curbside pickup and other times you were going to want delivery and so you know good good retailers
are going to have to figure out a way to support all those modality.
[37:16] And then in the whole kind of digitally native vertical brand startup versus brands from existing companies where where did Jeanette Allen.
[37:27] Yep that that is interesting so the it feels like then the.
Digitally native brands have more Tools in their their tool belt to overcome,
their deficiencies than the big brands do right now right like so you you go talk to the big cpgs and you talk about what their strategy is to infuse Innovation and have a you know a faster pace of new products
and have product that are better suited to the consumer and you frankly get a lot of blank stares and you get a lot of.
[38:03] Kind of the same unfulfilling answers that oh we're going to set up an innovation team or we're going to act as a venture capitalist in and go unifund a bunch of projects,
but you know these big brands have just not demonstrated the ability to get much faster and get much more Innovative and
these big brands that are exclusively selling through wholesale are fundamentally disintermediated from the customer so they do not have the customer preference data to use to
design and execute new products very well and I I just haven't seen any of them you know really like,
clearly articulated solution to some of those deficiencies whereas the the the native direct to Consumer products
have the ability to take advantage of all of the strengths of the direct to Consumer space and when they get to the point where they kind of max out on the scale they can reach direct-to-consumer they they have the option to them in pivot to a
a wholesale distribution model or a blended model or they're in a position to establish a reasonable valuation and get acquired by one of these big companies and so it,
you know why there are challenges on both sides it appears there's more ways to overcome the hurdles if you start out as a new digital native brand then there are
if you start out inside of one of these these big brands at least least for now that's that's how it seems to me.
[39:33] If I come pull the thread on that so we talked about so some of these grocery stores like Kroger creating their own private label or our own Brands but then if I'm a cpg
it it seems like.
That's another reason to go direct other than the channels kind of being complicated to navigate without a team so cpgs going director or is that just not happening in grocery.
[39:57] No no no it so it's often discuss there's not a ton of success stories right and so usually when a cpg tells you about their direct-to-consumer 6s they're going to be telling you about a direct-to-consumer brand.
[40:10] But they're all talking about it and frankly like I strongly advocated and I think you and I have talked.
In general I feel like developing a direct-to-consumer capability and strategy needs to be an important part of every one of these Brands because if yeah.
You you sort of look at this at the moment and you've got a bunch of brands,
dinner depending on on wholesale retailers and you look at the retailers and they're they're super distressed and have them bunch of head winds
their number one tactic for overcoming their head wins is in differentiating themselves from our our friends in Seattle or when I'm soon going to have to say our friends in,
Seattle New York Virginia.
Is to have exclusive products and have owned Brands and said the retailers and brands that used to be you know super synergistic have
are increasingly becoming Frenemies or direct competitors
and it and the retailers are frankly having a lot more success with that at the moment then the brands are so a bunch of retailers are becoming super successful at building Brands we talked about a couple in the groceries Facebook like.
Yeah oh my God I target has one strike three brands that sold over a billion dollars in their first year none of the digital native brands that we talked about on the show have and have done that right and so retailers are getting successful at making.
[41:39] The transition to build products,
and in that world there is a left there's less shelf space for the brands in a world that's increasingly becoming have a winner-take-all you kind of imagine some future when.
When you know we're all going to get the bulk of our purchases from.
In Amazon Monopoly in North America or maybe a Amazon Walmart duopoly there's a lot less points of presents to carry that brand product and so.
[42:07] That brand is going to lose all the leverage to the unit few set of aggregators at the top of the echo system on the less.
They're also able to sell the wrecked unless they can build a relationship direct with the consumer even if it's not high volume and profitable in the short run.
I feel like they need to develop the skills just so that they get some customer intimacy so they can start building more relevant faster,
more agile products and I feel like they they need a lab to test and learn all this digital shelf content and all these digital best practices that we.
Been talking about on Today Show so when they execute at Walmart,
they're not just you know sending an image that they have no way to test and hoping it sells well in Walmart like far better to be able to test all that content on your own direct-to-consumer channel
Gatorade it really quickly and then take a hero image that you know work since indicated to Walmart so for a variety of reasons I think that's an important
a scale for cpgs to evolve and I would say they are they are doing that cautiously and slowly.
[43:09] We haven't done it wouldn't be a Jason in the sky show that will Amazon and we recovered at the top of the show but
I didn't see anyone from Amazon speaking on I may have missed that but sometimes these conferences it's funny people are avoiding talking about it and stay 800-pound gorilla in the room was was there a lot of Amazon talk to at least find the scenes.
[43:31] Yeah so
to my knowledge Amazon really didn't have a presence at the show which on the one hand isn't surprising but on the other hand I would say
the founders of this show have actually been pretty decent at getting Amazon speakers to their other shows now admittedly the speaker's they get are the ones that you don't have the most vested interest in.
In selling their products to the industry so not shocking that
pay by Amazon is happy to go to money2020 and talk about their digital wallet right and
not shocking that that the Amazon Marketplace when that used to be a separate and into the you know was was happy to go to shop talk and kind of Recruit new Sellers and things like that.
[44:18] The but they did have the prime now folks I have spoke at several of the shop talk shows and so you might have thought they would be there,
it would have been fascinating to hear from
some of the Amazon Fresh people are now that you know that the folks responsible for the Amazon Whole Foods in a graichen in and none of them were publicly there I'm sure Amazon secretly had some people there but.
Almost every conversation when you say digital disruption of grocery,
everybody points to the same event that like there was a lot of talk about digital disrupting grocery but nobody nobody was personally experiencing it or nobody was very worried about it until the day that Amazon announced today,
they purchased Whole Foods and that that really sort of Kick this whole.
Disrupt digital disruption of grocery in a high gear and caused by you know almost all the people we saw speaking were people that got hired as a direct result of that acquisition.
[45:19] Mom said they were definitely on everyone's mind even if they weren't there in 4 in in person.
[45:26] Put in the other high like showing it.
[45:29] I think those were the big ones it is interesting that this is one of the spaces that I like doesn't feel like Amazon has one yet and they actually,
probably have some intrinsic disadvantages versus some of the other players so.
I'm by no means prepared to say oh my gosh they're not going to win
Amazon on the Rhone you know dabbled in in fresh fresh,
for I want to say amazonfresh is like 10 years old right and never really got a ton of traction and then after they bought Whole Foods I've been really impressed by how fast.
Amazon's been able to integrate a lot of their digital chops in a Whole Foods and then some test markets like the one I live in
they have some really compelling Whole Foods delivery options and Whole Foods curbside pickup options which are great but the reality is
Whole Foods is a tiny percentage of the whole grocery market and they've you know implemented these tests in a tiny percentage of the whole food so you know you look at the
the folks that Walmart or Kroger is touching with digital grocery versus the amount of customers Amazon's touching and right now.
Walmart and Kroger have a head start now I would argue Amazon the way faster more agile company than Walmart or Kroger and so
you know I think we can expect to see Amazon continue to make up ground but it is always interesting to see see a market where Amazon probably has to try harder than some other folks if they want to win.
[46:58] I don't know. What do you think.
[47:00] It's going to be interesting so you know they are pushing the Whole Foods pretty hard I've noticed in my Prime now recently there
they're kind of integrated Whole Foods delivery right in the prime now in her face which is used to separate set of inventory and yeah I think it's
too early to call account Amazon out of any fight.
no I I totally agree I'm so in and it's going to be fun to have a ringside seat to watch it all play out I will throw one other teas are out there
we did get to talk to several of the friends of the show that have been on the show a number of times before and so shortly after this episodes available will have a couple episodes live from the grocery shop show and we will get some other folks perspectives on the show in the industry and so you know
if you're if you're trying to figure out the the digital grocery space I would encourage you to look for those upcoming episodes as well
and with that this is going to be a great place to rap because we have used up our allotted time so as always love to continue the conversation on Facebook if you have any questions or feel
like we got something wrong we love to hear from you and as always if you love this show we sure would appreciate if you jump on the iTunes and give us that five star review that's the
the biggest favor you can do for the show.
[48:24] Awesome thanks everyone for joining us and thanks Jason for being our Jason Scott representative in the field in Las Vegas.
[48:32] It's it's never as fun without you but you were that you were certainly there in spirit so hopefully next year we'll get to do it together and in total next time happy commercing.
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.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 149 of the Jason & Scot show was recorded on Thursday, October 25th, 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.
[0:25] Welcome to the Jason and Scott show this is episode 149 being recorded on Monday October 25th 2018 I'm your host Jason retailgeek Goldberg
and as usual I'm here with your co-host and television spokesmodel Scott Wingo.
[0:46] Hey Jason welcome back Jason Scott show us nurse yeah yeah yeah.
So if you're at the front should I guess we'll will preface it's been a couple weeks but a show out so apologies to everybody we have been just crazy busy and what Jason's referencing there is
I did a small video for this NC State thing and then end up being in a promotion that they
are nationally a lot of people have seen it so that's been fun we'll put a link to it in the show notes so NC state has the motto which is thinking do,
I am and I'm featured in there talking about they can do.
[1:26] And they are airing at like on ESPN during the games.
[1:30] Yeah when the when the college's nobody watch college football UIC usually during halftime they get two spots that they can kind of do a promotional video about University each University gifts and this is one they've been running for.
[1:45] That's it's totally awesome I'm just saying it's my animated screensaver now so just so you know.
[1:50] It's a little creepy but whatever floats your boat Jason.
[1:56] Not even the weirdest thing about me.
[1:58] Another fun fact is we are both contribute to Forbes you had a really good article where you you went through your Amazon go store the force Star Story.
[2:13] Yeah and you are like some fancier CIO contributor if I'm not mistaken.
[2:21] Yeah if you have the tech Advisory board or some such
and I am writing about vehicle 2.0 which is a framework we've developed its if he for thinking about the future of cars which seems like it wouldn't have anything to do about e-commerce but it's kind of interesting.
The first of all you have a.
Perspective on how fast or how slow this vehicle stops going to go in and then second of all there are overlaps there so for example
imagine autonomous vehicles delivering packages.
[2:54] Yep for sure and I suspect in the not-too-distant future will be ordering a lot of packages from our vehicles and in many cases getting delivered to our vehicles.
[3:05] Yes sir that's good and then the in exciting car news so Tesla's new operating system came out so that that has been fun to play with and a lot of the folks that are in the same demographic issue and I the most exciting part about the parade
this is the Tesla West Nine is they have an Atari simulator in there as one of the new Easter eggs so that you can't do this while you're driving so full disclosure there.
Sadly but I guess safely but it is a lot of fun to play on the touch-screen the various old Atari games,
most fun one probably is Missile Command because he was always super frustrating to have to deal with that track ball and you can never get
faster left right it in your little basis would get destroyed so now you can kind of do a two-finger thing and it makes it a lot easier to save your bases file.
[3:57] I am always jealous when you get a new upgrade because I just think that's the coolest thing that you're you go to bed and wake up in your car has been upgraded it makes me want to like go out and get a fancy new cup holder or something for my car.
[4:10] Yes you could. You could get a Tesla you should.
[4:14] Yep despite the fact that my wife and I have no commute in the car is almost exclusively used by a three-year-old shirt.
[4:21] Call Anna Jason you got a lot of stuff you can be doing here either this week or next week.
[4:31] Yeah the the these next two weeks are super busy for me on the personal front this is the busiest week of the year for me tonight is my wife's birthday,
inside of a side-note shout out to you honey happy birthday she most wanted to celebrate it by having me catch up.
With the podcast cuz she knew the listeners were frustrated with the,
the Gap we've had and her main request for her birthday is she wants to go to the Star Wars experience in Orlando on a joint vacation with the windows so we're going to have to.
I think we're gonna have to find a way to make that happen.
[5:13] Absolutely that is one birthday gift I'll be happy to help make happen.
[5:17] Exactly and then it's a crazy fertility week apparently in my family because in addition to my wife's birthday.
Tomorrow is like my mother's birthday my mother-in-law's birthday and my father-in-law's birthday.
So so we're doing a lot of birthday celebrations this week and then Sunday I shoot out to grocery shop which is this new trade show in Las Vegas this will be the first year.
Mainly focused on digital disruption of the grocery category.
It's put on by the same folks that started money 20/20 and Shop talk.
And I think they were hoping to get like a thousand attendees in this first year and they actually sold out capacity of the venue at 2200 people.
So it's it's shaping up to be a really good event and I'm dramatically Overexposed at the event so Sunday night I'll actually be doing the keynote interview with Ashley Buchanan who's the chief Merchant at Sam's Club.
So I get to talk to him about digital at Sam's and we'll talk about scan and go and some of their partnership with instacart and some of the other things they're doing hopefully I'll have some.
Samara tough questions I'm doing a piano on.
[6:36] Brands using product content help build a brand since we got.
Folks from the Boston beer company which is like Sam's Sam Adams we've got Chobani what unit or disrupted the the yogurt space and we've got the wonderful company with the almonds and pom wonderful Fiji Water and all that stuff.
And then I'm doing a panel on the evolution of the cpg retail relationship we've got constellation Brands which is.
A big house of brands in alcohol space I think has Corona amongst others you have a elf Beauty and then a Fairway Market which is a great bespoke grocery retailer in the New York City area so.
Some topics that are near and dear to my house heart and I'm looking forward to seeing everyone at grocery shop and the.
I do have plan I know you're not going to go to join us so that always makes me sad but I do think we're going to get the opportunity to record a couple shows from there with some of the the grocery industry makers.
[7:38] Next year they're going to Rebrand the sink to Jason talk or something like that cuz it seems like you're just doing everything there.
[7:45] Yeah I think that was actually there original premise and then they found out like that the only for family members I could possibly get to attend we're all celebrating their birthday and so they decided to scrap.
[7:56] Expanded to smother people in the loss of that that looks good I look forward to seeing all the social media that comes out of that and and he ran to the interviews any trip reports.
[8:11] I do so,
we've talked about Amazon go on the store on the show we did talk after they open the first go store in Chicago they have open to other go stores in Chicago so now we have a.
A fleet of ghost tours and then this week or last Thursday Google opened a pop-up shop shop here in in Chicago for the holidays.
So Google has done pop ups for several years but they've always been in New York this is their first year in Chicago so I was eager to see.
What that look like and I I went and visited it this week so I'll talk about that in just a minute and then.
They have announced their first permanent retail store in the US and that is going to be in Chicago there's no official date on when that's opening yet so we're continuing.
To watch for updates on that but I'll be interesting to see what a permanent Google Store looks like but the pop-up is really sort of.
[9:12] Very similar to pass Google pop-ups it's it's focused on the Google Hardware products so the pixel 3 phone their new home hub which is there a voice assistant that has a screen built-in so it sort of.
Competing with Amazon Alexa show.
[9:32] They you don't have a a couple cool accessories I've never really smart a wireless charger for the pixel phone.
So you know you go to the pop-up they have all the products they had them on launch day.
Which would which is kind of cool as the first place outside of Verizon you can get the pixel 3 phone.
And they set up a couple of fun vignettes to sort of demo the capability so they have sort of a.
A fake record store you can go into and play music using the the Alexa assistance in there that their new high-end audio Fidelity speaker.
You can go into a tree house and do a bunch of home automation stuff so you can you know give commands to Google and you know see the shades in the tree house go up and down or change the lighting in a few different things.
And they have a kitchen vignette and in the kitchen vignette you can have a bunch of Easter eggs you can give commands and it'll like pop open a drawer with candy in it and some stuff like that so.
Some some fun little vignettes to kind of get you experimenting with a Google product but sorta in typical.
[10:44] Pop-up shop fashion you know it it really felt more like some sort of Museum exhibits where you could go in and try products rather than a working retail store.
[10:57] And you know the it was very sales assisted experience you know there more Google employees in the store then there were customers.
[11:06] You know if if you are specifically looking to get Hands-On a Google product it was great opportunity to do that but I'm not sure as a pure retail store.
[11:15] It was all that that interesting or or Works particularly well and in my mind the big change from previous Google pop-ups was just sort of the.
The visual treatment so in the past they've done he's really kind of techno treatments with a lot of like.
Animated light things and fiber optics and you kind of got a very sort of Tron feel from the the Google pop-ups in this Google pop-up was a much more.
Sort of the Vintage organic feel so you know instead of a house they had a tree house and they they don't sell these other they should they they're like merchandising all of the.
The the phones and he's cool Google tool boxes that they made for the store and so is very white.
Sort of organic store with a fake tree in the middle of it and it was two stories and so if you live in Chicago you're interested in some Google products totally worth we're checking it out there are a couple features in the pixel 3 that I'm super jealous up as a.
IPhone user they have dramatically improve new spam telephone spam filters which.
I feel like I'm getting a lot more telephone spam so that seem cool and they have a great new visual search built into the the camera and incredible new will light features for the camera that seem to be class weaving.
[12:40] Awesome I don't want to.
Get you an agitated but I am ambidextrous and my pixel 3 actually just arrived today and I'm going to crack it open after this podcast so I'll do it boxing next week and tell you about all the awesome teacher missing.
[12:57] Exciting I I probably will add one of the beat to I think it is going to be fun and if you have already gotten one spot I do suggest you get the the Google pixel.
It's really smart and clever like unlike traditional wireless chargers it recognizes each individual phone and you can have different settings for each phone it basically turns the phone into
a mini Google home hub when you put the phone on the charger it has a bunch of unique features that
I feel like everyone else should have thought of but give always the first ones to implement.
[13:31] Awesome I didn't know about that so I appreciate that
cool wall decals caught up on outside and it wouldn't be a Jason and Scott show without.
Amazon news your margin is there a opportunity.
[13:59] Yes Jason said at the top of the show it's Thursday October 25th and.
After the market closes today Amazon announced their third quarter earnings and just kind of position awareness if you listen to podcast
setting up for Holiday 18 and
I like good stuff going on in a little while kind of shaky here in the last couple weeks the stock market's gyrating a bit tariff kind of stuff is accelerating were to talk about some things there later than the show
around China impacts so for me this is a really important set up cuz this is kind of the one the last data points work
it going into holiday 18.
Add a reminder for everybody we tend to think of e-commerce as Baseline going about 15% 1/5 overall retail tubilee grows low-single-digit so 4%
so with that being said Amazon did announce their ornax and it's kind of a mixed bag so he was a little light and and I'll go into why but then profitability exceeded expectations so
as of the recording of that show the stock is down a tad and a smoke so.
[15:20] When you peel the onion on on the top line revenue came in at.
30% year-over-year growth is 56 billion and that was about 1% will at the street was looking for so that one person.
Turns out to be about a billion dollars so what's a billion dollars between friends who was largely on the international side
Amazon doesn't really give any details about things but reading the tea leaves their you know it feels like there's
there's some stuff going on they did annualize some things like suck exertion of some changes they made in India
but then also you know I think a lot of the Wall Street analysts are or feeling like this is
Felix of tariffs and packed so when item is sold from China and us that counts as
it's where the seller is that that counts is international Judy and Skip Bayless so so that could be Amazon on the little bit of that passes Air Force they're going on
Ding and revenue little bit more when you look at North America and you take out just when you just get the retail North America that snow cloud computing.
[16:33] Whole Foods is a 25% begin to put this in perspective Amazon overall grew about 30% even that it's amazing you know huge 800 lb scale
North America grew at 25% and then
International only grew about 15% which is a pretty steep deceleration from last quarter is 27% of us continue to do really well that 46%
and a physical stores came in right at expectations one of the stupidest things we like to talk about on the show is the advertising that continues to grow
triple digits that grew a hundred 23% and is now 2.5 billion dollars and
yeah that that just kind of looking at the trend overtime book with this the show notes so you'll get you one of 18 at 132%
U2 under 29% you 323% so little bit of a slow down but really just continues to be white hot
that eternity Jason for some other highlights.
[17:42] Yep it's always hard to talk about a Slowdown in growth when it's still over 100%.
That's a first world problem for sure but it's it was sort of a bifurcated story you I got the,
the revenue was a slight Miss for the quarter but earnings for the quarter were really strong so they were.
2.8 billion for the quarter which is the their highest earnings ever that means that's four straight quarters that they've earned over a billion dollars in profit hopefully that.
[18:20] I was just going to say I hope I hope that finally puts to bed the the silly myths that they're not profitable.
That is wildin more profitable than they were just a short time ago so that is like 10 x their profit from a year ago
and that earnings was a pretty solid beat on the market expectation so on the one hand you go man they say we miss Revenue but they blew away earnings that should be a great story
but then you know they gave their guidance for Q4 which was a little soft and disappointing to the market
and the ramifications of that is this after hours trading their stock took a meaningful dipso their stock was down 9% tonight,
if that holds tomorrow it is conceivable that Microsoft which had a good earnings report yesterday
well at least briefly pass Amazon is the second most valuable company so I'm not sure that says anything particular negative about Amazon but that's a pretty impressive run for Microsoft
will get themselves on the mixer.
[19:31] There's a little bit of overlap so one of the reasons Microsoft doing well is azure which is their competitor to AWS
it seems to be really doing well and and kind of
sticking out of a definite second position and nudging out IBM in Google that were trying to get that that second position by the Amazon seems like seems like it's
pretty quickly becoming a two-horse race between Microsoft and Amazon.
[19:56] An in general Microsoft is still way behind in Cloud but.
As a result able to grow much more quickly and of course in our category of retail what are the one category where
you know Amazon faces some headwinds and their major retailers that obviously don't want to use AWS and there's some big powerful retailers like Wal-Mart they really discourage their vendors from using AWS so
retail is one one particularly lucrative category for Microsoft azure.
[20:26] Yeah on the.
On the marketplace side one of the metrics than Amazon does discloses 2% of orders are units that came from Marketplace sellers last quarter it was 53% and it held steady at 53% again.
Don't spend picking up about 1% every quarter so stabilize here at 53%.
[20:53] Yeah and then there you know there after their names there's always the Q&A with a couple of the Business Leaders and,
I'm always looking for tidbits there and one question that that Amazon got asked is about ads on the Alexa platform and I was.
Happy to see there the guy that weaves investor relations for Amazon say that that they have no plans to,
put in the ads on the Alexa platform in the day exclusively want to focus on it being a good customer experience so.
Not shocking but but good to affirm that that they're not going there.
[21:40] The and then you know kind of following up on the analysis of of the quarter I think you know people are definitely looking at that International softness and you called out like that they laugh their suit.
Acquisition so that that probably had a material impact on International growth and then there's this big.
Indian holiday it's right on the cusp of a shopping holiday that's right on the cusp of Q3 and Q4 so.
Last year it was in Q4 this year it's in Q3 and so they're cute their comps.
Mirror over a year are challenge cuz the holiday was in in one year and not the other.
One piece of speculation is another report out there estimating the size of the Prime Membership.
And that they are reporting that that growth in frying is dramatically slowing down which is,
not a huge surprise
you know the Amazon themselves they said they have over a hundred million Prime households and that's a global number but in North America there's only like 120 or 240 million households depend on how you count so it
and it has to be getting harder for Amazon acquire more.
Prime households and if it is in fact true that they're requiring us households than that certainly would have an effect on on future quarters growth so that's going to be an interesting thing to what.
[23:09] Yeah yeah once you've kind of have every household on Prime then it becomes a
saturation game to see the one thing on the fourth-quarter guides that you mentioned is it was a little soft on Revenue but but about
8% off on the prophet side and Amazon's not being specific about it but one thing they did announce that we haven't heard on the stove is there
increasing everyone's wage for warehouse workers to $50 there's a lot of controversy around this so so this was a reaction to a lot of politics going on Bernie Sanders has been kind of lighting them up these ladies kind of
but I think as an ox we're kind of silly things where they'll take Jeff bezos's net worth in / 365 and don't say that that's how much he makes a day or so.
[24:05] Forgets the 20 years where he you know took tons of building Amazon but whatever I do dress and
there is a point there that there is a large disparity between his of the top echelons of Amazon warehouse workers to Amazon straighten that out by
$50 an hour doing so they get rid of stock options and some other things that they don't like that
I can't win so that in the lot of people trash come over getting rid of those things so that being said it is a prematurely and talk to
literally hundreds of thousands of employees so a lot of speculation that.
Big head wind on the bottom line going in the fourth quarter is going to be that that wage increase Warehouse her.
[24:52] Yep and I I think they were specifically asked if that it was going to have a material impact and Amazon didn't comment on
the exact impact of the wage increase but that that wasn't pretty like from my view a pretty Savvy move
you know there's been this trend in retail for a while you don't return a really competing for talent you know unemployment is low so it it's hard to get people and we've seen both Target and Walmart you like dramatically increase there
starting wages in an effort to improve the quality of the workforce and then you know Amazon came in and LeapFrog them in and Amazon is competing for four people at this point to fill those Protomen centers in so that like I'm sure there was some political advantage
in doing that like that you know I do think in a lot of ways it's the right thing to do I was here for the employees.
[25:48] But it also just is a capitalistic thing to do in terms of making sure that you get the input the workforce that you need in this competitive environment so
be interesting to see even what economic impact it has
but the other question that they got about the financial impact in this going to happen thank you for is
the u.s. postal rate increase that is coming and am I was pretty clear that they did not feel that the
postal increase was going to materially affect them into me this is another one of these sort of funny ironies
[26:28] You know that the president that appears to have some animosity towards Jeff Bezos adopts an issue and then some some which situation gets past like the sales tax
Supreme Court ruling or now this postal rate and
you know that you like him superficially is tweeting that this is going to have some negative impact on Amazon Amazon.
[26:52] Has more ways to deliver packages than everyone else they have more of their own package delivery and so the operations folks and Amazon or like no we're just going to be smarter about which of our delivery vehicles we use only think we're going to be able to absorb that rate increase
and of course no other retailer has those levers to pull in so like the
postal rates going up actually is a competitive Advantage for Amazon versus the rest of the market that doesn't deliver 15% of their own packages like Amazon does.
[27:24] Yeah to that vein couple of tidbits so
there's a lot of video surfacing of Amazon order to something like 20 to 40,000 Prime delivery dance these are really nice there these Mercedes sprinters
and I don't know about you in Chicago but in the Research Triangle the Raleigh-Durham area I probably see four or five of those a day right now and it started where they were going to large corporations so
where were there a lot with my stuffy and your folks are reporting to Neo at Cisco and Citrix and MetLife.
All these large employers there seeing the Amazon big ants go there a couple times a day and then now it seems,
large Prime neighborhoods deserve this kind of replicating the FedEx Ground model to FedEx ground
not realize this but the next error is W-2 employees FedEx Ground as a 1099 network of local stores that are given
license to FedEx brand and they operate ground on behalf of their local businesses so,
Amazon your kind of started.
[28:35] This mix of some fulfillment center employees are driving these things and I talked to several of them and the ones I've talked to her are full on Amazon employees
but a lot of them also are these 1099s ramazan will set you up in your own little 1099 delivery to you
certain number of packages and effectively a dollar per package so your point pretty fast meeting at Amazon that really wrapping that up.
A couple of other pieces of Amazon news not necessary related to earnings but Amazon did launch a new credit card in partnership with Amex this
I think maybe you last week that was targeted at small businesses and it has some interesting features it's a no fee Amex or if the first time you can get a free MX
They sort of have variable terms for each purchase that you can select at the time of purchase in Amazon so that so there's a unique user interface in Amazon for purchases better.
Completed with this credit card and so you can say for example that I want to use my Amazon reward points to pay for this purchase or you can say I'm going to,
pay back this credit card charge in the next 30 days and you get 5% back for doing that or you can select these 90-day terms.
You know take 90 days to pay for the purchase so kind of an interesting tighter integration between Amazon and Amex.
You know what I'm always interested in those kinds of tie-ins because you know payment is such a.
A potential competitive advantage in the e-commerce pay so it's interesting to see Amazon doing that.
[30:26] I mentioned earlier that we now have 3 ghost tours in Chicago we also had the the first go store open in San Francisco this week so these things are rapidly opening.
Side note kudos to the Amazon real estate team they've actually done a phenomenal job of hiding a lot of these stores from the media which is you know.
Carefully carefully watching property managers to figure out where all these stores are and I I know it's Amazon's been a pretty good job of surprising us all with some of these openings.
I had an interesting little debate with some folks on Twitter this week.
[31:01] You know as as it seems clear that they're opening a network of these stores and there is that Bloomberg report that they're going to have it three thousand of these go stores buy.
Doug Stevens a retail author and and subject matter expert me to tweet saying.
You know that 7-Eleven is now on the clock.
They're going to get dramatically disrupted by Amazon and they're really not ready for it and I sort of made a smart alec or reply.
You know while I've never would tell anyone not to worry about Amazon I'm not sure that first and foremost Amazon go is likely to affect 7-Eleven I said that.
You know probably print amazed year or hobo pie.
Are at much more risk from the Amazon go store then 7-Eleven is and my contention is the ghost or is really a restaurant.
You know whose main mission is to get you lunch when you only have a half hour lunch break and that it's it's not really a competitor to a traditional convenience store in so some folks on Twitter jumped in and we had a we had a good healthy debate about that then.
Obviously the Ender Wintergreen I'm right.
[32:11] Or they got blocked.
[32:14] Yeah alright I just scream them exactly a side-note top three categories at 7-Eleven.
7-Eleven sells a ton of gas which Amazon go stores don't sell yet 7-Eleven sells a lot of tobacco which Amazon doesn't sell
at all and then they sell a lot of alcohol which Amazon go only sells in one store in Seattle
so you know where food is in a growing part of 7-Elevens business it's not even a top 3 category and it's it's like 95% of the skews in this this ghost or so that's why I think Joe is much more of a restaurant than a traditional convenience store.
[32:53] When one last reminder is it's been a little over a year since it was on announce their hunt for hq2 so Alaska chelation is that we should be hearing about that here in the fourth quarter.
Amazon said it would take about a year now it's firm you this involves a lot of details and local governments and stuff so I.
Adders reversing a ramp up of speculation around hq2 stuff I'm kind of interested.
You know there's a lot going on in Chicago not pick on Chicago's great City.
For all the other stuff they've done the kind of event Seattle York and Chicago but now they're just really pouring it on in Chicago I wonder if that so I could slide indication that maybe Chicago's kind of pulling into one of the top.
Possible locations for hq2.
[33:50] Yeah it would be interesting with my wife and I were driving around town today and there's a ton of trains building conda commented like do the the condo developers know something about Amazon that we don't know.
That. Why do you think Chicago is a interesting market for Amazon and you know it's a good test Market because it is it does.
I have a broad representative demographic
I personally would be a little surprised if it's here but that being said I suspect we're all going to know pretty soon.
[34:28] And then you use it surfaced at nursing little spot between Amazon and eBay.
[34:34] Oh yeah
so you may actually filed a lawsuit against Amazon and it related to Amazon potentially trying to steal top Marketplace Sellers from eBay and the reason I was a lawsuit is
the allegation is that the way Amazon was doing this is they
very systematically infiltrated a private
chat board for these eBay sellers and created a bunch of fake personas and you know what we're reaching out in Contin privately contacting sellers,
through like a pretty sophisticated alleged hacking of this this site eBay communication platform and
you like it it seems like they have a fair amount of evidence it is true it's a little surprising to me that there's someone in Amazon's position would do,
you know I would certainly presume that wasn't a corporate directed to do this but that you know someone had enough autonomy
to do this and can put off of that scale it would be interesting so I don't know what the real story is there but it's going to be fun to watch the lawsuit play out as a an interested Observer.
[35:55] Cool so that that kind of wraps up our Amazon part of the show and then we had a lot of listeners that were sad that we we took a little break there so apologies for that and then two other topics that it looks really wanting this hit on IR Sears
and then this really big change to the u p u which is squarely in your.
[36:18] Your wheelhouse Jason saw the Sears side there was kind of two buckets of questions we got from listeners one was really you know some folks selling on the Sears Marketplace or are you in this would apply a guest to vendors
yo what what should I do to Sears in her chapter 11 bankruptcy
what percentage of the time companies come out of bankruptcy other times they don't and when they don't they're they leave creditors sitting there kind of holding the bag and a lot of times adders
even a Marketplace seller would be considered under their left holding the bag
and then the other thing so I'll tackle that one in the other one Jason was over all kind of Redan what's this really mean for retail
my guidance would be
you know it's all a risk tolerance question and Anna scale question so if you're you know if
if you did have a speed bump and you lost you know usually is inside of trailing 30-day payment type cycle
skiers of material enough that you did lose 30 days of that cash because of a bankruptcy if that is you know pretty.
[37:32] Material to your business to be getting packs it out of 10 percentage I would start trimming my sales for selling on Sears and reduced to a tryst September set
yes it was I think that's the prudent thing from a risk management perspective when a company goes into bankruptcy to start limiting your risk,
now if you're someone that that is super risk intolerant and
it is going to bother you make me time to phase out that Marketplace because and and see what happens with the chapter 11 you can always come back and it when the risk is diminished so I would kind of you know.
Figure out your risk tolerance a spectrum of hey I go bungee jumping off Bridges as a super sweet.
Each risk for breakfast all the way to I don't own stocks I keep cash under my mattress and level and then apply that to to your.
Your strategy for selling on Sears and also put it through a filter of materiality is is this more than 10% of your business or not.
[38:38] Yeah that seems like totally Sound Advice I can't believe you you gave out my mattress strategy online though.
[38:47] Yeah they will talk about inflation some other time.
[38:53] It's actually.
[38:55] You know every time
one of these is a significant retailer goes under there's always this question like who's going to benefit from them going under or what what's the impact going to be on the rest of retail you know Sears is still like a 10 billion dollar a year retailer in so
that you know it today.
Assuming they don't emerge from the realreal organization and and retain a significant portion of their.
There are 10 million dollar Revenue run rate a bunch of other retailers are going to benefit.
[39:31] The thing I like to point out is Sears has already donated most of its market share to the rest of the market so you know.
There there was a time when they were 40 billion dollar retailer and they've been slowly a roading since 2006 and they probably have donated.
Over a hundred million a billion dollars in in share to other retailers.
Over these last 12 years or so and so you know the the bulk of.
[40:03] The benefit of them going out of business like has already paid off two other retailers.
And you know there's a lot of analysis that goes in a who's going to benefit most from these stores closing and you know who has favorable,
merchandising categories that are similar to Sears who has similar geography to Sears to benefit from the.
The specific store closures.
But in general I think if you look at the macro Trends I I sort of have this premise that were really seeing a bifurcation of retail and where were essentially seeing.
A few huge aggregators that focus on selling every product that's available in doing so at a really low price and super efficiently.
And if that sounds familiar to you in North America and that's because I just described Amazon.
There would be a good argument that Walmart is also one of those aggregators that that's going to continue to do well and in the future we might have a duopoly if he's too big.
Big aggregators and then everyone else is in a really focused on selling curated assortments to specific.
Target audiences and really selling exclusive products that you can't get from the big aggregators in so those big aggregators are.
In the best position to benefit when.
[41:24] You know someone else that used to win based on assortment and scale goes away so like obviously Amazon Walmart or.
Going to take a significant percent of that share that Sears losses in Sears specific case because of a big portion of the revenue is soft goods at a low price point poles is particularly well positioned to.
To get a nice benefit from the Sears stores going away and because appliances what a big chunk.
Of Sears Revenue Best Buy is also in a position to get.
A nice lift from the the the Sears market share lost so I think those are the retailers.
Will see benefit the most but you know.
At this point we're not losing the big one of the biggest retailers in America we're losing eyeshadow up there once was one of the biggest retards in North America so I don't think this is going to be
a title change in the Retail Landscape by any means I think you know it's more sad because of.
The history of Sears and what a dominant position they want had and how important they were to the evolution of retail in North America and frankly in many ways how important they were to the actual development of North America.
[42:41] Anderson so you can take off the mattress all the money from of your mattress and put it. It sounds like.
[42:48] That probably would be far from the worst investment I ever made.
[42:53] What will save that story for a future ship so that's that's good perspective now tell us about this whole Universal Postal Union treaty and what's going on.
[43:07] So this is a very little known thing that suddenly is getting a lot of ink so
you know back in 1874 at the treaties burn the world establish this thing called the universal Postal Union later got rolled into the to be sort of a subsidiary of the United Nations and then the idea of this poster 3D was
that every country you would agree to uniform rates for postal delivery so when you're
in France and you want to mail something to Germany you could know in advance what the cost would be to mail that and the cost ought to be,
the same for mailing between every country and each because that mail requires the,
cooperation of at least two Postal Services the one that picked up the package from you and hands it to that that foreign country and then that terminal country that the country that gets it and has to deliver it.
[44:11] They ate their handling of that package the treaty
agreed on how those two postal entities would share the the rates for that shipment and they agreed that that the international shipments would get equal trip treatment with domestic shipment so if the.
Is the terminating country you know couldn't for example deliver International Post much slower or less reliably or with West tracking are these kinds of things.
[44:44] And so it sort of made it very easy and possible for 4 people all over the world to mail things to each other and know in advance how how much it was going to cost and have
pretty good confidence that it was going to get delivered and then overtime this treaty added some other useful things they added some standards like a big stamp should be they added electronic data interchange so that the the
Post Oak interchanges could be more efficient and they added some you know things to catch fraud and crime and and share databases and things like that so so we've all had benefited for a long time from the Disposable 3D
it's got a hundred and ninety-three member countries in it now.
[45:26] So if I feel like that's that's good for the world it's super important in a lot of e-commerce.
Pretty good cross-border e-commerce still gets delivered via the post office so there's a lot of artists that make beautiful art here in the US and they sell it to people in Europe in the primary way they deliver that is.
They mail it via post a post so the one sort of real challenge is,
did there was a clause built into this postal treaty that essentially said developing nations,
would get charged less terminal fees.
And so what that essentially said is more developing poor or countries would not have to pay as much
to have their their post delivered by richer countries and so if you're in one of these more developed countries
you are obliged to accept packages at a lower cost from a developing country and if you lost money delivering that the way you would have to make up that money is by charging the people in your home Market.
More for postage and like there's probably a good argument that that.
[46:43] That mechanism for developing countries was probably fair and had some benefits and made it easier for more countries to participate in the treaty, one of those countries that was flagged as a developing country was China.
And the treaty is super slow and it takes a long time to change
like I think there's not a good argument that China should still be considered a developing economy for purposes of this treaty but but they were and so what that essentially meant is
that a seller in China could sell something on Amazon to it to a buyer in the US and they could very cost-effectively,
male that that good via
post and frankly it was much cheaper to send something from Shanghai to San Francisco then it was to send something from Chicago to San Francisco and ironically that that seller in Chicago selling the San Francisco was
having to pay a higher postal rate to subsidize that cheap delivery from that Chinese seller so treated this really unfair situation where
Chinese sellers had a much lower cost of postal
delivery for cross-border trade then did for example American companies and so a lot of people felt that was unfair and so now the Trump Administration is threatening to pull out of the treaty,
because of that that fundamental unfairness which frankly totally agree is unfair the problem is.
[48:13] If we do in fact pull out of the treaty.
What that also means is that all those sellers in the US that want to ship via post anywhere else in the world can only do it if the United States negotiates a individual treaty with a country you want to ship your goods to sew.
[48:30] That that potentially would mean we need a hundred and ninety-three postal trees that we have to negotiate one and one with each of these countries,
many of those countries we don't have an ambassador with right now so I guess it would be a big Challenge and so while I think pulling out of the upu fixes this this.
Fairness imbalance with China
it's going to create a bunch of new headaches for people in the US that do cross-border trade and so what you know frankly the best out come here and what what I think a lot of his hope is the case is Milli by threatening to pull out of the upu we could put.
Pressure on the the governing bodies of the upu to sort of fix this this China Gap
to keep us in the treaty and so hopefully this is just some sabre-rattling it causes them to rethink the developing nation clause and we stay in the treaty but if we do pull out that'll be you no good news for some people that are competing with China but it'll be bad news for a bunch of other US base sellers.
[49:32] One of the companies that seems potentially most impacted is wish so
Bocas wishes Marketplace are Chinese sellers Supervalu oriented so they're not using FedEx or anything like that
they are using the postal system and the wish founder was actually kind of saying to you earlier point about it is kind of ironic that.
By raising the postal rates it actually kind of helps Amazon versus other retailers that this is another interesting kind of example actually oddly benefit Amazon
because you know now there won't be the goods from wish that you're competing with
Amazon isn't the middle sister where they bring products are from China on boats called Dragon Boat so it'll have to get a lot of their goods they skirt this this
this just don't understand how that works correctly.
[50:25] Yeah. You're exactly right and this is again the biggest sellers I actually have more options right and so even
and I don't know how true this actually is Betty wish claims that hey this isn't going to be you know to join material to us because we are selling enough stuff from China to the US
that we can be a cost-effective freight forwarder so we can put all those small
packages on our on boats bring containers over here and then dump them in the US Postal System to be delivered domestically and not have international right and because we're a big seller we have enough volume to aggregate to do that
where as you know smaller sellers wouldn't wouldn't have that option so remains to be seen whether which will be able to
follow through on that if we pull out of the upu treaty but like certainly it's your point Amazon.
[51:16] Already doing that and there was a I think Jason Delray did an interview with the CEO of wish and he had a funny comment like when the
the Diplomat talk about pulling out of the UVU one of the reasons they say it is it's totally unfair the US Post Office is losing three hundred million dollars on.
On postage as a result of this deal and the wish CEO offered to pay it
and obviously like that's not the the total cost that's lost from from this this imbalance but it I thought it was a funny snide remark.
[51:57] Hearing you describe it almost could be an eBay proxy on eBay benefits from a lot of this stuff too so it'll be interesting to watch that and then in the world that talk a lot about ePacket do you know what that is and if it's a fact about us.
[52:12] Yep like so that is a specific postal product and it
if I'm remembering right it's indexed to the upu rates but it's not actually governed by the upu rate so it would be
possible for us to change the ePacket rates without pulling out of upu but it would require the US Post Office to change
some of their their pricing policies and I think that might require a vote of Congress if I'm if I'm not mistaken so it's a
a slightly special case but it basically is indexed to the rest of this problem.
I'm so it's all it's all going to be interesting to watch like I never thought I would get a chance to talk so much about the nuances of international postage systems.
I think my my father-in-law the stamp collector would really enjoy it.
[53:09] And that's going to be a great place to wrap it because it's happen again we've used up all our a lot of time as always
if we got anything wrong or are you have further questions or want to discuss anything from Today Show would love it if you jump on Facebook and leave us a comment will try to reply right away as always if you benefited from the show
now would be a great time to jump over to iTunes and give us that 5-star review
if you hate it today show Scott's a personal cell phone number will be in the show note so you can give him a call and let him know.
[53:44] Absolutely look forward to hearing from everybody thanks for joining us everyone have a great week.
[53:49] And until next time happy commercing.
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.
Episode 148 of the Jason & Scot show was recorded on Monday, October 1st, 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.
[0:25] Welcome to the Jason and Scott show this is episode 148 being recorded on Monday October 1st 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host,
[0:41] Hey Jason welcome back Jason Scott shirtless nurse well it says you have a special treat for you this week we.
Jeff Bezos says you know is one of our top listeners and he knew Jason was in New York last week and he thought that would be a good time to open an exciting new store
the four-star store in Jason Our Lives always in a city on a new Amazon thing opens a reporter is going to give us a trip report today.
[1:10] Yeah I know it's super excited to talk about a 4-star I'm sad because the last show we were together so now I'm having to get used to the the separation and doing it remotely against God.
[1:23] I know I know well I'm sure we'll see each other next couple years.
[1:27] I'm looking forward to it already.
[1:29] Cool let's kick it off by so you know you and I fall asleep closely maybe not everyone else's is obsessed with the Amazon physical stores
let's kick it off once you give us an overview of the different store formats that are out there.
[1:49] Well so I think the first brick-and-mortar store than Amazon ever opened was probably the Amazon bookstore the original one in the University Center in in a suburb of Seattle.
Now I want to say there are 17 or 18 of the book stores open.
Instead of this is like the.
They do Intex sell books they also sell Amazon Hardware in the store some of the key unique concepts of the store.
[2:21] Amazon has Dynamic pricing their pricing on a line changes all the time they want to offer the same price in the store that they do online so the store has no price tag so you have to use the Amazon app and scan everything in the school or store.
To learn what the price is when you make your purchases you get in line at a traditional cash wrap but instead of paying with a credit card you're highly encouraged to use,
the Amazon mobile app to check out using your Amazon digital wallet so they have kind of a.
To my way of thinking convoluted High friction.
Checkout experience and I expect we'll talk about that more and there's a lot of speculation about the purpose of those book stores.
It it seems unlikely to me personally that that Amazon has identified the dead tree book category is a category where they desperately have to get more market share than they were getting online and so they open.
Book stores because they thought that that was the category the world needed more of my my promise has always been,
that Amazon has these really successful Hardware products like the Echo and the fire and the day recognizes that they needed a demo environment in a customer service environment for those and that the the books were kind of.
The decoration around the Amazon Echo Store if you will.
[3:50] And then what other formats are there out there.
[3:55] So a couple formats cropped up after that.
Amazon head-to-head Amazon Fresh for a while and today you want a couple of these Amazon Fresh pick up locations in Seattle so these were,
places where you can order your groceries from Amazon Fresh and instead having them delivered you could drive through almost like a bank teller.
I drive through bank to our kind of situation and they would put your groceries right in your trunk,
they're very fast service level so you can get your groceries delivered like 30 minutes after you place the order these two stores.
Open shortly before Amazon bought Whole Foods so this at one point was there.
That you know what like the tip of their Spear of their brick-and-mortar grocery strategy and then of course they,
they are upset the industry by actually buying a brick-and-mortar grocer.
So they they have of course they have the Whole Food stores is another Amazon format and they,
they made a lot of progress in digitalizing I think I just joined a new version of that were there.
[5:03] The grocery store so prior to the acquisition you could not find out what Whole Food carried in the individual store you cannot see inventory now you can shop the whole inventory of all the Whole Food store,
they've added a ton of omni-channel feature so you know Whole Foods delivers.
In many markets they have curbside pickup I would very fast service levels in in mini markets they've integrated
Amazon Prime into the Whole Foods experience so you you get discounts on product of your Prime member and you are now using,
your mobile app in your barcode to get that Prime discount when you checkout at the front Whole Food store so Whole Foods is there only one of those Concepts and then.
[5:47] Inside of many of the Whole Foods Amazon has a hardware pop-up shop and so there now 37 or 38 of these Amazon pop-up switch is a,
format you know. Dedicated to the Amazon Hardware so that's mainly Echo fire ring,
antonym of amazonbasics products and as we know that those are all expanding lines they're adding new skis used some of these pop-ups are not in Whole Food stores,
and then not included in that count Amazon has also done a shop and shop inside of a bunch of Best Buy stores that has a lot of these physical things,
so those are is far as I can remember where the main,
Amazon brick-and-mortar formats leading up to this this new Amazon 4-star store that just opened in the Soho neighborhood in in Manhattan.
[6:43] Cool so it's good over you so give us an idea of what.
What it's like when you walk in this thing
one thing I saw online a lot of people are not questioning the name for Star it's almost kind of like why not just have five-star stuff so I would love to hear your thoughts on that and then you walk in and give us a lay of the land is a
categorical or some people say it's a bunch of random stuff I would never buy just kind of all jostle together I love to hear your kind of like a little tour of what you saw there.
[7:16] Yeah they got some merchandising is currently in the eye of the beholder we haven't explained it to her listeners
the concept behind the four star store is that everything in the store has earned four stars or more on the Amazon platform,
or is a hot seller or is a new and trending products,
so it's essentially it's their taking these products that are doing really well on the Amazon e-commerce platform and putting them in a physical store format and so yeah you know.
Haven't given a lot of thought to the name the.
You know you're right like it's open a misinterpretation that it's tough that's rated for not five-star it if it really is meant to be four star and above.
In many of the products in their likely aren't 4-star because they're their new new trending products as well so so the.
The merchandise in the store is a little broader than the name might imply it's a 4000 square foot store which of the similar footprint to the book stores,
and the physical fixturing in the store in the signage in the graphic elements are all very similar to the bookstore so if you shopped a bookstore the.
The visual merchandising in the the four-star store with feel very similar to you.
[8:42] There there's One Merchandising element that's dramatically different and we'll get to that in just a minute but the main thing that would feel different about the four star store from the book stores is.
[8:54] Quite simply the merchandising assortment that is in the stores and in fact you actually can see some of the.
[9:03] The Fingerprints of this store in the earlier book stores so in the book stores.
At some of the unique gondolas they had four books is they would have a gondola just for books that were rated 4.8 stars or above,
at the time that was a novel concept that that you know that they had a merchandising display unit dedicated to well-reviewed products and then they also had a gondola for stuff that was rated 4.6 stars and above,
my New Yorkers for the store in New York so they had Us store that had you know that was very sensitive to.
Well reviewed products from other people in the same Market is you and so in a way you can almost think of this door as taking those couple of innovative displays out of the book stores and turning them into a,
a whole brick and mortar store there is very very clear wayfinding so the.
You like that the signs for the categories of products are pretty clear and in so you both have sort of tables that have things like,
new and trending products you would we have a category for like,
products at 10 to get purchased together you have a table for things that are hot in Manhattan you have those kinds of.
Of curated assortments based on on on ratings and reviews and user-generated content.
[10:30] On tables in the middle of the store in the most of the walls of the store are little micro categories so pet products or travel products or kids products,
and then there's a couple big category so they're their there are tables that are dedicated and labeled as Amazon product separately there's a home automation section,
there's a fire section,
there's a big section in the middle of the store that I'm pretty sure is a vendor funded display that's for the the the iRobot.
[11:10] Artificial intelligence vacuum cleaners.
And so you have a bunch of these categories and I think it's toy fair to the unit people that walk in and say hey it feels a little hodge-podge G disorienting.
To me what that is is you got a.
A category of pet products sitting next to a category of travel products right and you you know there's there's not necessarily.
In an obvious association between those two categories and yet they're their merchandise adjacent lie in the store.
I'm not sure if I mentioned it earlier but they're even tables for things like amazonbasics cookware for exam.
So that the assortment can feel a little.
[11:58] Random the or or you know there's some objects of positions of the assortment but in a way that's one of the things that's interesting to me about the store,
you know ink increasingly we talk about stores like Amazon's website as being the.
[12:15] You know the absolute winner at things like a sort mint and convenience and priced and so we talk a lot about you know the best play for a lot of other retailers is to be at the other end of that spectrum mbn that sort of.
Accuration in Discovery into the Spectrum where you you know you you could be surprised and delighted to discover some new product that you didn't even know you wanted,
did the retailer help you find and none of the previous Amazon Concepts were really very good at Discovery and certainly Amazon's website you know has not been successful at Discovery,
yeah they've done the number of Pilots including one we talked about last week the the Amazon Scout experience to try to get better Discovery but that's always,
been sort of a a gap for Amazon and it's it's been one of the.
The plays you seen a lot of other retailers do to try to compete against Amazon and so now you have this new store format that I do think,
has a strong element of surprise and Delight but if you went in there to shop for Amazon products if you went in there to see the new echo or to see the the the microwave oven which side note it's not in the store yet.
[13:28] You you would discover some other products that are highly rated that a bunch of people are buying on Amazon that you probably didn't know existed and said there is that kind of fun element of surprise and because it's a broad assortment
a lot of people point it out like you know it's a pretty it's a particularly good assortment if for example your shopping for a gift for someone because there's
a wide variety of different things for people with different tastes.
[13:54] Coop's what,
we'll see where this was the biggest swell a lot of people in New York love that store called story that you know,
Angels kind of every quarter that has a theme of the tend to be seasonal like around. X day it'll be love and home
Macy's acquired that I believe and then that's a store that's like really just focused on Discovery and then we've had beta on the show where is really around device Discovery at what time is the Apple Store you can have that time.
How would you kind of rate this and that Spectre mode stores oriented towards discovery.
[14:37] So it is much closer to the,
the sort of beta end of the Spectrum in in fact I would in some ways that share some common strengths and challenges with the beta format right so
you know like Bay that you're your apps to discover some new stuff when you walk in that store that you didn't know existed and that's great but will I get beta,
there probably aren't a lot of customers that have a particular product in mind.
And then are going to go to the beta store to fulfill that particular product right so you know to me one of the challenges with the beta format is it's very strong if you just want to discover something you didn't know existed but it's it doesn't you know,
do particularly well as a destination for products I already know I need.
[15:25] Into what's interesting about this Amazon 4-star is it does have a little bit of both like a view
new that you're all your friends were talking about Echo and you finally want to jump in and buy an echo or do you already have an echo and you want to learn about more home automation products that you can integrate with your Echo,
this store is going to be your destination they have the broadest assortment they have in staff
Nina in-store people that are trained to teach you they're doing in-store demos and things like that and so it is your demo for Amazon products and then you're going to have that beta style Discovery experience,
around the Amazon products so in that way it's a little bit better of a blend you did you mention story Into Me
story also is a very much a discovery experience but it's a much more,
carefully curated Discovery experience so.
[16:20] Everything in story is going to fit into a single theme in that theme is going to change every couple of months or every story is they call it right so you know if it's a,
a local food base theme all the products in the store are going to be related to local food and how to prepare it and shop for it and buy it,
until there is a cohesive theme and you know the the cohesive team in beta is sort of tech gadgets if you will,
then you know that there really isn't as much of a cohesive theme in this Amazon store it's more of the decoration bye bye rating,
plus all the Amazon products but I do think.
[17:03] This is going to end up being a destination store that's a mission for people that decide they want to buy Amazon products if you want to see that microwave oven before you buy one,
I think this door is clearly going to be your destination if you if you live in the New York area and then it is going to be.
Another store in a popular shopping district in SoHo that people just want to go into brass and see what's new in hip and they're going to expect to see fun new stuff every time they walk in the store and compare that for example to the,
the world's most successful retail concept Apple,
like I would argue that there's very little fun surprise when you walk into an Apple Store I mean you know when they first want to take care of a lot of third-party product but as they have launched more of their own products they really.
Apple is really narrow the assortment to just stuff they sell and when they you know bought beats they said they didn't want to sell other people's headphones very much and so,
in general all the products in that Apple Store are Apple products and they change at best once a year and so you're really surprised when you walk into an Apple store that you're going to be able to walk into this Amazon store
you know it certainly every couple of weeks and in discover some new stuff so that's an interesting play for Amazon.
[18:18] Go see you're getting you got the vibe they're going to be changing this products pretty frequently like where they like running around like oh my God this is now below for stars and here's the new thing in this is hot and turned in her.
[18:29] Yeah I definitely don't get the sense that is going to be real time but I think they are committed to two very frequent product refreshes and that certainly is one of the things wall,
will want to watch.
[18:41] The I hinted up front that there's that the merchandising mostly feels exactly like the Amazon bookstore but there is one dramatic difference between,
the book stores in this door and that is that this door.
Uses digital displays are what we call Electronic shelf labels or sometimes they're called electronic fact tags.
In front of every product in the store so there's a little e ink display in front of every product and what that lets the the Amazon 4-star,
store do is it let that store show that Dynamic price in at that price changes throughout the day,
the prices updated on that on that ticket in real time and of course in addition to having a price on that ticket
they also show the average star rating and the number of reviews that every product has got it has and so since all of those things are kind of real time and can be changing on the website all the time,
it makes sense that they went to a digital display in the store so that you get that updated information so it's not so much,
but they're changing products out every single day but at the very least they're updating all that information about the products every single you know our,
and then interchanging out the products fairly frequently.
[20:02] Is it you know when you say this I imagine like a little candle kind of cut to fit on the Shelf is like is it an Amazon product they've made for this or is it a third party.
[20:14] It is not it's a third-party product so there's a.
Vibrant competition out there for these fat tags some other retailers use them Whole Foods interesting enough was an early adopter they use them in some categories like the beer category.
Kohl's has deployed them pretty much everywhere in New York City there's a very popular photography store.
That's a e-commerce site to the rest of the country which is called B&H Photo and they use all these fact tags the in many states,
if the price of the cash register is different than the price on the Shelf the Retard gets fined and so one of the reasons that a retailer might want these electronic fact tags is to guarantee that the cash register price is always.
To the shelves into a lot of retailers particular in Europe have deployed this technology just to protect themselves from that kind of Regulation,
I'm in consumer protection laws but increasingly we're seeing that you can also use these digital fact tags to give customers a better experience and if you're someone that's going to change prices frequently.
Frank Zappa Warren Buffett owns a store in Nebraska called that are in Omaha, Nebraska Furniture Mart.
[21:27] They they sell a it's a huge Furniture campus but they have a 50000 square foot consumer electronics store that's kind of like a Best Buy in it,
and that store spreads all their competitors prices every morning and they update the price on everything in the store to be lower than any competitor and they do that using these digital fact tag,
so we're trying to see him,
yeah it is a display technology that's very similar to the Kindle and I did do a little spelunking when I was in the store and and their particular solution comes from this this Bender called,
so um I'll put a link to to their products in the in the show notes but it's s o l u - m.com.
And you know typically all these vendors make a wide variety of sizes they have some color capabilities so you can add Getty ink in like three colors,
but mostly what Amazon's using our bar kind of the least expensive products in the in the line so they're the two smallest format tags than Amazon's using and they're just black and white.
These things are run on a battery they clip to a shelf just like a paper sign would.
[22:38] Store updates prices on a server that talks to all of them you use a mobile phone with Wi-Fi to update pricing,
and then there's a zigbee server which is a flavor Bluetooth that used to actually update all the all the individuals back tags in the store.
[22:58] White so I have been in an Amazon bookstore and their you kind of used app why do you think they're using this instead of the app based approach.
[23:07] Two reasons number one like I would if you actually go back to our bookstore first first show I suggested back then that I was surprised Amazon wasn't using electronic fat tags in the bookstore because
I felt like forcing customers to use the app is a.
High friction experienced some customers will do it some won't but it's slower and you know customers shot the store they don't have the app and so,
I was kind of surprised they didn't have fat tag Justice all the pricing problem but now in this poor starving store they've doubled the problem because they had that they have the dynamic pricing problem but now they have the problem of showing you what the ratings and reviews are
like that's the whole premise of the store and so they can't get that social proof available for every product than that's you know,
it's hard to deliver on the on the promise of the store and so I think they needed the fact tag to have the real time updates of the of the the star rating,
and the dynamic pricing and so you know I think that that's kind of cool I'll bet you we don't see any new book stores open that don't have these,
these these tags in them and I'll bet you if if Amazon does deploy this this format a little more broadly that it's another nudge to a lot of other retailers because once you,
have the ability to see the star rating in the store for a product.
[24:31] You really want that everywhere and you you certainly want that at Target and Walmart and you know once once the expectations are raised that you can easily get that like I think a lot of other retailers are going to have to.
Have to match that capability and are least I certainly hope so.
[24:46] Cold out how often do these things update like when you're in the store did you see them updating or you think it's like that once a day thing or.
[24:52] So I didn't I didn't see any updating I didn't have the patience to stay the same
United change a review and see it see a change I pray I should have done that in hindsight
in my mind I I know if I'm working with these tags that it's totally viable to change the price multiple times a day so I just imagine that they're probably refreshing the tags every hour or every,
couple hours in the stores you don't want to constantly refresh him cuz they are running on a battery and so for example if you.
If you updated every 10 minutes or something that you know that the batteries would would last considerably last time.
These tags actually don't use any power when they're not being updated so one of the benefits of the E tank is it needs electricity to change but once it changes.
It doesn't take any power to two.
Keep its display State and so then when there's igby goes to sleep you basically have a tag that's that's electric but isn't isn't drying any power from the battery which is pretty clever.
[25:54] I kind of believe V Amazon 6S for mandevilla themselves cuz they've got all the underlying technology and.
[25:59] I'll be totally honest.
Yeah I'm familiar with the number of these tag manufacturers I was not familiar with this particular manufacturer and I was somewhat surprised when I you know
climbed underneath that is playing was looking at the back of these things to see the day they were a third-party product I tend to agree with you I can feels like something,
you think Amazon would have engineered and then maybe potentially sold the other people.
[26:26] Did you get arrested.
[26:28] I did not get arrested.
[26:31] Did you get caution to the work of the lake sir sir get down from that ladder.
[26:36] I feel like I have this whole skillset about being really slick and smooth and retail stores and and you ain't getting a little another Eyes Photography and stuff and it's mostly wasted skill now because in the old days,
they tried to catch you and they really frown on that like now like every single person in the store is taking pictures for Instagram and what not and so.
If you like being stealthy is a is a valued skill in the stores
I will say One Missed opportunity I was really happy to see the digital fact tags he missed opportunity is what you can also do on those digital fat tags is you can throw an NFC chip,
inside of the fact tag.
In effect this manufacturer even offers that as an option and so is we we covered last week the newest Apple products can now read NFC chips with in the background and so what that would mean is.
[27:33] You shop this door you see the price you see the number of ratings and reviews and you could take any Android or any brand new Apple phone and just wave it in front of the price tag and it could open the Amazon for the detail page and let you actually read the reviews for example
and so to me that would have been a nice link,
to the customers mobile device for the people that want to do a deeper dive or at the very least Amazon owns their own 2D barcode technology called smile codes you would have expected,
there to be a smile code you can scan for each of these products in at least so far they they have not gone that way so maybe that will be there next door concept is though,
the lad smile codes in the NFC chips to the to the digital Factory.
[28:17] Someone told me on the tag anyone can shop in there but it will actually highlight if there's a prime discount so there's certain things that were either Prime exclusives our heads exclusive Prime discounts did you see that.
[28:29] Yeah I did not notice any Prime exclusive but I did notice product that had a prime discount and so then the tag use this kind of is was format and said they say like with price.
You know 1999 Prime price 1599 or whatever.
So you could see that that you know and they they this store like I got you know I didn't count how many skus are in the store but like it it,
it would not Shock me if 40 or 50% of all the shoes in the store are Amazon products between Echoes Kindles fires.
Amazonbasics you could easily imagine that have two products in the store Amazon Prada.
[29:15] Sagittarius fortune.com.
[29:17] You you may yeah usually I have a muted for podcast but because we did a special episode tonight I decided to leave her on and she's punishing me for it.
[29:25] What else can you highlight about about the storks prankster.
[29:34] So the instapot was prominently featured I know that's a super product Everyone likes to talk about the.
They did have some digital displays for some of the Amazon product so.
Particularly for like the the ring doorbell displays they they had a button you can push that was built into the table and they are like a 20-inch monitor built into the table and they played a video sort of.
A demonstrating the the the ring value proposition to customers and said that you know these were these richer interactive tables most of the Amazon products.
Out and available for customers to try and use and then tried to set up good demo environment for all these products.
This is all live merchandise so all the Amazon or non Amazon products if you wanted to buy something you you grabbed it on the Shelf there's an inventory on the shelf and you will you walk to the cash register and and buy it yourself.
[30:37] You know so in general I walked in that store and I might go out you know this is a more fun store to shop then any of the previous Amazon Concepts I've been in pain so I thought that was really favorable and I actually think.
The idea of merchandising the store based on customer social proof is really smart and I think it's very smart for two reasons.
Does ratings and reviews it become like the most persuasive attribute in selling stuff online and and you know there's a lot of studies that each other like 2nd or 3rd behind price as the,
the primary attribute to customers care about Amanda cases they're more important attribute than the brand name.
Anythink gosh all those ratings reviews are ubiquitous available online they're not available in any brick-and-mortar format right and so who's the first retailer to figure out how to leverage ratings and reviews in a brick-and-mortar store.
[31:30] What a surprise it's Amazon I think that's really smart I think a bunch of other retailers are going to.
Have to move in that direction and we've also talked on the show a lot about this trend of moving away from.
Sort of intuition bass merchandising to data-driven merchandising right in historically,
you know if you were opening a store that was going to cater to gift-buying you'd hire some Merchant and they would you know be responsible before deciding what Pool Products They Carried and they would use their own intuition,
and if they did go to,
new product trade shows and they look at stuff and they say I want that bad in that and I don't want that bad in that and it would be entirely based on their own previous experience and intuition,
I'm increasingly we see some of the really successful online retailers like Amazon and Stitch fix.
[32:20] Replacing those merchants and their intuition with data scientists and their evidence and so you know now you got an example of a brick-and-mortar store that's largely curated.
Based on data in this case review data rather than the intuition of a merchant and so you know again,
traditional retailers probably look at that and look down their nose at it but I think it's the direction that retail is going in and it's not not wholly surprising that that Amazon is.
Pushing pushing the world in that direction more so than then you know we need traditional retailers currently.
[32:58] Calypso summarized by give us like a couple things you loved in a couple things you hated and then what do you think this means for the future of retail.
[33:08] Favorite things like I think the overall concept of of merchandising based on social proof,
I really loved I loved some of the the clever cross merchandising categories like you know things that are frequently bought to be together like that's that's not a.
Merchandising approach you I've ever seen in a in a physical store before so I I liked some of those obviously I really like.
The electronic bag tags in and letting customer see you live ratings and reviews in the store,
and I I love the the surprise and does Dwight element in the fact that you don't know in advance everything that's going to be in that store and you might might discover something new so to me those were all the,
the big wins the thing I hated is,
that the checkout experience as far as I'm concerned totally sucks and I think I think they totally missed it it it is the same checkout experience at the bookstore but I didn't like it in the bookstore and now I think it's even more acute,
in the store where they have a higher velocity of purchases and more skus so.
You get to the front of that line and the clerk wants you to open up your Amazon app.
And go to a bar code reader in the Amazon app and scan a barcode that the clerk has at the point-of-sale counter so the first problem is.
[34:29] You may not have the Amazon app installed.
If you do have it installed you didn't need Wi-Fi or cellular connectivity which they were actually having problems with cellular connectivity in this store.
If you're both of those then you have to be smart enough to know that the way you check out is by clicking the camera icon in the app which is totally unintuitive.
That's arguably the most stupid thing I've seen since Amazon since Windows put shutdown on the start button.
[34:57] So I got to click the camera I get the barcode reader I scan the barcode that Amazon provides me and then that generates a new barcode on my phone that then the cork has to scan so it's a handshake the barcodes.
There's some potential security arguments in favor of it but it's really convoluted in high-friction and it just watching people check out it felt like I was sitting in line in The Genius Bar watching,
watching the Apple Genius you know folks trying to help people with problems on their smartphone and they were having to do like tech support for every customer to help them check out.
And you know I found myself just saying like geez can't you guys just use the.
The barcode reader in and swipes on credit cards here cuz it would be much faster and more pain less than this was an.
You know that the huge huge irony of course is that the Amazons store format that gets all the buzz,
is Amazon go in the whole value prop the whole premise of Amazon go is,
we make it really easy to check out and so then they had this other really interesting format and Amazon for star and the one thing that they get wildly wrong as it's the world's hardest or to pan so I guess that's.
That's a room for improvement for Amazon.
[36:12] And what so you luck the checkout what's this mean for the future of retail.
[36:21] Yeah so remains to be seen whether you know this is something that Amazon's experimenting with where it's you know there's a way to look at this and say,
this actually is just an evolution of the bookstore that you know I opened up by saying that my own personal theory is that the book stores are really about selling in Deming demonstrating Amazon devices and in the same way Apple had to open their own store stat to increase their,
their market share with their products and you know we see bows and a lot of other people have their own stores to tell their own product stories.
Amazon need their own stories to tell their product stories and this is just a.
AA higher-margin more interesting version of of what they launched with the bookstore and so that's true it wouldn't be surprising at all to see if we of a few hundred of these.
The stores you know in in in some. Of time and if that happens then I think a lot of the best practices with his from the store are going to become consumer expectations that a lot of other stores are going to have to match,
if it just stays as a novelty in New York you know I think it's it's something that the.
The retail Talking Heads like you and I will talk about but you know it won't necessarily.
By itself Drive new customer expectations and therefore Force other retailers to evolve.
[37:45] I am,
I forgot twinsies did you get any vibe that it's I've been down to Soho there's a lot of popups like down there and that it's pop-up or did it feel permanent did anyone talk about that.
[38:00] Nope not today very explicitly said that this is a permanent store and not going to be a papa but you are right like there's a lot of similar stores.
In that neighborhood that are sort of medium ish turn pop-ups that might be there for 3 or 4 months.
Google opens a store over Holiday Inn in a very similar space.
But this this feels like a permanent one in again like there's a few bucks or they're under construction so they may may be very similar to the ones were familiar with better that you know the next book store do they plan it open.
Yeah I won't be surprised if they're four star stores instead of bookstores or or you know a closer blend between the two like this just feels like Amazon evolving their own format for merchandising their own products and I think there's a,
a lot of logic in in Amazon doing that.
[38:52] Yeah and you know relentlessly analytical so I'm sure they're taking those you know that 4000 square foot is split up into sections and they know the revenue per square foot per day,
etcetera and I bet they'll have that as an input into your comparing this format versus all the other ones and and their it feels like they're iterating towards something that you know is an optimal store.
[39:18] Oh for sure and I'm sure part of the reason they're so adamant about getting you to check out with the App instead of a credit card is for that analytics right when you check out with that app
they're they're able to associate you and all the shopping you did in that store and what you bought and what you didn't buy with your Amazon account and all your history and so you know I expected the
did they're taking it very hard look at that data and that's part of the reason that you're highly discouraged from from using an anonymous credit card when you check out there.
[39:49] Did you see any instrumentation like her cameras or anything that could be you know kind of go like technology at least kind of seeing which part of the store you went to or anything like that.
[39:59] Nope they have some and I wish I would have needed a ladder to find out the vendor but they have traditional,
retail traffic monitors in the store and not just in the front of the store so to your point like they're probably able to do heat map to the whole store but these are like.
Mortified webcams in a in a security case and so they are great for understanding traffic and dwell times and things like that,
but they weren't near dense enough to resemble the sort of Amazon go Style,
attract everyone's face you know perfectly throughout the store and the store doesn't fact have a public bathroom which is one of the things we talked about you you can't do in a ghost or if you're trying to track the customer perfectly at all.
[40:43] Last question did you find anything exciting that you bought.
[40:47] Well so I did I was traveling and I too I try to travel light and so I couldn't buy anything big but in all these new store formats in the go store and then again in His Four Star
format they had some branded merchandise and so I've been buying the permanent shopping bags from all the different store formats and they have.
This sucks steel water bottle with Amazon graphics on it and the name of the store and so you know now I have one from.
Go and and four star so I feel like I'm starting an Amazon brick and mortar retail collection.
[41:24] Rick will have to put those in the show knots loves you.
[41:27] Got it I wasn't happily upload some pictures.
But Scott that's probably going to be a good place to end this Amazon 4-star special edition of the Jason and Scott show
as always if people have questions we didn't cover or you finally disagree with anything that we said on the show we'd love to hear from you on Facebook if this is the show that that finally pushed you over the edge
take the extra 30 seconds to jump on the iTunes give us that four star review or five star review either way it would get us in the Amazon store so,
we would certainly appreciate that in a special shout-out to all our new Spotify listeners this is the first episode going live,
on to Spotify along with all the other podcast formats that we've always supported so happy to have the team Spotify in the the Jason and Scott show Family.
[42:23] Until next time happy commercing.
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.
Episode 147 of the Jason & Scot show was recorded on Monday, September 24th, 2018.
[0:25] Welcome to the Jason and Scott show
this is episode 147 being recorded on Monday September 24th 2018 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:41] Hey Jason welcome back Jason Scott show listeners for long-time blisters you may detect something different in the audio today.
Jason and I are actually physically in the same room together this only happens about,
maybe one in 10 episodes maybe one in 20 but I am in Chicago for the B2B show called B2B next that started this evening and then is ramping up tomorrow and I'm giving a talk about,
winning the away game for B2B companies and Jason lives in Chicago even though he rarely is here so it was fortunate we were in the same city at the same time.
[1:15] It's super fortunate I'm just finding out now that you didn't exclusively come to Chicago to see me so I'm a little hurt but I am thrilled for your company and companionship none the less.
[1:27] Yeah I can Chicago to see you... And do a quick cake.
[1:31] Yeah I mean I feel like if I knew Scott wing it was coming to Chicago I would throw a trade show just to get you to do it.
[1:37] That's thank you I appreciate it we should do a Jason Scottrade shift I'll be our next one of our 2020 goals.
[1:45] Yeah if you're any of our friends in the trade show industry don't worry Scott's just joking.
[1:49] Will have peanut butter and jelly sandwiches it'll be within the range of 6 Starbucks.
[1:58] I like that last part a lot.
[2:00] Call somebody excited to be here because there's an Amazon go store and I am going to stop by tomorrow morning if it's not raining but I heard you have already been.
[2:10] I have indeed I've been super excited to touch you because I feel like this,
week is just busting with exciting e-commerce news that Amazon go store actually opened last week,
and I was out of town so some of that Amazon go stores are in locations that are open 7 days a week this particular one,
is in a busy downtown area during the week that's kind of dead on the weekend so the store wasn't open over the weekend so today was my first chance.
To go shopping and compare and contrast it to the Seattle locations.
[2:47] Brickell what were the the pros the cons the differences the similarities.
[2:52] So I have a feeling most Shoppers would feel that they were very similar to the Seattle one is a reminder just walked out technology you have to use an app.
[3:04] JJ Watt hashtag JJ Watt.
[3:05] #Jay Watts you have to use an app to get in the store you cameras watch you throughout the store you grab all your purchases at this convenience store format,
and then you just walk out and Amazon automatically charges your account for your purchase at so that's the original promised the first store in Seattle had a very visible,
kitchen until like the majority of items they sold we're actually not National brand food products they were.
[3:34] Sandwiches and in meal kits that were made on site on the premise.
And they also in that original store later got a liquor license and started selling alcohol,
they open the second location in Seattle that did not have a kitchen and I and many others assume they use the one kitchen as sort of a hub-and-spoke and deliver food to,
go shuttle locations from that kitchen so I was really curious to see what they do in Chicago when they open their first store and once again there is not a public kitchen so either they have.
A private kitchen somewhere else in Chicago and they're delivering the meals in or,
and I did seem slightly farfetch but they're delivering the meals from out of town,
and restocking on the I was kind of curious if they had the date that they were made on the sandwiches and they they have the date their best consumed by.
Which most of the sandwiches that were available when I was in the store where best consumed today so.
[4:36] You could fly them in on that Fleet of Amazon Prime planes.
[4:40] It's always remotely possible and since the store just hoping you can imagine there's a kitchen coming somewhere else that isn't live yet or maybe it already is why there's no there's no I could have been his one way or another store has more.
Gondolas in the original store so there's more aisles in the store which since they're watching you with a bunch of cameras in the roof I imagine the aisles are a little harder to do because they potentially block lines of sight.
It has two entrances.
[5:12] So that adds a little bit of complication you walk through kind of a Subway style turnstile and scan a QR code on your Amazon Go app,
to get into the store in the very first or when you were running the app and you grabbed purchases you could kind of see on the app I running,
shopping cart you could see what Amazon thought you had it when you put something back you could see it disappear in real time from your cart.
In this store and I did two shopping trips you don't get any real time does ability to what you're taking you walk out of the store and frankly the second you walk out it's not clear.
If you been charged at all and then a minute later this receipt pops up that says pending and then about 3 or 4 minutes later,
you get an itemized receipt that shows you what you charged and I don't know why the difference but I bet the.
The scenario here seems a little problematic you could potentially being a cab on your way away from the store and find out you were.
You are Miss charge for something.
[6:14] Sounds like human intervention in there this is one reason I can think of you to have a pause like that you know of some kind of Mechanical Turk like check that's going on somewhere.
[6:24] Potentially it the original store,
they actually have Windows and you can see a video observation area where a bunch of guys in red shirts are watching video and this was like,
even when I was an employee only mode none of that is visible in the store now that doesn't mean it's not there it just means they they didn't choose to build a.
A window in that first or is in an Amazon owned building so you imagine,
it's cheaper and easier for them to do exterior things where they're just a tenant in a in an office building.
In the Chicago store so unclear they have an army of people watching I did two purchases and both were accurate,
I bought a web we just walk out technology technology coffee mug for my wife some Amazon go.
[7:15] You're hopeless.
[7:16] I am I am Amazon go chocolate for for Stephen and I got the beam on a sandwich because,
we heard that's the number one skew and I thought this would be a super exciting gourmet sandwich and Jeff if you're listening the sandwich wasn't that good I was so disappointed.
[7:34] Too much Mayo not enough a Sprouts what what was off.
[7:37] The bread to be my ratio I thought was way off it was way too much bread for two little feeling.
[7:44] It's interesting that there's been a fair amount of traffic on Twitter around people that have gone to the store and initial reaction is oh I'm not worried about grocery stores I'm worried about 7-Eleven.
At is a kind of what you think through this.
[8:00] So I think there's two categories that are potentially at risk one is 7-Eleven or just hit more generically non gasoline convenience store so it turns out,
that 80% of convenience stores sell gas and that's a special reason to go there that the Amazon go doesn't have so it is a competitor for those doors,
Those those kind of sore tennis sell a bunch of prepackaged food in National Brands and there's a little bit of that in this store so there's National brand drinks and there's a few different varieties of chips but the assortment.
Bike is probably like more Amazon made stuff it probably feels slightly fresher and more healthy than.
[8:45] It sounds like an old Bon Pain or those are called or a Marks & Spencer in the UK where they're saying yeah kind of.
[8:50] So I was actually going to say like a pretty amazed you or maybe sort of grab-and-go pre-made sandwiches like.
[9:00] Where I'm from we call it pret a Manger you get the fancy French talk.
[9:04] I work for a French company so I've learned like for French words and you just heard 3.
The other ones not suitable for our general audience podcast in some ways.
It feels like the primary use case for this store is,
office workers grabbing lunch and not being gone from their desk that long and so you can imagine that that was the original problem that Jeff was trying to stuff for was getting Amazon employees back to work quicker,
and yes I could be the Subway sandwich that this is more a threat to.
[9:39] Yeah one of the writers so internet retailer is here in the city and one of the writers was saying in Chicago it is a huge problem to go out for lunch and his it's a four minute longer walk to the Amazon go store
but it took him 2 minutes to get in and out and all the other places he walked by we're at the 30 minute wait so it is you know we've had arguments with some folks on Twitter that talk about,
it's not really convenience and then one of the things I think long-term they're going for is there going to be less labor a better one that goes to one says it's got like three times the labor of any other store they've ever been in.
How to get Amazon's just Staffing that early days to get people,
trained and download the app to help kind of jump start it but I think long-term I think the labor will be very low on these.
[10:27] Yeah I think you're right like the you are out customers are definitely outnumbered by Amazon employees at the moment.
That's because there's some new things that customers are having to be taught and so you know we we were talking earlier it's
it's someone analogous to an ATM machines first launched and Banks would staff a human to stand next to the ATM and teach you why in the short run that that didn't make sense why why.
Put a person next to the machine trying to replace a person but once I want to learn how to use ATM machines they were able to get rid of those trainers in the airline's did something very similar with,
electronic boarding passes where they had a lot of help initially so at the moment.
They remove the friction of standing in line to pay but they had this new friction of having to download an app before you can even get in the darn store so that a lot of people standing outside the store in the rain,
helping you install your your app now luckily Amazon's from Seattle so that people are familiar with standing in the rain,
presumably they imagine a future when everyone already have the app install the and or it'll become more familiar and so they won't they won't need all that labor to explain everything to everybody.
[11:42] Brickell and then last week you were at shop.org which unfortunate had to miss due to some hurricane issues but give us a little trip report from shop.org what was interesting there it was in Las Vegas this year your favorite City.
[11:56] Sorry one other thing I forgot to mention on the Amazon go they just want to ride their super quick they did add alcohol to the Seattle store and there's been a lot of talk that's another,
friction point because now you have to have another human you know you're supposed to just be able to walk out when you're done but now you have to have a human when you're walking out they can check your ID,
and Zoe you know we talked about the pros and cons of that this store does not have alcohol so that that may have been some decision or maybe that it takes longer to get a liquor license.
[12:28] This may seem unrelated but in my city of Raleigh we were a Goldilocks City for a lot of different things because we have just like a million million at people
Ivory digital City and all that good stuff we have all of the different kind of Transportation model so we have all the lime bikes the birds and all that stuff I've tried all of them and what's interesting is they all have,
if you're over 18 to use this and I'll have a driver license scanning mode where else can the front,
Idaho Ciara and they scan the back and they're saving that data as you saying I am over this age I don't think that works for alcohol but,
I kind of think there could be some way to do that and you have to work with the local alcohol real people but you know,
Amazon really good at kind of saying alright let's take a room of people and put them somewhere in a back alley in Seattle not in front retail space and just like
you know we fly all these drones out of remote locations why not have a lot of the stuff pushed to a cheaper location somewhere like maybe the people in the Amazon store they're standing around maybe they're standing somewhere in Seattle for the Chicago store if there's no reason to have to physically be there.
[13:35] Telepresence for doing a d Checkers and in fact you can imagine that use that same teleprinter sentence for delivering alcohol at some point and I D Jackson.
All kinds of boys like that I have zero doubt that Amazon can solve the technical problem of doing,
inaccurate age verification at your point it will probably take slightly longer and be slightly harder to get the,
the Bureau of Alcohol to agree that that's a suitable approach.
So you would ask me about shop.org we had surgery on last week and we did talk a little bit about some of the content with sucharita so she gave,
a presentation about marketplaces that was super interesting I know that's a topic that you sometimes have a personal interest in.
I did some stuff on on the areas where artificial intelligence is actually getting Traction in retail in Commerce and got some decent feedback,
but one of the things that jump. Org has added in the last couple years is an innovation section so this is a,
less expensive portion of the trade show floor that's cheaper to exhibit that's enticing,
newer younger emerging companies and so it's one of my favorite parts of the shofar to walk because I'm generally familiar with most of the,
vendors that have been exhibiting shop.org for many years but it's fun to see some new you know sometimes crazy stuff.
[15:04] Answer this year two companies kind of jumped out at me there's a company called Shiro.
Which is really focusing on the problem of digital.
Digital Shoppers getting the equivalent,
personal experience of an in-store Shopper and so along the lines of the ID check you just talked about these guys are essentially,
creating a telepresence solution so that store staff when they're not helping an employee customer in the store,
can I have live chats and create video content for customers that are shopping the website.
I'm so it's sort of a way to have a more human interaction with web Choppers that's whatever Jean the in-store labor force and that's,
part of the genre of omni-channel that I think is really smart and interesting so I like that.
Approach and then there was a company called seek and and I suspect we can talk a little bit more about this in general terms later but,
augmented reality company for mobile phones we've talked a lot about how augmented reality is probably much more important than,
virtual reality for Commerce in the short run and what seek is really focused on is.
[16:28] Apple in OS 12 just launched some new features that now that you do good augmented reality in the web browser no app required and so seek is.
One of the first companies with a tool set that retailers can,
license on the cloud to have good a our experiences in a mobile web browser without having to get an app downloaded and I think that's really smart and obviously there.
Timing their company launched with the the release of this new product last week.
[17:02] Brickell and then last but not least I think you were going to New York to go to recode did you were you able to make it to that to see mr. Del Rey.
[17:10] So sadly so I have a ticket I had a client call me in another Direction at the last minute but I did get an opportunity to watch,
a lot of Jason's interviews on YouTube and they're they're uploading all the all the speakers to YouTube so if you're interested you are,
they're all available in a couple that stood out to me the founder of Shopify who seems like.
He's sort of up to his his public visibility in the last few months that you used to be kind of a rekluse that didn't,
do a lot of public presentations he had a good conversation with Jason Delray I had sent Jason all kinds of specific questions I wanted to ask about shopify's size and Market penetration which I notice.
Jason didn't get a chance to ask but he did talk a little bit about who's probably the Marquee you know Enterprise customer using Shopify which is Kylie Jenner,
interview back into some of his answers you don't think he he was saying that over the last 2 years,
Kylie Jenner sold 900 million dollars worth of product on the,
maybe two and a half years sold 900 million dollars on Shopify which is in a pretty good scale we normally think of Shopify as a long tail solution for very small Merchants but that's a pretty good size.
[18:39] Yeah I think what makes it work is I think it's not a huge number of skews right I think there's like,
two nail polishes and tendus too. So I think she just has like in a quantity of Brazilian of 50 skews which doesn't put a cart through too many of its Paces Paces you don't need a fancy content management system
you just need scalability in robustness on the check outside.
[19:00] Yeah I know I totally agree there are some boxes that that checks that shows that they have good elastic availability for these peak days but you're right like there's a lot of things that you would exercise in the catalog with a million skews in it that.
[19:14] That particular site isn't isn't demonstrating scale on it at all,
I had asked Jason if you could ask who some of the big catalog we can go there but it was interesting cuz he what he talked a lot about hey we started trying to solve for the small business customer,
and a lot of companies as they grow try to move up market and he he's claiming the day over we don't want to do that they don't want to abandon.
Their core market so they want this new product Shopify plus which is intended to be more upmarket but they explicitly,
launch that with a new team and a new office in a new city and sort of partitioned it.
From the original offering so it really Leverage is the quote the court code base and add some new capabilities and services but his promise for.
[20:10] How he was going to expand their Market rather than a band in the the low end of the market to move up was,
The Silo this the Shopify + offering and he talked a lot about how in his mind,
front and commerce experiences are actually pretty easy and he's a coder you mentioned a lot of the original Cody Road,
is still in the platform and hasn't needed to change for the front end but they're like 90% of the ongoing development effort they're doing are all the post order code in.
Complex water management and integration to to Legacy Erp systems and one of the big features they just launched for Shopify plus is the ability to manage multiple Warehouse locations for exam.
[20:57] There was you I saw some people kind of kind of gasp on Twitter because I don't think that those numbers were public that Kylie had that he revealed
I mean she had talked about in 2017 we talked about this on episode 145,
what was out there that they were dude they did 300 million in 2017 so it means they probably did for 5500 maybe even 620 18th so you know I don't think a lot of people would have guessed,
what was that big so kind of added her Revenue I don't know if she was aware of that or happy or sad or she's probably more on Instagram than following what's going on too.
[21:33] Exactly where she I think she left Twitter so so he was safe I don't know yeah but that was the first time I heard some confirmation from a third-party Source oh.
That was interesting another talk with Jen Rubio and Jen was actually at shop.org but then she she was also interviewed by Del Rey she's one of the two co-founders of a way which is,
terrific example of a digital native vertical brand in the luggage space.
[22:01] Yeah and I have my birthday present was away luggage to this is my first trip using it and I have to say I'm very pleased right now.
[22:06] Nice so I feel like it gets really high marks we may need a product review from you the one thing I'm always curious about is I think a lot of the way luggage has the option for a smart battery built into the luggage,
and there's a lot of controversy now about the airlines not letting you certainly not letting you check that but in some cases,
making you take the battery out to even carry it on which frankly doesn't make sense to me.
[22:32] Yep so it's checking it you can't check it with the lithium in there and they now pops out so I think they're V1 was fixed and now it meaning it could not.
[22:40] The ball so it's easy to pop out and put in your lap.
[22:41] Injectable that makes a lot easier to charge to like lifting your suitcase up onto the.
[22:48] Well I look forward to buying something electricity from you at Future shows that we travel together.
[22:52] Absolutely just at yeah I've got a milliamp hours of plenty.
[22:57] So we've heard a little bit about a way one of her investors what was on Earth from Comcast best Adventures was on her show earlier,
this year but one of the interesting comments that she made the Jason that I thought was really clever so they have a few stores at the moment one in SoHo in New York,
in one of the kpi that they have for the store is.
How many times people upload Instagram pictures from the store.
In a way that sounds cheesy and sort of superficial but as we're in this world where,
sort of Assortment and low friction shopping is moving out of brick and mortar and onto the you know these big online marketplaces one of the main roles for brick-and-mortar is around experiential environments,
and one of the ways you know you've accomplished a exponential environment is when people shopping in the store,
want to memorialize their trip to the store so I actually thought that was a kind of clever and smart metric to be looking at,
maybe we'll do a deeper dive in some other show but there's this big trend of these instagrammable spaces the for example the Ice Cream Factory in San Francisco there's a couple temporary ones you just opened here.
[24:19] Yeah I have a I have two teenage kids and every time we go on a trip we have to include their the things they want to do or these instagrammable places that they've seen on Instagram so.
What time it was this bubbly ice cream thing and then it was raw cookie dough then it was let's see it's rolling ice cream is big now.
[24:40] No answer I mean on the way.
[24:42] The food is very instabul in which is a huge part of the experience.
[24:46] And that sounds somewhat silly on one hand but it it makes a lot of sense and you know it someone reminded me in the old days like to differentiate yourself you just had to be unique amongst your 200 code students,
in your high school class or ever did your high school class was,
but these days you have to be unique amongst your ten thousand friends on Instagram and so you know it is harder to differentiate yourself and so these these opportunities for,
more digitally native Shoppers to have a differentiated experience and share it you know makes a lot of sense so that's a smart thing for for retail designers to be thinking about.
[25:25] Packaging for a way was really interesting that comes in a cardboard box what you expect,
but then the bag is in a really nice kind of a cloth bag and then when you open it there's a whole experience around there's a little booklet there global travel pack that comes with it,
and then they train you on how to use it and then there's a little book about,
it is very much pitch is a Lifestyle brand of you know the things you can do with your way and then they promote hashtags that you should,
do while you're going and you know it's almost kind of like the beginning of an adventure around travel and and going to see things so it's pretty well done your versus you're just like you know.
Popping open a Samsonite or something and you know it'll be just fall out in this kind of experience.
[26:10] The premise of her shop.org talk was.
They build the brand less about talking about the features and benefits of luggage and trying to sell luggage and then said they are,
they start from the perspective of selling travel experiences so the store,
is less about here's how to demonstrate all the things in the luggage you can of course do that but the luggage is in vignettes of aspirational trips to Bora Bora in Amsterdam,
and it's it's really about reading to me in for you having this fabulous vacation and oh by the way,
you need this luggage to get there as more so than it is features and benefits of the Prada.
[26:51] Absolutely cool thanks for the trip reports I think that was some good stuff like I got trips happening and it wouldn't be a Jason Scott show without.
[27:16] So a lot to cover in Amazon news we talked to Jason give us his live report from the Chicago Amazon go store and then a friend of the show we going to get him on here Spencer soap.
Yeah he he broke a story where there have been internal talks and I'll Circle back on this about.
Amazon potentially opening 3000 Amazon go stores by 2023.
[27:46] I think I might have been like 20/21 I thought it was a relatively short.
[27:51] This is funny because we've been talking on Twitter about you. Just feels like.
There are they are opening stores at a pretty good pace and it feels kind of prime now when they they decided with prime now it's go time and then suddenly there was 40 to 60,
Prime storage pronounce doors to 3000 is a stretch just kind of getting that real estate I've heard a lot of skeptic say it's impossible while they do that and it figured out how the end of the alcohol sign 3000 Lisa's that fast
so I think it will be.
I think what could be happening here is your encourage the Amazon meetings to do a lot of brainstorming to write press releases from a future State and I think maybe there's some of that that kind of came up so I'm not sure.
Yeah it feels like damn it nailed the format yet I think they're probably won't get a couple more figure it out but you know,
when they do on a scale these getting to 3000 I don't think that's impossible.
[28:48] Yeah I'm sort of in the same boat I'm up to mine so for sure.
Part of the Amazon methodology when they first pitch new idea they write the six-page memo.
Attached to that memo is they write an aspirational press release that they want to be able to issue when the things been successful so for sure there is a press release for Amazon go stores that talks about a mask deployment so.
[29:12] We just open the 3000 store.
[29:15] So that would that would be the exact Spencer one possibility is someone just saw that press release and misunderstood its purpose.
The the other side of my brain says Amazon actually is pretty good at keeping secrets and they don't tend to have a lot of unintentional weeks so the fact that this was weed.
Partly I believe that probably wasn't completely unauthorized and so,
is that because they really are preparing for scale and if so you know I was surprised cuz I wouldn't have thought they nailed the format.
[29:53] But you know or is it potentially I had fake I don't know but what I will tell you is,
it's absolutely possible possible to open that many stores and Retail in that time. And retailers have done it,
in the nineties I work for Blockbuster entertainment we opened a store every 12 hours for my entire 10 year so once you get to a certain scale,
like these things are really Temple dies then the the advanced teams are you know just 6 weeks out in front cutting deals on leases and everything Cascades from that and so it.
Absolutely possible if they decided to just penciled out and that they needed a big footprint of stores they could run 3000 stores by 2021 now.
3000 stores if this is really can me competing with a convenience store 3000 stores actually probably isn't enough to have a real meaningful business and now that Amazon's a trillion-dollar company.
[30:52] You know if there's a million-dollar p&l for each of these 3000 stores like.
Arguably isn't a big enough business to get in to be really material to Amazon so we'll have to see.
[31:04] Do you think he'd stores doing a million dollars but what is convenient store to get to take gas out.
[31:09] Yeah I'm trying to and I don't have specific knowledge that this is an estimate based on other types of small format stores,
and I would imagine that in the those convenience stores there's a huge standard deviation cuz there's going to be some fast Runners that are easily 10 million dollar stores.
If you have 3000 there's there's going to be some snow our stores in there too so to me,
you know a million to a couple million per year for many kinds of restaurants would be very good.
[31:41] So million at 3000 is 3 billion so each million is 3 billion so if they did five that be 15 but that's a needle mover for them to hunt.
[31:53] You never like to talk about Revenue you always like to go with the big number.
[31:56] Well then there's a multiple there that yeah so yeah so that that's.
[32:06] That's going to be interesting to watch that would be to meet someone fascinating if that's the brick-and-mortar format that gets.
Scale the fastest versus the books or the or you know some information of the grocery pick-up for some of the other things they've done.
And a new store format won't will probably talk about in a minute but another piece of online news that we saw from Amazon this.
Weaker last week was this new Amazon small business store fronts,
and so I thought you might have a POV on that but the gist of it is it's a way for small business that's a 3-piece seller on Amazon to offer a curated collection,
of products and have their own sort of landing page and in some ways you'd be where some of our listeners might not,
Amazon used to have a Amazon webstore which was essentially.
Competed with Yahoo web store and let us small business run their own website on their own URL that's not what this is.
[33:13] Yes in a lot of people depressed confusing these things.
That's the problem one of the main problems with Amazon webstore was it had the initials a w s s cousin to the cloud computing AWS,
PSO2 Amazon used to have a thing where they would go out and run a store for people it was the downgraded kind of technology that.
Your Target and all those guys ran this to me is just really giving a little bit of content to the store owners desk and be types so they can tell them or their story,
and they're highlighting some of them and,
part of the press release was really starting to thump their chest and say over 50% of the items or the units sold on Amazon or from third parties and there's an integrated TV commercial as well I haven't seen it running.
So it feels like a didn't get like a huge I haven't seen on NFL games are in that kind of stuff which of the big spots
I'm so don't know where they're running it but I did see the online version so but it is you
if your 3-piece seller it is pretty cool to have an Amazon you know out there used to be kind of this dirty secret that some of the stuff you bought from Amazon list of these third parties now Amazon's kind of put you more front center so it felt like a big.
If something is change they're pretty dramatically and how they're thinking.
[34:32] And so I I think you sort of app we described it but I have heard people,
sort of think of it as a Etsy competitor which is not really right Amazon does sort of have another offering that's more competitive with that seat and then the Jason Delray did Ash Shopify,
if they considered it competitive and he had the the sort of typical competitor answer it feels like a little bit of a trap to me.
[34:59] It's a trap.
[35:02] Pictures of Admiral Ackbar.
[35:05] Black bar on it yeah yeah I don't know if it's true or not I mean it is very hard for.
[35:13] Going on Amazon I would use it likely wouldn't make that my only destination on the web like me Amazon has one channel for most people shouldn't be there exclusive Channel.
[35:24] When your Kylie Jenner you can have your own store and not worry about Amazon and you know also comes to you and I'm sure she had a lot of power in their relationship.
Promosi small business out there and you start on Amazon and then you're lucky if you get anyone to your website so so yeah yeah I think it makes a lot of sense for four people to embrace it and and,
rapper on it a lot of people that's because some of the ones that are highlighting do you have more of car that Homespun handmade kind of provide to him like there's this handmade Candle company that was both on the front page of the store fronts and on the TV commercial
I hope those people have a lot of inventory because it felt like they're going to sell out of those handmade candles pretty darn fast.
[36:04] Yeah I was always a problem when you highlight the small businesses right.
[36:08] Couple of quick things Amazon has been obsessed with visual shopping and they've done several kind of things around that so,
the the first one is they've had they had something called visual shopping where you can kind of like pick some colors and stuff then they deprecated that,
then they have active on the homepage if you look at the top bar
I'm always logged in this Prime and I think this is available and non-prime to it'll say new and interesting finds and that's kind of like a Pinterest so you could put together a little you know of Jason's Board of interesting finds of cool gadgets I'm so Scott a Pinterest board, feel to it
that I've always thought of new and interesting is kind like their Pinterest competitor have a new one called Scout if you go to amazon.com Scout and it's more of a Instagram meets machine morning to see thumbs up thumb down some stuff
and then it's supposedly going to learn about what you like and don't like and and.
Pretty quickly after 5 to 10 ups and downs you'll get to some interesting new products that that it learns that you may want
so then so that kind of feels like Pinterest Army sorry Instagram so they've got.
[37:15] Pinterest and Instagram covered the other big visual thing out there is Snapchat and actually just today announced integration with SNAP,
where are you can go and take a snap of the picture and then Snapple use I assume they're using the machine learning a library that Amazon has for Parker
Mission so you see a cool celebrity you see Kylie on your way home tonight you take a picture of her sneakers and it will identify them and then show them to you over on Amazon which feels kind of like an affiliate type model so I'm sure there's a rough share there
but it is pretty interesting that snap is the front end of an Amazon kind of the backend which is Young so now they have an integration on the snap sides the good kind of,
the three visual shopping Technologies covered in a way to different business models which is pretty pretty.
[38:02] No I I would agree the Scout thing was kind of interesting to me I've heard some people describe it as Tinder for shopping.
[38:10] Apple swipe right.
[38:11] Yeah you go get products and go hot or not and they're broken at in the category so you know you you decide you're looking for,
home furnishings and then you can say lighting and you get 5 chandeliers and you say like don't like don't like in as you're doing that,
the assortments getting curated to visually 2/5 chandeliers that match your taste in so it's it's pretty fun and fast and immediate and they're promising,
more categories to come it's slightly reminded me of you go old school on Amazon when they used to mainly sell this,
stack of books and video.
[38:52] The recommendation logarithm was based on what you bought but of course you could buy a book arm or watch a video that you didn't like and so they act they used to have an interface where you could look at all the stuff you bought and go back and say you liked it or didn't like it,
and sort of refine your own recommendations and so if you want to invest some time you can improve it in my mind this felt like,
how much more evolved visual version of that so that it's interesting to invent new ways to shop and,
Amazon's always been great for the spearfishing but like you know browsing and Discovery has been the Gap so it's it's interesting to see them try new things and it seemed interesting the snap one to me.
[39:36] Is a very interesting because a lot of social networks have tried to integrate Commerce and they generally try to do it in a bran friendly way,
and like it's not particular brand friendly to say and we're going to sell everything on.
Amazon right like when when you want that feature so this is like the Pinterest wins feature which is a visual search capability but then connecting all of those visual searches to Amazon,
no other retailers ever going to buy an ad on your platform and so part of me wonders if snap was only able to do this because they sort of are in the Challenger position,
Instagram feels like it's getting more of the momentum and so this was,
a a big move snap could make but potentially the risk of alienating a lot of other advertiser's.
[40:27] Yes snaps been under pressure and there.
Their head of Partnerships left recently and he is a big yeah she was an internet analyst I've known for a while and,
I imagine they may have been building some stuff out they realize how hard the backend is and they kind of got the front end working and they just decided to marry them together instead of having to go to all that.
One thing that occurred to me as you're talking about they are stuff earlier is Amazon does have an AR functionality and it used to be buried in that so you'd have to go kind of down the sub menu at the hamburger menu down three levels in the camera app now and then update,
you have your normal scan barcodes but now you can search with photos is is kind of promoted to a very high level up inside the camera and then also you can do smile codes
and then last but not least you could do if you had room so it's right in the camera now so they've they've upgraded the AR View and in the Amazon that up into the camera,
which is pretty nursing another part of this visual search is Dave and Kurt are going to take out your Amazon app hit the camera button there's a lot of cool new stuff inside of there to play with now.
[41:32] Yeah I know it's very cool,
another big an Amazon announcement as if they didn't have enough is they had a president last week and they launched I want to say 14 new products with Echo embedded in them.
[41:47] Yeah and I was really excited for you cuz I know you are really big on the Amazon button e things and they had an amazonbasics microwave and it has a button on there where you can order more popcorn.
And I just envisioned you and having that installed by now have you bought and installed one of them.
[42:05] So the challenges I have a 3 year old son that's where and how to talk to all the Echoes and.
Would constantly be running the microwave if it was too in closer to the ground so I feel like it's probably a bad combination of might like Echo cook popcorn with nothing in the microwave will be happening a lot in my house.
[42:26] I saw a lot of people scoff at this but you know the the microwave is a challenging thing so every every microwave you come across is different,
and yeah sure if you're going to do a minute heat up or something it's not a big deal but for my microwave whenever I want to defrost something or whatever I have to take out the little guy and there's this complex you know,
non-intuitive side of things you have to do where is it be really cool to say
you know Alexa you know heat up this pizza and it just kind of knows that okay you need the heat at 50% and so it's I think there's actually something there
that that actually is a time-saver to be able to say that for the microwave and have it kind of decode oh you know I need to go 50% power so the cheese doesn't get all rubbery or whatever it is that did microwaves do,
so I don't think a lot of people realize that that it's doing that behind the scenes there's there's a fair amount of complexity as I read more about it,
in there about what it's going to do with the voice that. I think it's pretty interesting.
[43:21] No I I think there is some very real world use cases a lot of the space saver microwaves don't have a numeric keypad anymore and so you know now you have this.
dial that you know is sort of variable speed that you have to use to set microwave for 3 and 1/2 minutes and so like voice is the perfect way to have a minimal space footprint but still have no easy low-friction access to,
you know all of those features that often don't get used in the microwave because they're too hard to find.
[43:53] When when I was excited about is in my car I can I can put an echo dot in there and.
It takes a little works at to connect it to the Bluetooth every time is it's not like Auto connected to the Bluetooth,
but it's a really cool Auto interface but you know I don't think my OEM is ever going to have Alexa and the dash certainly they'll be some people that do that
some people are brought into the Apple ecosystem some people are building their own so one of the projects I was excited about was called Echo Auto so it's kind of like an echo.
But I think the Bluetooth going to be more persistent and smart and connect better but also has it kind of lays flat and I think you can velcro it to your dash and it also has eight little microphones on top so you know they're saying that it'll be able to hear inside of a car better,
sex can be a pretty interesting auto experience that's why the one I was most excited about,
but sadly I know you can't pre-order it unless you have an invitation so all the Amazon people listening I know I would love an invitation I don't know about Jason,
Jason Jason would probably love an invitation to.
[44:56] For sure without doubting you for your fancy Fleet of automobiles I'm just going to say that your OEM probably wouldn't add an Alexa interface unless and until Jeff Bezos divested blue origin.
[45:11] But there were a bunch of other products they improve the core products so they did another iteration of like the view in the. The View has a is a smaller footprint,
overall but a bigger screen so I have a couple of the 7-inch devices and use them in my house and so now the,
10 feels more appealing they have a clock which it's an analog clock and I.
I don't have a place to put this but I really want this,
so it is a traditional analog clock that looks like a standard kind of office wall clock,
when you set timers which is one of the things I'm most frequently do with the echoes in my house they have sort of stealthy LEDs around the rim of the clock,
that show you the progress of the timer so you can see him visually how much,
time you have left in a timer but the feature that I think is most cool which is super lame is when daylight savings happen,
the hands on the analog clock actually moved to automatically change your analog clock for daylight savings.
[46:17] You give me staying up you're going to get this or you have to stay up till 3 a.m. my time does it still 3 a.m. in Chicago or is it to him.
[46:23] I couldn't tell you because I have no analog clocks and all the digital lens automatically adjust.
[46:27] You can stay up all night watching and waiting to see what it does like this it just doesn't stand still for an hour and our plastic depends on if we're going forward or backward this is this is we're going to do a live report.
The world's best book still nothing happening.
[46:45] Rest of it we have some grass growing.
My big thing I felt was interesting about all these releases is you know we talked about it CES this year that Alexa was embedded in like five thousand devices are 4,000 devices into,
there was a school thought that they made these initial products to see the market and they're happy to sell these core products but that,
they were you know trying to be very appealing to oems to get embedded in a lot of other products and so it's somewhat surprising to see them.
Expanding the line of first-party products that they in bed in themselves and arguably.
That could make it less appealing for other microwave ovens to license the tech or.
They could make that the must have desirable feature that then entices other opm's to take the future.
[47:37] Yeah I got a fire watching the video that they were.
There's been a couple microwaves actually integrated with with Alexa and I get the feeling they're underwhelmed and I think they wanted to say here's where the bar needs to be you no have it,
be able to talk about different recipes and talk about you know defrost my vegetables and have it understand that stuff. I think they're frustrated that allow that Williams to do that kind of thing.
No some of the commands for like Alexa run the oven at 50% power which is I think they were trying to make more of an intuitively than than though instead.
[48:10] No I think I think you could have hit the nail on the head with that I did feel to mention one other interesting product they have them or audiophile.
Alexa now so you can I get an Alexa with a.
Remote subwoofer which more directly causes us to compete with like the Sonos is of the world.
[48:31] Recode pregnancy.
[48:33] I teased earlier in our Amazon segment that we were going to talk about another new retail format from Amazon and that format is a pop-up shop that Amazon and Good Housekeeping,
just opened at Mall of America.
So this a curated assortment of products from Good Housekeeping and they all have smile codes which you mention which is Amazon's proprietary 3D barcode and you scan any of those smile codes,
to be able to order those products from Amazon.
[49:08] Cold sores a kind of touch and feel and then you can't really buy from there you have to buy them online.
[49:12] Yeah my sense I have not visited yet Mall of America for a long time with the largest mall in the US it's so realize that status but it's this huge huge destination Mall in Minneapolis.
[49:25] I've been there Camp Snoopy as big giant thing in the middle.
[49:28] Yeah that's an amusement park in the middle of the mall I I've spent weeks Sweeping in that mall we don't we don't need to rehash those.
[49:35] So we'll save that for another podcast.
[49:36] Those stories but so an interesting new new partnership as Amazon you know partners with more these curators create you know novel newcomers experiences.
[49:50] Okay that was Amazon news and looking at 9 Amazon news
I like to keep track of everyone's holiday forecast cuz we're sitting here knocking on the door of October and so we Deloitte was out our good friend Casey and they are at 17 to 22%
incest pretty robust with a 19 and a half midpoint internet retailer came out this week at 15 and a half
and then sucharita was on and she talked about how they haven't formalize our forecast but she was thinking kind of
14 to 16% and she kind of highlighted that the the Grinch this year could be these tariffs and there is,
creasing noise even since we had to treat on like literally 3 or 4 days ago you know Walmart is really kind of banging the drama and there's a lot of people out there saying,
hey this this could be a pretty big head when coming in the holiday so we'll have to see how that plays out.
[50:42] There's a part of this could be a scare tactic but they're saying in some categories that does terrorist could drive 10 to 25% pricing keep creases in some category.
[50:52] And it's all the dollar store but what are they going to do.
[50:56] Yeah that would that would obviously.
[50:56] Scot a dollar 15 store doesn't have the same ringtone.
[51:00] It doesn't but if you shop at our store you'll find a lot of not. I don't already sorry spoiler work yeah.
There was another big acquisition in my world,
on Friday I want to say and that was that a Dobby has been very active lately and Acquisitions we talked about their acquisition of Magento the e-commerce platform on Friday they acquired martello.
Which is a big marketing automation platform that particularly excels in the B2B space.
[51:38] That was a was a big deal in it how do you think that's going to is that kind of tying into Magento one report I saw so now that adobe owns Magento there's a lot more Wall Street people talking about it,
I'm in every report I read is not very favorable towards Magento and it talks about them as a share loser to Shopify Bigcommerce,
now a lot of that's anecdotal so do these Channel checks and there is kind of hearing you know if they'll be at these still be at the shop.
To hear Rumblings Aid you agree with the B is this some kind of a very trying to stitch together a cloud in an interesting way because sales horses gut you know
Cloud for everything they've got you Noah house Cloud car Cloud marketing Cloud sales Cloud 9 Stein cloud.
Is Adobe playing catch up what's going on.
[52:27] Infernus to Adobe I'm not even sure I would say they're playing catch-up they me depending on how you look at it,
Head Start of lead sales for Salesforce from day one was Cloud oriented with a single product right so they they,
yeah unquestionably dominated the cloud CRM model in eventually put a world of hurt on the,
the traditional on-prem CRM folks and they've expanded to have what they now call is a marketing Cloud right so their marketing cloud,
then they added exacttarget which was their sort of direct marketing thing and they since added a bunch of pieces to the the Salesforce marketing cloud.
So they printed to me and where that actually is at sorry to be complicated a second Cloud for sales.
[53:18] Is Commerce club.
[53:19] It's a Commerce cloud and said they've Salesforce about to Commerce put Solutions,
demandware and Cloud trays which is more B2B so that's in the Commerce Cloud Suites you got a bunch of these marketing activation tools in the the marketing cloud,
Adobe has probably had a marketing Cloud longer than Salesforce and also through acquisition they acquired a bunch of,
they would put their analytics Solutions in their CMS solution their campaign management solution and they have a bunch of customer data product,
so I would actually argue adobe's had a more comprehensive.
Suite of capabilities and what they call the marketing Cloud then Salesforce.
[54:09] One of the tools in that sweet is called campaign manager and that probably is not the absolute strongest product in the sweet and it's primarily focused on b2c,
outbound Communications and so Marketo bolsters that capability and sort of experience and in the B2B.
I would agree that that in general Magento is a share loser to some of the cloud-based Solutions most notably Shopify but I would say,
an area of strength for Magento has probably been on the B side of Commerce in so you could look at that from Adobe and say,
hey the marketing cloud has been pretty successful and well penetrated in the The Big Brand b2c space. Between Marketo and Magento.
Probably bolsters their treads in the B2B space and you know potentially on the longer tail a little bit more.
[55:07] That was way deeper than I was.
[55:09] Yeah I'll see a lot of my Adobe friends in my travels this week so that I'm sure they're going to tell me if I got that wrong.
[55:15] Quotes of this was also a big week because we're both Apple Fanboys and lot of new stuff out there's new watches and phones and you had a fun Journey on your phone's I'm sure listeners would love to hear about.
I had one where I I did the whole get up at 3 and was disappointed cuz launch day was the 21st and then I got to like 28th October 5th ship date,
but being good under-promise over-deliver I got my Apple my new phone today.
Came in 5 days earlier which was exciting and I was frantically installing and upgrading and so I got the x-maxx and I'm really happy with it it's got a longer battery doesn't feel ginormous I feel like I'm back to that plus format.
I also have a.
Pixel 2 and it feels like it's almost the exact same format as up until 2 so it's been good and then I also got the new generation 4 watch sadly it does not have the ECG yet it's coming soon,
but the thing they did those genius there is they got rid of the bubbles and it just feels like the data display is,
in a 50% larger so there's a lot more information on the watch which is which is kind of neat and it seems like the battery life there is dramatically improved tell us about your your phone experience.
[56:31] Well first let me just paint a word picture for our listeners
during this entire podcast on our face-to-face and Scott has mainly been playing with the Amazon VR feature on his giant Max phone and flashing his humongous Apple watching me.
So I have some serious Apple Envy as we sit here I'm sad to say I had to replace my Apple watch 3 months ago so I did not pull the trigger on a Gen 4,
I knew after I.
[57:00] Is your screen cracked.
[57:01] No not yet but it may be by the time I get home tonight.
[57:05] Girl accident.
[57:07] After I saw it I was going to have some screen envy and I I certainly just watching you and having some screen Envy,
luckily there's a 24-hour Flagship Apple Store about 300 yards from where we're sitting right now so I can fix it on the way home and I don't think they're in a constrained Supply situation I think you can walk in and buy a watch.
[57:28] Sounds like a fun trip that we can report on next week.
[57:31] So I got up in the middle of the night in the middle of shop.org to place my.
IPhone upgrade order at the earliest possible moment and I also pay a little bit of extra money in this Amazon upgrade program because you generally have.
Preference for the new stuff.
[57:50] The Apple subscription program.
[57:52] Apple subscription program includes AppleCare so if you're going to buy AppleCare anyway it actually and you were for sure going to replace your phone every year,
it actually does a pencil out to be a decent economic deal but the main reason I do what I don't want to get anyone is because,
I want to make sure I get that new phone day one because frankly all my clients on day two are going to be disappointed if I show up without the new Apple product.
[58:20] You have a secret it says retailgeek right on your laptop you have to I mean you at the bar very high.
[58:25] Yeah so I got up early,
finish my pre order was promised a launch-day phone I was traveling on launch day I sent that and it signature required so,
I sent a signature required form to be put out in my house while I was gone somewhere justix went awry on that and the the phone didn't get there so I came home Friday night to a sorry we missed you.
[58:53] The saddest worst customer experience although it's my fault it still is the most disappointing customer experience you can possibly have your want your phone was here but now it's not.
[59:05] Wow wow wow.
[59:07] So jump on the UPS website change the delivery address to some UPS lockers very close to my house,
and get it rescheduled for Saturday delivery so now I don't need a signature or sometime Saturday UPS is going to drop this at a walker that's half a mile from my house so I'll get it into the day Saturday still in time for my trip this week.
Saturday 6 I get the exciting note that is in the locker walk over to the locker the locker opens and is empty.
Want Walmart so that was very disconcerting turns out the driver made a mistake.
They delivered it to the locker wait tonight and so I I did in fact like my phone,
moments before we started this podcast but unlike you did not have time to activate it yet so I also got a big capacity Max and then and I'm excited for that as well.
[1:00:08] So you know we ordered about the same time and you pay all that extra for the subscription I got my phone earlier.
[1:00:13] Yes I mean the main takeaway from this whole story is Scott is better than Jay.
[1:00:17] It just luck of the draw.
[1:00:21] But I will say there were a couple things they were either surprises in this more the OS X launch and the hardware or that I just don't have missed during announcements but there's two kind of,
relevant features to Commerce,
so we did mention when the OS 12 operating system was iOS 12 was launched that there's a new improved AR library in it called AR Kit 2.0 what I missed,
is AR Kit 2.0 that you do AR in the web browser no app required and so I'm that's the capability that are friends at Sea car using,
to watch that so in general I don't recommend retailer spend a bunch of money on an app,
because there's a lot of friction to getting users to download the app I do IKR experiences for a lot of in-store retailers and so now I get the best of both worlds my retail clients can implement,
the in-store AR shopping features without requiring an app so that that's actually very exciting,
and then the Easter egg in the hardware is the phones that you're holding the access model so that excess in the excess Max which is not how Apple want you to say it by the way they want you to say 10s.
Yes in 10s maxed and coming soon 10 r.
[1:01:46] All have an improved NFC chip over the previous generation,
and what's exciting about this new NFC chip is a,
it has a passive reader in it so the original phones with NFC chips they can really only be used for Apple pay and you couldn't use them for other experiences,
now we have a complete implementation of NFC,
and one of the things that means is for example a store could put an NFC tag in every fact tag in the store,
and if you just wave your phone you don't have to launch an app or do anything you just have to have the phone unlocked if you just wave your phone over that tag.
You will go to a web page that can have supplemental product information for all those pages so now we can have NFC tags that we put in our house to like,
trigger scenes for virtue we can use them for shopping all sorts of capabilities in the NFC stack that we didn't used to have now with this new hardware we did so I actually bought.
In NFC writer in a bunch of tags to start playing with us and they came even though I didn't get the phone so.
[1:03:00] What are the most fun apps and if you look on Twitter
iOS 12 I think comes with measure so you can go measure all kinds of random stuff there's always funny people pictures of people measuring like their cat's tail and all kinds of interesting thing so it's a it's a cool way to experience they are.
Have a lot of fun measuring stuff.
[1:03:19] I will say this some of the third-party measuring apps that use it still better than measure but it's fun to have a native Native program.
[1:03:27] Call any other fan boy stuff.
[1:03:31] Nope nope that was it again I think there's going to be another announcement with some iPads and then there's probably at least one model of iPad on my list for that so I'm.
[1:03:43] One thing that we watch Pretty closely is the stock market to see what's going on in IPOs and there was an e-commerce IPO this week There's a European luxury Marketplace called farfetch
and they went public on the New York Stock Exchange and
this one was interesting date they price a little bit below the range but they end up raising 875 million which is not too shabby and the stock,
October 50% on on diepio day does farfetch Marketplace lol you probably haven't heard of evaluation of 6.2 billion,
be billion there revenues are about 400 million a year which we know that's a very good multi,
but they're growing north of 50% year-over-year so that's why they are commanding a really good multiple there so it should be interesting to see what they do with those phones or largely European
I'm in focused on luxury you can imagine more International expansion and maybe even a push into the US that's what I would do where I European luxury Marketplace.
[1:04:43] The Ed suddenly found a lot of excess capital.
[1:04:47] And did not this time I thought it was interesting we've talked a lot about a rvr on the show we did a deep dive you and I are kind of hobbyist on this and what did we miss in VR at least is that killer app,
so I'm a big Elon Musk fan and he announced kind of surprisingly a SpaceX,
project funded by a Japanese billionaire where they are going to go on a moon travel servngo launch from Earth on the bfr
the big Dokken rocket and they're going to take that puppy and circle the moon and then come back and he announced on Twitter I use a mouse with air quotes because.
Alive not a hundred percent sure he's serious about this but he generally is like you know what he says he's going to solve things that are not flamethrowers but they really are they did that,
the boring companies real most the stuff that you think is a joke
end up being real he did say they're going to live stream in 4k you were going to have series of cameras mounted on the spaceship and they're going to
Live cast of er to imagine of your experience where you.
[1:05:57] Be on the spaceship and looking around as it goes around the Moon bee that could be the killer app and I'm I'm curious to see what headsets he's going to work with and know you'll on,
probably would decide the ones out there aren't up to spec so maybe they'll have to be a boring headset or a SpaceX headset or something that comes along with it so they'll be fun to watch and kind of out there,
pretty super geeky.
[1:06:21] You and I could be at the geekiest launch party ever for that product as weak sit in a dark room with her.
[1:06:27] If you see the only sold two of them and it's the same guys that bought the Fire Phone.
[1:06:35] Exactly there is a retail tie in there that the Japanese billionaire you know I think he sold like,
8 seats for this first flight in the Japanese billionaire bought all 8 he's a retail billionaire and he runs a company in Japan called Isuzu which is like a big,
fast running apparel retailer in Japan and I think he said he's giving away the other seven seats two artists to create,
like art rendering the the cool experience of being in space.
[1:07:08] Brickell nail salon close or something.
[1:07:10] Don't don't know but I like to see retailers being the first first tourist to orbit the Moon.
And with that it is happening again we ran out of time even on our extended length in person podcast,
but in the highly unlikely event you didn't get enough of Scott and I on this episode jump on the Facebook and let's continue that conversation and as always if you enjoy this episode or just to put us out of our misery,
now would be a great time to jump on iTunes and give us that 5-star review you know who I'm talking to you're the last Wisner that hasn't done it
now would be a great time.
[1:07:54] Thanks for hanging in there everyone and we appreciate you staying for this Marathon Jason Scott show where we get to cover a lot of fun topics hopefully you enjoyed it.
[1:08:03] Absolutely in until next time happy commercing.
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.
Episode 146 of The Jason & Scot Show was recorded on Thursday, September 20th, 2018.
[0:25] Welcome to the Jason and Scott show this is episode 146 being recorded on Thursday September 20th 2018
I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.
[0:41] Hey Jason and welcome back Jason and Scott show listeners Jason were sitting here at episode warning 146 knocking on 150 and
there's someone we've been trying to get on the show for a long time but she is so busy
it's taken almost a hundred fifty episodes for the stars and the moon and the planets to align so we are really really excited to finally have on the Jason and Scott show the
Infamous and famous sucharita kodaly welcome to the show sucharita.
[1:11] Oh thank you Scott and I'd only been waiting for years to even be invited to the show so this is my moment.
[1:20] Usually the inter I give like a little blurb about people and I was like near LinkedIn and there was so many things you've done the the ones I'll just throw out there you've got tons of retailers at Walt Disney and of course well known for Forester so
so you're welcome to show excited to have you.
[1:41] Thanks for having me I appreciate it finally.
I feel like the weight is going to be well worth it as you know from having listened to a couple shows we always like to start by a kind of orienting the listeners with a little bit of background and sort of a.
A quick synopsis of of the scope of your roll now so I know you have a fancy title principal Analyst at Forrester.
What does a principal analyst do.
[2:10] Yeah I'm pumped Forrester for for for those who don't know is a technology research company it said based in Cambridge
Massachusetts and we have a number of analysts to focus on different aspects of a technology research and I've focused for the 10-plus years that I've been at Forrester
I'm on the retail industry so that means digital retail omni-channel issues mobile Commerce
social commerce and anything and everything that really
involves a bit technology or the internet and I work with retailers and a lot of the technology
suppliers and Technology software providers that that support the retail industry.
[2:56] Very cool and Anna Scott alluded to it but you you have a prodigious retail background before coming to Forest or can you share their listeners of the synopsis of how you got there.
[3:08] Yeah yeah there would you pull just before I had joined Forrester I was at a department store so I worked at Saks Fifth Avenue for the saks.com team.
And the four sacks I worked in Big Box retail I was at Toys R Us for for a little while and then before that I was at a startup during the
first.com the late 90s and it was that it was a startup
that was in the e-commerce space selling baby products Baby Style and that was actually founded by a colleague who had worked at Disney
when I was when I was there so so that is that range of experiences except brands
internet start-up department stores in big box.
[4:00] Awesome and that you Scott and I are part of the prestigious club we have we've all served on the shop. Org
board of directors and you and I were just at shop.org in Las Vegas last week.
[4:15] Indeed indeed yeah that shopped out of work is where I think I got to know both of you.
[4:22] So that alone is a good reason to be part of shop.org to get to meet fabulous people like Scott and sucharita and.
I'm curious I haven't had a chance to kind of debris that you sent the show any big takeaways or or.
I think thank you you saw or heard of the show that they stood up to you.
[4:43] You know that the topics that seem to come up have been a lot of the topics I think that that don't have been
pretty popular in 2018 as you know Jason I know that you had spoken on that like a Ally and machine learning which retailers
I think we're just still trying to get their arms around what does it mean for their businesses and is there a flexibility and is there applicability really to amateur business that has a large sore foot
print where where is there an opportunity there and in how do they even know
think about leveraging it it to their advantage.
Amazon is always have Perpetual topic of it's almost kind of every conversation I have with a retailer it almost seems like it
I have done to that territory.
There was that that you know also I think I'm an interest in in just it as an extension of the Amazon discussion around marketplaces.
And that will likely be wanted
the topic said that will probably talk about today is that is that a Facebook and what it's doing with it
latest Commerce Commerce initiative those are definitely that that the teams that stood out to me that seem to be recurring that that came up over and over again.
[6:09] Nice I actually feel bad because Scott wasn't able to make it this year due to the hurricane.
[6:15] We miss you Scott.
[6:17] I know it's not the same.
[6:18] Is the first one I've missed and I think I'm going to say tennis shoes on it it was very strange not going this year but I've heard a recap so I saved.
[6:28] Nice if you're doing the math at home that means Scott started going shop.org when he was a teenager.
But you gave it talk there's a secret session on the giveaway that the inside scoop is it shut that or there's a secret invite only session call Executive afternoon and Shop. Org.
Then all the fancy people attend and that's when they get all the big brains to present.
And you were one of the presenters at that section and you actually talked a lot about marketplaces and I was as I was listening I was thinking of myself.
Scot Migos toys.
[7:02] Well this is wet that Scott's been evangelizing for for so long right is it is how much of the world is is now marketplaces how much of retail is now Marketplace is and the Forrester stats are that globally marketplaces are now.
50 more than 50% of all of e-commerce projected to be north of 60% in 5 years or so
so your call at has always been right Scot Wingo.
[7:29] Thanks thank you I need to bring you on on all my meeting so you can talk.
I'll just put a quote then I'll just put on my slides Scot Wingo is always right situated so
you know one of the things we identified early in the Chow beiser was sweet we started going to China and realizing
you over there it's like 90% marketplaces to do feel like we're heading towards that kind of world or do you think you feel like that kind of balancing point in the 50 to 60% range right where do you think that goes.
[8:03] Well I'm a large you're right I mean it's there's a large part of e-commerce that is China it is the largest e-commerce Market in the world and when most of the e-commerce in the largest market is marketplaces it's going to be skewed a little bit that figures for the US I think we have our life
more like 30 to 40%.
[8:23] That was a global to 50%.
[8:25] So yeah sorry I if if that wasn't clear
but that so so where is the saturation point for for marketplaces in the US and I think that that is a question that's all smelly
what's there to nuances I think that are important with that question 1 is how broadly we Define marketplaces once you get into defining marketplaces with travel or potentially with food or other categories
it becomes the penetration numbers change and it's actually even higher because there are certain categories that are entirely marketplaces like in a large marketplaces like ride-hailing.
[9:05] So so that is why I think that there's a there's a there's a very narrow definition of e-commerce that we have now which is about
30 categories of physical goods and within those 30 categories the future I think is ultimately I intertwined with the future of Amazon in retail and I think that's the at the big that's one of my big questions is given
Amazon's first-party margins which I don't I think are probably the lowest margins of all of its key category is that it does business in Risky Business says that it participates in I think it really begs the question of yet you know do they
do they consider do they lean into their
higher margin businesses like advertising or cloud or hardware and ultimately
give up on on some of the retail on pieces and they've become more of or they become more of a service at service provider and in that in in that scenario I actually think.
[10:13] We may see a cab to that market place to Unistaff.
Maybe we won't get to 70 or 80% liking somebody you know some of these other markets like China or north of that but.
But I did it for I think it's it's it's heavily dependent on your what sort of happens in the next five years with Amazon.
[10:34] Yep so we we've already kind of jumped into it but it wouldn't be a Jason Scott show without talking about Amazon so it's a good Market Marketplace kind of approach
I had a 30000 foot question for you I were Twitter buddies and you know if I kind of look at the trend your your kind of.
Not anti Amazon but I get the vibe that you're kind of feeling like you know
maybe they'll come under more scrutiny around some stuff with what's going on there.
[11:01] Well I think that it there a lot of people that think that I did you know there's there's no question that
there are there certain
things that happened on Amazon there are CEOs of companies like Birkenstock and Swatch that have called out you know that there are fake versions of their product on on Amazon so you have
counterfeit issues you have pricing issues there
yet you know there are issues related to the authenticity of reviews on the other number of products that I bought an Amazon that I'll have like 500 positive reviews and then you get the product and the packaging
contact this URL for support and it's it's a URL for some heat for a non-existent website.
[11:55] There is all kinds of there all kinds of issues with you know it's gotten to Amazon has gotten so big and even though they have some of the most Brilliant Minds in retail working.
There are there are there a lot of fraudsters in the marketplace that are
one step ahead and constantly you know it's it's a whack-a-mole situation for Amazon so so my so anyway my net-net of my
by my salon Soliloquy here is that I think that there are.
A few different directions that Amazon could be tackled it could be you know that you have State's attorney generals.
[12:38] Brett unipack reading some case with the but you no wonder that the guys of consumer protection laws we have
it another artist at the
DUI Mantee trust commissioner I'm just the other day who said that you know she's looking at some of the pricing issues with who or what the data that Amazon is collecting from Marketplace Sellers and does that affect
the pricing of UniFirst versus third-party merchandised so so there are a lot of different I think
constituents within government regulation that I think may have some some legs to stand on with respect to addressing these issues I mean that I can't think of other business that's had a first and third party Marketplace in.
[13:30] Piano ever and you know kind of that also has
instant transparency of information and
there there just no laws around this so it's it's difficult to retrofit our existing laws on topics like predatory pricing or price-fixing.
When it you know what Amazon May doing may be doing their site nuances to those to those issues.
[13:58] Yes and hq2 you want to share Charlotte.
[14:00] Might my guess what Charlotte was do was kicked out of the first round better shot.
[14:13] Yep yep we're on the short list.
[14:15] Write the short list of a my my my bets would actually be on Boston.
[14:19] A lot of people are saying DC because of a lobbying thing which I don't understand at that tire lot of lobbyists 20,000 lobbyist.
So Jason I got in a vigorous debate with some people about Amazon go
they were they announced they were going to open a couple more people like this is crazy and stupid and then they announce they're going to open 3000 leakage that they may open
what would you think about the Amazon go store in the strategy there.
[14:50] Well I think that you know when when things like this are said with Anonymous sources it
it does become more questionable that I want to see the lease it is and I'm going to wait and let you know I'm not going to speculate too too early because I feel like
we've seen this movie before you know when Amazon took out the lease at the Empire State Building everyone thought that was going to transform you know grocery in retail and
distribution in New York City
you know after they launch the bookstore's there was speculation that it was you know they were going to have you know hundreds of them throughout the country there by think 15.
You know when they even launched with Amazon Fresh you know I think that there was some speculation that they were going to be in you know hundred plus cities and
you know what a very short. Of time and that roll out spend a lot
a lot slower so I I don't know that I completely believe the rumors there's a part of me that that wonder is you know is it
is it somebody who's trying to short grocery stocks is planning these Rivers you know so I'm not I'm not I'm not sure that I fully believe it.
Also be the logic of of opening that many stores that do require such a high capital investment.
[16:14] I'm usually pretty small format stores.
Especially ones that are not selling high-ticket goods and you know a lot of what they're selling or these you know convenience store items are lunch for someone.
You're not talking about you know business that is like 10 or 15 million dollars per location and I'd be surprised if it was even that much so.
Terribly High capital investment for a business that ultimately
I don't know how much of an impact is going to have on Amazon's overall business at this point I mean the kind of bet that Amazon needs to make now now that it's like a 200 billion dollar plus company
it has to be really big and and I don't even know that you know kind of opening a convenience store chain is going to deliver.
Those kind of numbers for them.
[17:14] Yeah and we like we like to say it's a trillion-dollar company just use the bigger number.
[17:19] Google valuation versus Revenue right.
[17:24] Yeah that is a very first world problem when you get to the scale where.
Buying a business is only interesting to you if it as a potential to be huge and an Amazon certainly has entered that phase.
Sign on Amazon go if the rumors are true and they roll a 3,000 there's an interesting question does that disrupt convenience stores I-80 is that horrible news for 7-Eleven or is it actually worse news for like.
GSR Quick Serve restaurants like Subway sandwiches and those folks because it really seems like the in the first few stores.
The the purpose people have her going to the store is to get lunch more so than you know get emergency convenience items.
[18:09] Right right yeah I think that that's that the end up an unknown I mean that whether it ends up being more of a grab-and-go restaurant
dsmi restaurant semi going to pick up some Essentials I mean when I when I visited one time and they had meal kits
bars in a wine all kinds of eating it seemed almost like it was an experiment on you know what are what are things that people can can carry
consumed in the next few hours so so yeah it'll be it'll be interesting to see I mean I don't know that 7-Eleven and.
Gas station convenience stores are going to be necessarily that disrupted the reason being that you're fundamentally it's gas or cigarettes or the other some other driver of the visit to those stores
as far as as as Amazon goes ability to provide food I think yes they become essentially a new
at the dispensary to come like a new quick service restaurant in in the space
you know when it's I think that that's just the natural competition in the restaurant industry and it's so hyper competitive and it's so hyper competitive I don't know that any given quick service restaurant is going to feel the pain because there are
their players that come and go in any Market within the restaurant industry in a year's time any.
[19:37] Yeah yeah it's it's really going to be interesting to watch the one thing it was interesting to me that you know they just open the third one in Chicago first one had a big kitchen in it second one was very close to the first one in Seattle and I didn't have a kitchen because presumably.
That kitchen was sort of a hub for spoke of a story but the first one in Chicago does in fact have a kitchen and so you know when you're when you think about it like that.
Well a lot of the traditional convenience stores may have some food but they don't actually have fresh food they're preparing on site.
And I think we did hear from one of the Amazon execs that that's so far that be my sandwiches they're number one's cute whereas like a convenience store it would be a beverage.
In the old days cigarettes.
It's going to get you some lunch another category that people are selling speculating Amazon is is on the cusp of disrupting is the pharmacy
I know they bought till pack earlier this year any any thoughts about Amazon's true aspirations in the pharmacy space and how that might play.
[20:42] Yeah I mean it will this is it's a it's a fascinating one because going. To the point about they need to go after really really huge markets obviously Healthcare is one of the biggest and one of the fundamental advantages of healthcare is it it's a sec
actually growing unlike retail which is growing probably at the rate of inflation that Healthcare is growing.
Faster than inflation and to be part of that
probably one of the more scalable aspects of it in there on the prescription drug side versus on the provider side and by the way there actually let you know there was the whole announcement of Amazon with Berkshire Hathaway JP Morgan which is actually an experiment on the provider side too but on the
the prescription drug side of it makes it makes a ton of sense it's an enormous mark.
You know a hundred billion dollars plus there's inefficiency in that space and if Amazon is able to do to help support that.
And Chad make life easier for for everyone in the Echo System whether it's.
A medical provider or whether it is a patient that's that's a that's a transformational thing so so that makes actually a lot more sense to me because that's that's a market that
that that is one of those markets that could be meaningful to a company that is still 200 billion dollars in Revenue.
[22:10] So just tap it a little bit when when retailers asked you what to do about Amazon what what kind of what are you.
[22:17] I think that
there's a lot to learn from Amazon Amazon executes of course incredibly well they there they have they make
customer so happy with with their fabulous customer experience whether it's shipping or how easy it is to
return something or how easy it is to track
merchandize or you find whatever it is that that you're looking for I'm so so all of that I think is is absolutely worth emulating and you know I always point out that
one of our data points says that one of the things that consumers want from any website is just visibility until when you know when an item is supposed to arrive
and you're Amazon's been doing that for years but yet to this day most e-commerce site still don't have it so when the question is you know what should we do about Amazon my
first inclination is to take the best parts of it because you know they said some pretty good standards in.
In a great customer experience and so I think that that's that's that's one of the things that you can do there I think that there are our other opportunities from the standpoint of leveraging a lot of the information of a night I think that Amazon is one of the
largest open source product databases.
[23:35] And I'm going to expose a lot of what's actually selling on their site when you dig into categories and subcategories and Sub sub categories and I don't know that there are a lot of companies that
take advantage of that data to see if there are opportunities and trends that benefit them to
now it's light from from Dad I think that's one of the biggest questions that we got about Amazon are related to
well how do we how do we engage with them as a as a partner on do we sell on the Amazon Marketplace knowing that it is it could be
you know deal with the devil if you know where exposing everything from emergency to.
Velocity and dumb is that is that something that could come back to haunt us if they
Jordan shoes Deb to private label or or basically
take the best aspects owns of you know kind of merchandised universes do we go at it and try to sell something to sell our products direct-to-consumer through other channels and and that I think is those are those are tough act to existential decisions that
be at the right answer is going to vary from company to company it's going to depend on everything from your culture to what it is that you actually sell to you know what kinds of barriers to competition your brand is has even set up if any.
[25:00] But that but yeah it said it's a it's a complicated relationship I think the easiest answer is you take the best of what they've already established and and you know of an embrace it and
harder side it's a big kind of how do you how do you spell exist in this you know in a world where
online it such a dominant force and it is that it's it's it's proven to be.
[25:28] Front of me to at it too many Brands and retailers you know I used to work at Toys R Us and see it you know kind of a lot of that there was a big huge lawsuit in an hour more than a decade all of that when you go back and read
you know they're the ultimately wet that the judge wrote about it
you're so much of of what happened then when Toys R Us was selling on Amazon platform.
Still applies today in Amazon's approach toward its Partners so so that this this notion and this is concerned that their front of me is is absolutely.
[26:07] Yeah one of the fun games to play on Amazon is sort of imagine what categories are going to disrupt next do you have any prognostications you care to make about about love wet wet the next big move might be.
[26:21] Well I think that you know what I've been thinking for a while is I think they're going to make another go at mobile phones we know that they're their first attempt at the fire phone was loose a disaster but that was just a thing
wrong item wrong time you not the right
the right mix of value for for the customer but the Despicable phone being a space is so large and is one of
again those categories that would be meaningful to a company that's already 200 billion dollars
that it it almost seems that they would be foolish not to take the IP that they had development that's their playbook right is like you know nothing's a failure everything is
you know learning opportunity that you build on later I mean I'm actually more surprised that.
After all the failures and challenges with grocery which is such a low-margin category they keep going after that
whereas phones which are you know when you look at you know Apple's number is a really high margin category why
why they haven't Give Mickey why they haven't made another attempt there I think there are other categories like you know potentially you know Automotive or travel that are also substantial.
That they may tackle in some way shape or form.
[27:48] But and I'm actually in a frankly surprised they haven't already done something in in the automotive space but but I think that's hardware makes a lot of sense and also given.
So much of the unicorn of the credibility they've now built with with Echo.
As a hardware manufacturer I think that you know any attempt at a phone this time around will be more positively receive.
[28:17] Yeah that's really the reason why I guess I'm hoping is wrong because.
We we do these forecast at the beginning of every year Scott and I are highly competitive and I think you may have just agreed with one of his his pics in the forecast so I just for the sake of me winning I'm I'm hoping that doesn't happen but I.
[28:37] Sucharita is truly a genius.
[28:39] What we're just going to link to one another Twitter Scott.
[28:46] I'm actually going to go back to an Andre at at that show and I'm going to add a prediction that Amazon is going to get into the microwave oven business.
Cuz I didn't answer I see that one coming back I don't know if you guys got the news Amazon announced 14 new Alexa enabled products today and you know there's a microwave oven in a wall clock.
[29:05] Yep I thought you'd be excited about the microwave it has a order more popcorn but I know you can't talk about you love the buttons being integrated so that's exciting.
[29:14] So needless pivot off of Amazon for second and we could certainly talk about them all day.
Most other retailers that are definitely trying to compete with Amazon have a very unique attribute they have these these physical stores that Amazon doesn't have.
Any any thoughts about the best way to leverage those those stores and sort of omni-channel way as a competitive advantage or what what are you saying going on in that that's out of the fence.
[29:43] Yeah it's so I one of those pieces at Forrester that I just finished up doing research on is retailer LED media networks and it's funny that because this Amazon actually the biggest of retailer let me in it works but there are actually a lot of meat media networks bad
that are less well-known but are successful growing profitable and really interesting engines of
profitability for for retail or so
Best Buy has one target has one Walmart has one and you know Credit Union there other players in retail that are in the Commerce Pace like Expedia that have had these media networks as well and the most successful ones are seeing double-digit percents of their sales
coming from these media networks and their.
Profitable been there for retail business so I said okay so what's the implication there and I think that the takeaway is that retailers have opportunity
take advantage of the assets they have and monetize them in other ways and for some of these large mass Merchants one of those ways is to see
what they have as traffic you know they the biggest Merchants have more.
[31:07] Captive visitors who are engaged for longer periods of time than most media
prettiest out there whether it's a magazine or you know what
a TV show or you know a movie I mean it's it's an incredibly powerful.
I said that they have that very few have taken advantage of and some of that spin just historically.
[31:30] They never knew how to take advantage of that into technology didn't exist to necessarily make it scalable there maybe like a TV that would be mounted in Walmart stores this is before
Cloud these things would break down and no one would know and it may take months before somebody figured out that it needed to be fixed and you know there goes you know the media that should have been
visible in that particular Store so slow but things are different now and you know I think.
These online media networks are proven that there is an ability to get alternative revenue and I I see this as an opportunity.
For other large mass Merchants whether they're hyper markets or.
[32:17] Even drug stores convenience stores that attract broad audiences of
so so that's one thing I think just the
overall mix of how retailers look at inventory the idea of stores within stores and Market places within storage and being more inventory light letting the brands be
more of the stewards of what's in that physical store I think those those are those are definitely things that have to to to be different I mean what I'm describing is more kind of you know play is Sean how do you monetize the store and how do you think about.
Destroyed from in a different financial model not just you know having a lot of inventory and selling it but ultimately all of that also needs to be wrapped
into a great visual experience and you know when you look at retail I'm especially the big National chains.
[33:17] Supposedly the most experiential like Mall based apparel Merchant the really for the most part haven't changed that much and you know that the Adena from when they started too often where they are now.
But the sector that I'll look at 4
visual inspiration is the ruler look at the restaurant industry I mean there are so many different
restaurants out there that cater to so many different demographics and you know whether it is the highest-end booty
the culture or whether it is you know kind of mass you know there's a lot of innovation in in the restaurant space and.
Part of that is due to Innovation and Yuna food and ingredients and menu items a lot of it is also in.
[34:06] The visual look and the inviting nature of the establishment and that's part of the reason that the restaurant industry which is.
For the most part offline I mean there's now online ordering but you know it's still an experience where people go to the
the venue for the most part and even in the age of seamless and all of the delivery space at the delivery company is I mean it's still the vast majority is is is still in the the physical store I mean that's a space that's grown like 30 or 40 times in the last few decades
and I'm it's because there has been innovation in the experience and if retailers applied that same Innovations their businesses I think.
You know me they would they would probably bring a lot more people back to the shorts.
[34:55] People speaking of storage to every store I go to now is full of Halloween gear we're sitting here at September 20th Halloween will will come and go pretty quickly and there were looking at holiday 18 our friend Casey over at delete they just released their forecast and they're saying online growth
17 to 22% which is pretty robust I think last year they said
that they measure 18% based on the categories and stuff where where have you guys put out your Forrester report and and where where do you think that's going to end up.
[35:29] Yeah we're in the midst right now of figuring out those numbers were not quite as a aggressive as Casey's number is our figures are in
the low-teens they've been about there for the last couple of years and you know part of part of that is
it is is you just kind of that historic Trend and so much of it is is about
the key holidays it's around that it's Black Friday Cyber Monday you know this person in demand that really generates so much such a high volume of the sales
there's one other big unknown and for this particular holiday season and that's what effect the terrorists are going to have on on retail I mean the the latest round which takes a fact.
[36:20] Any day now effects
a lot of consumer goods in a lot of holiday items like apparel accessories Footwear Consumer Electronics Home Goods so it'll be
it didn't even even though we're probably not going to be in a revised our forecast down for that reason you know we'll see and at the end of December and in January if there was any impact in if there wasn't
yeah we can he is a great sigh of relief for the holiday season but then
yet you know it. That just means that were delaying the inevitable and the impact will be seen in q1.
[37:00] Got it so the tariffs are the possible Grinch this year that's going to a bummer.
[37:05] Yeah yeah I mean what's that mean that the terrorists are 10% right on most of these goods and when you look at some of the mass merchandised particularly
you know in nabbed and HomeGoods are electronics that the margins are any then
stop by for some of those categories so the retailer couldn't even absorb it if they wanted to so
will you absolutely will see some of those eventually show up and in what consumers have to pay.
[37:37] This actually brings up a topic that that kind of we hit on the show sometimes you know we will do these news reports and everyone's reporting so I can Amazon
Q2 was like 30% growth and Walmart was 40% and Targets this all the online numbers.
And then Target was like in a 30%.
But then e-commerce is growing 15% even even like shopify's GMB kind of an aggregate is growing at like 20 or 30%.
So have you have you thought about the site I kind of end up
there's there's some people in the industry that kind of say they think the number to 15% kind of off because it's Baseline to this government number and it's a survey and comes were bass lines off of that
it is a question I ask myself is if the biggest slices of the wedge of the pie are growing.
Twice a 15% than the ones were not talking about have to be something has to be losing Trinidad share for e-commerce going to be growing 15%.
[38:43] Sears JCPenney
yeah I think that it's there is you know there's that psychological bias called survivorship by us that that we hear about which is that
yeah you know we could we talked about the 6s cases and 6s cases talk about themselves and what you end up with is
kind of have an understanding or seemingly and understanding that that that everyone's doing well.
But when in and I do see a lot of the the numbers from specific retailers because we.
[39:22] They still out our surveys and not everyone is is doing that well I mean there are absolutely do you know kind of some of these thieves.
Some of the big box stores this past year for the last couple of quarters have been doing fairly well but
a lot of small ones are not and Gina there are a number of companies that are that are dying you know a lot of
a lot of retailers in the big box space you know I mean Toys R Us great I'm Staples you know Office Depot you know there's so many.
Companies that are included in Indy's figures that you don't you don't always think about because they're not
really publicizing Derek their stats but that's that I think is an important piece to keep in mind there's also and I think they get the other prevailing pieces then.
[40:18] An e-commerce the big have been getting bigger which is ironic because e-commerce was supposed to be an equalizer right it was supposed to be in a zero barriers to entry and anybody can you can come in.
But you know what you are seeing as you know you're seeing company is like that like it look at you know Amazon getting more share Walmart getting more share getting disproportionate share to the growth of the industry and.
Neon we definitely know that it's harder to attract customers it's harder to let you know kind of gain mindshare on the internet these days and you know that could be part of
part of the issue 2 is that there are 800,000 e-commerce Merchants out there in the United States so you know this is many of them are or are not
piecing double-digit growth and I think that stuff you know likely where the figures that we see are coming from.
[41:12] Yeah I certainly will buy that the survivorship bias light.
Affects how we do this I do still think though there's some goofiness and have and numbers are collected and reported by the the
the census Department
like there's actually some tangible examples that they report you can get the date of is IC Code and you know for example if you take the ssic code that Walmart sand and you look at e-commerce sales in that ssic code
total sales e-commerce sales for that ssic code are way lower than Walmart's e-commerce sales so there's
something's getting Miss coded or like it's even sales are getting attributed in a different bucket or you know it again.
In many cases of these are self-reported numbers to the retailers just have to make a mistake in order for the data it'll be wrong so potentially.
Simulation of of some of these weird data collections in this new industry and some of the survivorship bias that your your highlighting.
[42:13] That's a fair point Jason I mean I think that the truth is and this is the dirty secret of a forecasting is that.
There's no there's no one knows what the right answer is because there's nobody has every datapoint
and you know as a as a result of that Unifour casts you no matter who puts them out or a combination of a little you know in a little bit of Art and Science so you know there is the date of points that you do know and do you have different
types of data points that you can gather some can be in Summerside data .7 could be you know retailer.
Yeah they're always questions around how accurately or how truthfully you know companies and people may be answering
some of these reported numbers and they're even very few even when you're talking about the census it's not getting figures from from
yeah the IRS it's getting again it's getting figures from a survey
defense is definitely has the ability test unit has the government behind it so you know there is presumably a little bit.
You know the sense of responsibility that people have to have reporting numbers truthfully but even they aren't going to get
every single data point so there's there's absolutely extrapolation and within that extrapolation there is a lot of
there's there's there's a lot of speculating and that's where the art comes in.
[43:42] And we're not going to sell that on the podcast unfortunately.
But I do want to Pivot.
An annoyance I have and I'm just curious you you would have some sort of analogous conversations on with clients I'm sure I get asked a lot about these trends that in my mind are simultaneously like overhyped buzzwords.
And really important trends.
I got to talk about one of those a shop.org a I like you know I sort of my my POV was.
That it's grammatically overhyped in a lot of people you know her are trying to implement a I just to say they implemented a i
but in the long run it's going to have these really profound effect on on our industry and be hugely disruptive the one of those trends that comes up the most in my world is personalization.
I'm curious if you have a a point of view about personalization like is anybody doing it well or are we doing enough of it are we doing too much of it what your.
What's your thoughts.
[44:42] Why yes yes it said it did yeah incredibly I probably one of the most frequently asked questions that that we get
I mean my perspective and I'd love to hear your thoughts too because I know that you'll have a point of view on it is that I don't know that people know
even what it means I think that a lot of people still think that personalization means the recommendation and Jen's there other people who think that personalization means getting as much data as you can collect
they don't have any plan for how they're going to use the data that they collect you know I mean some of the
the best examples when I
pink at you know kind of the heart of it what's great personalization is you know when a sales associate or somebody that you've had a business interaction with her some,
Commerce interaction with to send the thank-you note you know where they do something special for you.
In a bathtub a great examples of peanut butter personalizing an experience that's incredibly welcome but that type of personalization.
[45:49] Doesn't get considered in the discussions that that retailers are having about personalization.
I'm so I'd I think that you know there's it's your personalization data-gathering.
Big data analytics officer I think all of these terms get get co-mingled and there is not.
Even a great.
[46:16] Did you know there's not even I don't I haven't seen any great examples of companies that have have have truly you know kind of Taken personalization and created some unique strategy.
And have made you know billions and billions of dollars from it I don't know I mean that maybe I'm mistaken have you.
[46:37] No I'm desperately looking for that example cuz we get asked for it all the time and I I'm sort of a I like mine with you I am fond of reminding people personalization isn't an outcome it's attacked it right and so
you know how I get annoyed when people say the goal is to have personalization because like your goal should be to use a packet your goal should be to achieve some some help come.
[46:58] Exactly cuz then you're just checking the box right I mean you're not really you know kind of delay you're not doing anything for your business that's that's meaning for for your customers.
[47:08] Yeah like so I would argue most person was it when people say personalization what they really the outcome they're hoping to achieve is relevant city right like is never more relevant experience that therefore connect better with the Shopper in in case of Commerce.
Like I know I can't think of any front in experiences that are.
Fabulously personalized should therefore be more relevant for the Shopper I would argue like a maybe like a stitch fix is a good example of personalization in the custom assortment they offer customers pretty personalized to them.
But not so much on that on the front end shopping.
[47:46] Right right right and I think that you know sometimes some company is make it carried away with it you know this idea of relevancy doesn't matter as much if you have a small or limited product catalog you know it's like then you're over personalizing you know you just want people to see everything in your you know 50
product catalog and it doesn't make sense to necessarily you know go more granular than than that.
You don't make the tennis sounds if you have a catalog with you know 5 million products but I think.
You know that that's part of the the challenge 2.
Anytime within you know small product how I can get very nuanced if you know if it's a VW purchase or if it's a very complicated purchase but
but but yeah I mean there's there's often this the sense that you know personalization is some silver bullets and you know it's not.
[48:41] Yeah and I 10% agree like you know sometimes you don't need personalization if if your product is super relevant to a huge audience you have a great product and you can make the same offer to all of them and I would argue that that's Apple for example.
And you know if you can take the best personalized e-commerce experience in the world and I'll take apple and I'll probably retire before you.
[49:02] Exactly and I think also you know I mean maybe if some of the Holy Grail is is loyalty like how do we get
you know the outcome being in this store this belief that somehow personalization is tied to loyalty or tied to more loyalty and and I think that's where so you know there is a little bit of
the best loyalty programs out there it's not necessarily about personalization it's just that
they give you free stuff for her you know they just they just have amazing prices or perks.
[49:40] Cool so we spent a lot of time kind of in the in the present may be stretching out the holiday but but let's going to go to 325 and maybe 10 years out what her what are some of the things that are on your radar that that you think retailers brands should be thinking about
our show is talked about everything from drones 3D printing to a rvr what what are some of the things that get you excited about the future of online retail.
[50:04] I think that within Rudy tail the the biggest changes are going to be in.
Disrupting the orthodoxies of retail and what I mean by that is that retails fundamentally constrained by
a few things that
they've always done you know they've always owned inventory they've always you know hired store associates to do certain tasks and they don't even share those store associate with other stores in their chain they
did they have real estate that they have bought you skin a 20 30 year 50 year long leases that they're they're stuck with.
[50:50] And when I say the orthodoxies change I think all of that changes in the future so it may not be you know and in some cases technology will
will potentially in power and change aspects of that like for instance with labor force
differences in the most retailers now you know will have their store associates and they they
put them on their shifts and they come in and the store associates only work with
that particular store but there are companies out there there companies like shiftgig for instance that actually have a Marketplace of basically store for workers and as a store you can tap into that market place based on who's available who's
worked at your store before you know who has good ratings from their managers and who's in a potentially train to unload a truck
or he knows how to work the returns desk or whatever the task maybe that you need and that kind of nimbleness I think is is what
retail in the future it's really about rethinking how are things done now and are there ways to
change that dysfunction in the future for our for the better in the future.
[52:13] I do agree I think that that is a very interesting for the evolution and you know how can we leverage that that in Star labor force across a bigger pool of customers with.
Telepresence is in all of those sorts of things.
[52:27] Right absolutely
absolutely yeah the new question I think that you know me we've spent so much time in the last year talking about omni-channel but for the most part it's really still only in the realm of fulfillment issues and
it you know me there's any channel merchandising omni-channel customer service on. You know there's so many different places where
cross-channel present exactly like what you described and why can't I FaceTime you know somebody who knows everything about being a Sony.
TV's when I want to purchase a Sony TV like you know that's that just seems like that's a logical thing to do.
[53:07] For sure and I hope we do see that in the in the near future I think they're actually may have even been a few vendors in that space in the Innovation Center in shop. Org.
Some of those guys will make it.
But that's going to be a great place to leave it because it has happened again we've used up all our a lot of time but if you have a burning question that we didn't answer on Today Show or you have a comment we
encouraged you to jump on the Facebook and continue the conversation there
as always if you enjoy the show the way you cannot repay us is to jump on to iTunes and give us that 5-star review it really helps us to continue to build our audience.
[53:46] Sucharita we really appreciate you coming on here this evening and sorry it took a hundred 50 episodes for us to line up everything but let's let's have you back on in less than before
episode 1 300 your very active online where do you Journal edirect people if they want to see your your thoughts about what's going on up.
[54:07] Am I I am a big Twitter fan so I would say Twitter yes my Twitter handle is an decimal Peru which is which is the name before I started using my married name is s m u l t u r u.
[54:22] Awesome we will put that in the show notes sucharita as always it's been a true pleasure thanks very much for coming on the show.
[54:29] Thanks so much Jason and Scot.
[54:30] And until next time happy comercing.
EP145 - Industry News Amazon, Walmart, Apple
Episode 145 of the Jason & Scot show was recorded on Wednesday, September 5th, 2018.
[0:25] Welcome to the jason and scot show. This is episode one hundred and forty five being recorded on wednesday, september fifth, two thousand eighteen. I'm your host, jason retailgeek" goldberg. And, as usual, i'm herewith your coast, scott wingo.
[0:41] Hey, jason, welcome back, jason scott, show listeners.
We're sitting here in early september and thought we would update you guys on some e commerce news in between our releases of some great guests that we had when we were in detail east on jason. I want to start off,you had a tweet, and i didn't understand really what you're talking about.
So your little grumpy, you're usually happy tweeter, so i wanted to pick your brain on this one, so that the tweet says, i'm so tired of talking about the r o i of a i based personalization client, quote, what's the r o i ofpainting my house.
Me, it depends, is your last paint job one day old or ten nailed. What color do you want to paint it?
End, quote and seen so tell us what? What does that mean?
[1:26] So first of all, i've been watching my twitter analytics. And it turns out that when i'm cranky and i just rant about something that annoys me in the moment, it gets way more engagement than the like, superthoughtful, ah, well prepared tweets that i do.
So now i'm just i've just decided to try to be cranky. Jason. So that's, what that's really all about?
[1:45] So it's, not a it's. Not ah, fake account. It's. Really.
[1:49] It is the real me, although you did call me out. My my son did do some tweeting earlier this week, and you correctly identified that, too. Ah, which is pretty funny.
[1:58] I think it was like left. Parentheses. Right brace at e. I was like, what is going on?
[2:05] Yeah it was either my three year old or the president united states one of those too probably.
[2:10] Ah but like so that i think what happened there and this comes up a lot of,
people are super well intentioned but like a client will reach out and they're trying to sell some initiative internally like hey we really want to do this new aye aye personalization initiative,
and we need to pitch it tio our senior executive our board of directors or whomever and so i get all these well meaning queries what's the arli of aye aye based personalization,
and i get why they're asking the question but it's an unanswerable question in my mind because a,
yeah based personalization is a tactic like you could do it well and it could generate a way better customer experience that had a huge improvement or you could do it super poorly,
on and have a negative experience and have it you know have ah negative return.
[3:03] And it's not a binary thing where you weren't doing personalization before and now you are right so you know everyone's starting state and in st,
are wildly different on dso that's kind of ah i think you you slightly mis read my quote like,
if you ask what the r o i painting your house is like the first thing i want to know is is your last paint job a day old there is a ten years old right because if you currently have a really crappy paint job.
The are lies probably hire for repainting it. Then if, you know you have a super fresh paint job and are you going to sell your house right away? Because then there's going to be a monetize herbal value for painting it?
If you're planning on living in the house for ten more years, the return is gonna have to be your personal satisfaction from that improve curb appeal, and you can have a four year old repainted or you going professionalpainters repaint it because that's goingto dramatically affect the outcome.
That's goingto ah influence that return. And so, ah,
i guess i'm i was just slightly ranting that people want this super simple number and, you know, if you google our ally on a base personalization, you're going to get some, like,
ah, be cg report that says that you get an eleven percent left if you do a i base personalization,
and so that's, you know,
it obviously totally absurd, but lots of people you know, go to their board of directors and say, hey, we're implementing this new tool because bcg says, we'll get eleven percent more sales.
[4:33] Maybe it would make you less cranky if you just said eleven percent.
[4:36] Yes, that's, exactly what the poor account manager asked me the question. Want this for me?
I just wanted that bcg study on. Instead, i gave him, ah, stupid metaphor about a house, and then i outed them on twitter.
[4:52] They loved it. And hopefully they don't listen to the podcast because you get a double dose.
[4:58] Well, i guess we should move on. Hopefully, hopefully, they weren't listening. It wouldn't be a jason scott show without.
[5:12] Use your margin.
[5:20] Well, it happened aah! Little bit last week and some this week.
Amazon is flirting with a trillion dollar market cap.
We've been kind of watching this race here on the jason scott show for a while, apple has been pretty squarely in the trillion dollar club now for about a month it's kind of flirting with one point, one trillion, and i'm sure,
with some new iphones there on tap, we'll talk about the minute that that will's further cement that,
um, but amazon, when their stock price gets over it's right around two thousand gets two thousand five or seven or ten something like that right in just over two thousand it gets into the trillion dollar mark.
So it's been flirting with that it's closed over in a couple days as we're recording this it's underneath it.
Um and, you know, i think who knows when they announce q three results?
We may see it kind of stay there if they have a solid q three, so i was thinking, i have to go back and look at our holiday ah,
guess is i was thinking amazon will get there first, but apple beat him, but it is interesting now that we have these two companies and, you know, kind of in the trillion dollar club.
[6:28] Yeah, it's, super interesting. And i saw. I don't know that it's meaningful in any way.
But i saw this pretty funny analysis today on like jeff bezos, personal net worth has increased sixty seven billion dollars. This year is a result of that.
That stock climb. So that's eight million dollars an hour, that his net net worth is increased.
[6:48] Yeah, and there's all these, you know, there's, a lot of politics now, kind of surrounding amazon and there's.
All these folks that say, you know, jeff basis, they kind of take his net worth and divided by hours or something like that. So it's just tons there, like he makes eight million dollars a second, and he pays his workers fivedollars an hour.
All that sounds kind of hooey, because, you know, jeff bezos has put all his capital at risk, and he sells very little amazon stock, so it's all paper money until he sells it.
So i don't know. It's apples emerges.
[7:22] Yeah, i mean mostly only sell stock for rocket fuel, right?
[7:25] Yeah, absolutely, yeah, most of it. Or, if he's going to buy a newspaper like a newspaper, like the washington, like the washington post.
[7:33] Yeah, a lot of newspapers, exactly.
[7:34] Yes, yeah, so that that's interesting to see, you know apple and amazon there, right in that trillion dollar club.
[7:42] Yeah, for sure. Be interesting to see, like when they are safely over it, and it sticks. And if anyone is able to join him?
Ah, i did see that j crew is the latest kind of director consumer brand.
Ah, that has announced they're going to start selling their product on amazon, in addition to selling direct to consumer.
[8:07] Yeah, that'll be good, it's. Funny. You know, i've kind of over the years. I think i've pitched everyone on this, and i've heard, ah, more, quote, i'll never saw an amazon in, quote.
Then i've heard, yes, i want to sell on amazon so it's, kind of gratifying to see these walls come crumbling down.
[8:25] Yeah, i will say that what is interesting is at the moment, and they're the latest of a number of brands that, like at one point, would have said, will never be on amazon. And now they're selling on amazon.
The majority of those brands are doing it at a point of distress.
Right? And i think j crew's, like, pretty clearly a distress brand. That's, that's looking for cem for, you know, an infusion of life by potentially selling through these marketplaces.
What, what we haven't seen yet are like, you know, companies that sold direct to consumer are like cooking with gas growing really fast, and then are deciding, like amazon is the next distribution point.
So it'll be interesting to see, you know, when and if we get some of those examples as well.
[9:10] And i think they're there. I think a lot of the d m v b s are on amazon.
They just don't make a big deal about it, like these guys are doing. It clearly kind of send a message to their shareholders that's, like, we're doing something, but,
you go look at the mattress category on amazon, i think could be surprised by what you see there and,
ah, you know, some of them, yeah, but no boast made a conscious decision not to, but you'll find all the mattress guys were there, and, you know, other categories have, ah, lot of the direct consumer kind of guys are onamazon.
[9:40] Oh, to be clear, i agree, and i think i know there's a bunch of digital native brands on amazon.
And in fact, i would argue it's, the second most popular distribution channel besides direct to consumer for those young brands, it's, much more popular than selling wholesale through traditional retailers.
Ah, but i guess what i was more saying is the ones that were holdouts and for what, for a good or bad reason, said initially, and we're not using amazon is part of the strategy, like a warby parker or bonobos or someonelike that.
We haven't yet seen one of those go. You know what, we're drilling really fast. We're trying to reach more customers, and we were wrong about staying away from amazon. We want to add amazon. I just i don't feel like ihave a good example of that scenario yet.
But if a listener thinks of one, definitely drop us a line.
The big news, though, in my little corner of the advertising world, is the amazon is piloting.
I think, technically, beta testing a new program where they're offering a amazon tracking pixel for for brands to put on all their own properties.
So they can get a multi channel, multi touch attribution model for all their there at amazon media. And understand. Like what?
What? Actual sales on amazon are are occurring as a result of their various marketing activity.
[11:10] Yeah it's kind of even a broader theme and we talked about allowed in the show i think we were we've been really early on this that you know we kind of have said that this is going to get,
out of another billion dollars kind of offering for these guys and if you track it out it will be his biggest facebook by i think twenty twenty two ah,
the mainstream media has picked up on it leased the business press so there's been a lot of articles in the wall street journal and the new york times loved don't really add anything but this was really pretty interesting so iwould just want to throw this quote out there our listeners,
they interviewed the new york times had a peaceful linked to it in the show nuts.
[11:47] Talking about um you know, just amazon moving in on the market and they had a quote from monica mcgurk and she is,
the chief revenue and e commerce officer that's nice title at kellogg's that's so cpg on and she said we can reach the right consumer at the right time using their wealth of data to target,
other traditional digital platforms do not have the level of purchase data that amazon has on their customers,
so you know that's pretty powerful in the same article had some quotes from verizon and,
geico and you know so pretty interesting and even i think some car liam's that are you know amazon, with their wealth of data, is starting to get some really interesting signals from people on where they are.
The purchase funnel. And i just don't think you get from other ad platforms.
So it's going to be be interesting to see where amazon takes this. And, you know, i think we've predicted it's going to be really big business. I think this is what takes amazon from a trillion to the next.
You know, several hundred billion dollars of market cap is, you know, this. This becomes another big pillar and a big business for them over time.
[12:56] Yeah i agree and i feel like it works really well as one of multiple revenue streams i actually think that's a much healthier place to be than to be ah ah a pure advertising based business model like a google or afacebook in the long run,
but it is you know i remind people like for the majority of of history the majority of marketing has had really lame kp eyes and success criteria right like,
most most marketers are their success criterias how many people saw that the,
the marketing that they did or at best like how many people remembered my brand or you know, unaided recall or these kind of,
synthetic success criteria on and then you know you've got a platform like amazon where the success criteria is,
how much stuff you sold and what was the gross margin for the incremental stuff you sold right and so you can really look at the spin on that platform through much.
[13:58] Clear set of green eye shades than you can you know certainly that that super bowl ad that you bought and even more so than you can like,
top of funnel brand awareness advertising that you might do on a platform like facebook and so it is,
it is very different and i do think marketers get kind of giddy about like having these more tangible r o i kp eyes,
you know, it is to me slightly different form of advertising like i do think there is some value in some top of funnel brand awareness advertising.
But i certainly think it's much more valuable on these platforms, like facebook, google, amazon, where you can, you know, way more actually targeted.
And just put the content in front of an audience that's likely to want that content vs that ad. You run on the super bowl that you know, ninety nine out of a hundred people have have no interest in your your toenail funguscream.
[14:54] Yeah, and if you're calling about a year ago, we had darrell juvenile on there and that's episode eighty six on one thing, that really kind of stuck in my mind from that episode was they talked about being able tomeasure downstream from amazon.
So not only could they get to your point that you're omar margin of what they were selling on amazon, they were advertising their products on.
Then they were seeing kind of a bump in sales at target, walmart, costco, other places like that where their products were, because, you know, as we you know, you have a little bit of, ah, disagreement on this.
But, you know, there's survey date out there that shows that amazons become the product search engine.
So, you know, you have an outsized impact by advertising an amazon, because not only are you gonna sell more stuff on amazon, there is downstream benefit out into the physical stores as well.
[15:44] Yeah, for sure, and, you know, the site, the more mature platforms like google and facebook, they're actually spending a lot of time trying to come up with that that multi channel attribution and tell you like, howmany people are showing up in a store as a result of their advertising,
and they have to use really in perfect methods to do that like that, like, upload your own point of sale sales data, and we can match it up, you know, for the small percentage of your shoppers that,
that are known customers when they buy stuff at the cash register,
you know, amazon has has more than four hundred grocery stores, what you could imagine them adding an attribution model where,
you know, they told you how that that media you're buying on their platform drove traffic in whole food stores, for example, like theirs, lots of interesting things that you could you could see play out here.
That doesn't remind me of one adjacent piece of news that i'll just briefly mentioned here there were there was also an article that got a lot of people slightly perturbed.
It came to light last week that google had been buying personal data from credit card companies to do some of this this in store attribution on behalf of their ever.
[16:58] On dh that's. Uh, so, i guess, that's. Just controversial because it's tracking you, mohr and everyone's freaked out about all that.
[17:06] Yeah, it's, you know, it's all the personalization fears, and you know how much of your personal behaviour do you really want google to know, like they, you know, in their own ecosystem, they know a ton, andnow they're, you know, one one gap that they had versus amazon is amazon.
See stuff you buy? Google usually doesn't on dso.
More recently, we've seen google partner with a couple of big retailers like wal mart and target, who, for particular use cases, will share their sales data with google.
And now we're seeing that google is going out and buying, you know, credit card sales data as well, the kind of augment that database and and build that big,
in my world. That wasn't shocking at all, like, i mean, we've all known that that data was for sale.
And so, like when it became a big news item you're like, oh, people are upset about that interesting.
[17:56] And you guys are getting a ghost. Where have you been today?
[18:00] Uh it's it's not open yet so they did just this week open a third ghost door but they're all still in seattle so they're all in downtown seattle on the one that just opened two days ago i have not been to yet,
what's interesting about it is that it's the biggest go store so it's about twenty one hundred square feet,
which is ah an average sized convenience store it's not a huge store but why that slightly interesting is the very first ghost door that's you know in in the day zero building is,
eighteen hundred square feet and so then they opened a second one in seattle that was actually smaller it was fourteen hundred fifty square feet and they're a bunch of ah pundits are maybe i should say a few pundits theywere like ah,
amazon's having trouble with the technology and they're having trouble scaling in and they can't they can't even make it work in eighteen hundred square foot store so they're having to downsize,
to the smaller stores,
which didn't seem very accurate to me at the time and then you know two weeks later after all that that came out like they opened the third store and,
what a shock it's the biggest one right and it turns out more there's a variety of factors you used to pick a a store location and do a lease and you know you you have to take the size space that's available that means herecriteria.
And sometimes they're going to be a little bigger. Sometimes they're going to be a little smaller.
[19:26] Yeah, it'll be interesting to see what they used extra three hundred square feet for, you know. Will it just be more of the same, like more prepared food? Or really introduce a new area?
[19:35] The thing i'll be particularly curious to know so that eighteen, the first door had a kitchen and they prepared a lot of food in there, right? And so one of the nice i think they're number one selling skew is this b masandwich that's made on premise, and you can grab it and have for your lunch.
The second store does not have a kitchen, so presumably there they're driving prepackaged sandwiches from the other store or from some co packing facility somewhere.
Um, and, you know, you is easy to imagine that the food's not going to be his fresh and that it's not quite as good an experience when the kitchen isn't connected to the store, and so i'll be curious,
if that third store has a kitchen again or of the you know, they're trying to have a centralized kitchen that feeds the number of stores and, you know, i'll certainly be curious to see how the chicago store when it opens,which they haven't.
I've been to the site it's under construction, they've announced the location, but they haven't announced yet like any details about what actual size that is or when it's scheduled to be opened, so i just have to drive byoccasionally.
[20:39] Do they security run you off when they see you milling around out. So.
[20:43] No, i mean it's, it's, it's, literally in the willis tower building, which used to be the sears tower.
So it's, a pretty public space and it's it's on the ground floor.
And, you know, just the windows, air, all newspapers off. So, you know, you can't.
You can't see it. But it's. Not like you see a lot of robust activity from the outside, or guards or anything.
[21:03] Yeah, cool that's, our amazon news summary. And then i know any geek worth their their street credit is excited about next week.
Jason know, you and i are on pins and needles, because it's going to be new iphone week next week. Or do you looking for?
[21:24] Yeah well you know so i feel like a lot of the mystery has gone these days that you know, apple is amazing compared to most companies at keeping like these private development efforts under wraps,
but even for them has become next to impossible and you know apple in particular like to manufacture a lot of the phone so they can ship him shortly after the announcement so i feel like most of the major stuff has beenleaked,
and you know so now you watch the announcement to see like the ten percent that was a surprise or that they got wrong in the weeks,
but based on what has been leaked ah it's not super exciting for me it's it's what like i think apple has historically called kind of s year where they increment the,
the previous products rather than a dramatic change like the iphone ten was last year,
so i think it's going to be faster,
going to have a little more memory you know, i don't know what your experience has been but like one of mine pain points is not that the phone isn't kind of performance or that i'm doing some,
ah advanced math on the phone that needs more horsepower they're going to offer you and i both have the ten they're gonna offer a bigger screen size in the ten,
which yeah i don't know what i'm going to do you ah i possibly will get the bigger sizes just tow.
Have something more different. But what are you thinking about?
[22:51] Yeah, i think the operating system will probably the big new things, so the less talk twelve will come out,
it's, one of these it's, kind of like an s release itself and there's gonna be a lot of just kind of tuning and performance improvements and that kind of stuff.
Um, yeah, i'm, uh i'm kind of there's, not a lot of e commerce stuff going on.
You know, last time we had this, who had apple pay for webs, that was a nice little nugget on the commerce side.
The only thing i can see that has a little bit of e commerce angle is some of the e r stuff is coming on, so this will be a generation on air kit.
I know you've speculated about three d cameras, and are we gonna get one of those? So, you know, i'll be watching for any surprises around that.
[23:36] Yeah, i think from a period commerce standpoint like, you know, the,
the rear facing camera, the camera that you, you know, see that sees you when you're looking at the phone is a three d camera in the in the iphone ten that's what they use for the face, i'd,
and their couple retailers that kind of leverage that right away for some interesting e commerce experiences, warby parker can scan your face and use that scan of the face to recommend frame specifically for you, whichis pretty clever.
What would be really exciting is if that back camera ends up being a three d camera at some point, i haven't seen that b a rumor yet for this phone, but that feels like the kind of thing,
that they could sneak in, and that could be a surprise announcement, and if that were the case, you can imagine, like all the furniture guys would be super excited.
All the apparel guys would be excited because there's a lot of experiences that could be enabled with that that camera could be used for really accurate measurements of where to place furniture, art or,
what size apparel the wear is.
I'm with you, like, clearly, like a bunch of the things i'm excited about our inn, o s twelve.
[24:46] The like i hear that it's just going to perform way better, and so you know, even if you keep your old phone, your old phone is going to be snappier because it's it's much more efficient,
one features the camera now has native q r code scanning, so you know, for folks that are having to use a third party q r code scanner for any any use case you khun, you can now use the built in camera, so that is slightlycommerce e,
and this isn't commerce e at all, but the the feature on most excited about in the phone going back to jason cramer ginny,
they have a new feature called instant tuning, and what this what you do is when you get some annoying notification on your phone that you never want to get again,
today, what you have to do is figure out what app made that notification drill twelve menus deep into the settings things scroll through your three thousand aps tto find that app,
and figure out how to have a change notifications so that app doesn't, um,
notify you in the future, and in this new os they have this feature called instant tuning, which essentially means like you can click an x on the notification and that apple never notify you again, which i'm eager for.
[26:02] Yeah, i love the feature. Where, when you have to, do, you know, dual off that the it'll automatically just kind of copy the codes, so for you, and you can split it. Summer. I spent a lot of time entering the stupidaccess codes. Consulate.
[26:16] Yeah, so i agree with you i'm excited to slash i i guess i more recently have mixed feelings, so the the feature for folks that aren't super from there would do authentication,
so you type your password to get into some account and then as an extra security measure, they send a six digit code to your mobile phone and you have to type that six digit code in, so that verifies that you both,
are holding the phone and have the passwords.
So you have, you know, two factors of authentication.
Two factor authentication is way more secure in text messages is one of the common ways to do two factor authentication and so,
in os twelve there, automating that like you no longer have tto,
switch over to the texting and remember the six digit number to type it in like the browser can literally like automatically detect the code from text messaging, which so like you, i'm excited about that comma.
All the security gurus have told me that,
using the sms text message for your second factor of authentication is next to worthless because it's, so easy to fake your identity and hijack your sms messages,
that the security professionals really don't recommend using sms messaging as that that second factor and two factor authentication so.
[27:38] One. So we're all just kind of like going through the motions. Makes me feel good. I feel so much better.
[27:39] Sorry yeah, sorry to burst,
we're all doing more work for no extra security exactly.
[27:47] Cool the there's. Rumors of some watch upgrades and ipads.
The one thing that's interesting. So apples, definitely doing something around.
More of a pr are kind of, ah, area.
They've got a bunch of patents. There aren't. Cos i don't think we're going to see anything here but there's, a lot of rumors going around that they are working on a pair of, you know, of a our glasses of some kind, so thatthat would be the big one more thing, if there was gonna be a surprise, i think.
But i think that's further off, and, of course, they're working on a, you know, a kn automated car, but again also far off.
[28:25] Yeah, don't i like, is boring, but i probably will.
Ah, depending on what they look. I get one of the new ipads, like, i think they're going to have a lot smaller vessels. And my ipad's, which i used fairly frequently, are kind of long in the tooth, and they definitely haven'tbeen getting the same updates that the phones have.
Ah, and i kind of want a pencil and don't have. Ah, ah, i like the small format ipad, which had they haven't out heretofore, offered a pencil for. So if they make a smaller pro, which the speculation is that they will. Ah,that could be an exciting upgrade for me.
[29:00] Awesome, cool couple lightning around things. Just make sure no one saw some of these news items.
Instagram, which is owned by facebook, has been flirting around with some shop bubble kind of options, and now they're going to roll out an app that really let's brands,
published their catalog and the instagram picture kind of oriented way, and then consumers khun just shop using that app.
S so that's going to be interesting. Are you hearing much from clients about the effectiveness of selling industry, um, over it, channeladvisor, we're not really hearing much about it, but maybe we're not talking to the rightfolks. It seems like it would be kind of really segmented in the fashion area.
[29:39] Yeah, so there's, certain categories where influence or marketing is disproportionately affected, i would argue, influence marketing's, getting more effective across a bunch of categories,
but it, you know, it's it's, totally dominant in fashion and beauty,
and so definitely in those categories, people are excited about the richard commerce features.
Come on. Instagram is emerging as, ah kind of the darling of the social of the north american social media platforms for discovering customers with buying intent.
So it's kind of ah, taken over for pinterest in that regard.
So i think people are excited about it, you know, comma there's, there's, certainly no one that i know of that's making a fortune on it yet, or, you know, is, um, you know, i don't think there's a grand slam case study justyet.
[30:32] Ah related to that influence our marketing thing though,
ah you know i know all the westerners the show know that we like to spend a disproportion amount of time talking about the kardashian family um so kylie jenner who has a very successful cosmetics line,
has just announced that they're going to start distributing that product which was originally a pure direct to consumer play through ultra,
um so through a wholesale channel and that's interesting to me because there's this there's this really.
[31:09] Important divergence of influence or marketing like theirs what i'll call traditional influence or marketing or you go find these people that have a huge falling which kylie certainly does,
you know kim kardashian certainly does and you pay them a bunch of money to say something about your product,
and that advertising a super expensive and increasingly ineffective right because everyone knows,
that kim kardashian's a paid spokesperson for that whit bomb and doesn't really have any personal affinity for that whip on and so that kind of paid mega influencer stuff i'm not very,
excited about and have never particularly liked but what's working much better are these influencers,
that are making their own products and turk turning themselves into a brand,
on dso kylie cosmetics is certainly one of the best examples of that like arguably her her net worth has has surpassed some of her sisters because,
of this line and so you know now this is an example of a digital, native, vertical brand that hit some critical mass.
And now they're expanding to other wholesale channels and for our earlier conversation.
Kind of interesting that the next channel they chose was olga. And not, for example, amazon.
[32:26] Yeah, yeah, it's going to be interesting to see. Do you know if it's going to be stores and online err are just stores?
[32:33] So that is a good question. I would expect that it stores and online.
It is absolutely true. There are some cosmetic brands that give distribution rights to olders and sephora's for in store, but not online.
So there is, ah different assortment that those retailers have online offline.
But i would, i think, that's more and more rare. I think you know, older, generally doesn't want to sell anything in the stores that they're not allowed to also promote online. So i'm going to assume it's everywhere.
[33:03] Yeah, another kind of ah na names on news.
There was an interesting kind of ah, kerfuffle with walmart. Soso walmart acquired moose jaw back in the day about a year going guess now on dh then they just launched a kind of a store within a store concept. Andwhat walmart's doing here?
It's quite classic mark laurie is, you know, they really want some of these kind of premium outdoor brands things that you would find it like an r e i or a back country.
But those brands say, you know, we don't want sohn woman.
So what they did is they acquired ms jo, which is a place where all those brands cell. Then they opened up a moose jaw store within wal mart.
Well, some of the brands were having none of that. So several of them there's one called black diamond and a couple others were like, no, we never agreed to sell our stuff on walmart. Please take that down.
So kind of a clever way of getting that product honey on wal mart. But i don't think the brands were really on board with that one hundred percent.
[34:03] Yeah although i do think some of the reporting on it kind of misses the bigger point right like so there was this like,
i don't know what the conversation was with black diamond and why wal mart thought that they could sell it and then black diamond got upset and said they couldn't.
[34:22] But what what's interesting is that most of the brands that moose jaw cells are not on this premium portal on wal mart right like him very clearly wal mart didn't try to sell them so i know you read these articles andit's almost like,
oh my gosh they tried to take all the products they have permission to sell through moose jaw and sneak them onto the wall mars mark site,
and that's not actually what happened,
if you go to moose jaw and you moose jaw dot com and you go teo like outdoor jackets,
you're going to see like forty brands of jackets that they sell including all the aspirational brands in the outdoor space the you're going to see patagonia north face and um all of those those aspirational brands,
if you go to the moose jaw shop in shop on walmart which is to me kind of awkwardly called the premium outdoor store,
and you you go on outdoor you're going to see like two brands and one of them is the moose jaw house brand,
so it's not like they tried to sell all that stuff and only black john diamond stopped them like the majority of brands that moose jaw cells,
like clearly told wal mart way don't intend to be part of that, and wal mart didn't put them on there, so i don't know what was different about black diamond that caused,
them toe to be,
the subject of all these articles.
[35:51] You know, i think the leveraging that the brands that wal mart owns on their site, you know, is interesting and ah,
but but the shop and shop feels a little weird to me, like the way you get to this moose josh shop and shop wal mart is you go to the guided navigation and you say i want to shop for a peril on.
Then you say, you know, they're under the apparel there's a bunch of choice is one of them is outdoor apparel, and a different one is premium outdoor apparel, and when you click the premium outdoor peril, you get this,like moose jaw curated selection.
But it's it's, you know, the much narrower assortment of moose jaw stuff that's allowed to be sold on wal mart.
So, you know, it's, a it's, potentially better shopping experience, but do shoppers really want to self select between average outdoor apparel and premium outdoor apparel? I'm not i'm not so sure they do.
[36:40] Yeah, and, you know, i guess if you're intrigued by that stuff, you could go over to moose jaw, so it drives kind of within family traffic.
I don't know, it's, hey, you know, you, you miss every time you don't take a swing.
So i think it's interesting to see him taking some swings of this stuff and tryingto you know what, what, what, what i would do if i was them, as i would say, the brands.
[36:57] Yeah, and they do.
[37:00] Look, we're selling your stuff on warrant. You misunderstand our customer, our online consumer, wants your stuff, that that's the thing i've never understood, like why brands have such a like, oh, my god, i wouldnever associate with wal mart.
[37:12] Yeah, no, i i tend to agree. And if i were walmart, i'd be using the search query data and things like that to be making those cases,
you know, again like, to me, it's, a little bit of, ah, you really start splitting hairs when you're like, ah, selling via amazon's, not erosive to my brand.
But selling on wal mart is and selling through jet, maybe is. And selling through moose jaw, which is owned by walmart, for sure, isn't like the the lines just get really bored there.
[37:45] And i have ten out list.
[37:47] Yeah, and all by the way, all your stuff is like unauthorized versions of it are being sold on every market place in the world. So what?
Yeah, yeah, yeah.
[37:54] And i saw last year stuff at costco.
[37:58] So i feel like a little bit of that. Is people still acting like the old world economy in the new economy?
I will agree with you. I do admire walmart seeming willingness to test, and one of the things that's interesting to me is,
ah, moose jaw ends up being a shopping shop that's in the walmart, earl, they've watched some other new brands like all's well home, which is there, like premium home goods, and they watch that is a complete separatestandalone site on its own.
Earl. So you actually camp all swells a walmart invented brand that you can't buy on walmart dot com, but you can buy from the separate sites.
So could it be there, you know, trying to figure out what the consumers want and do it that way. And i like, i certainly think that's the right approach.
[38:45] Ah, so speaking of wal mart, like one of the big categories that they're all in on, and that there's been a bunch of news lately is ah, walmart, target and party, party, city air, all dramatically expanding their toyassortment,
as we start to approach holiday season and, of course, poison ruses and in the market.
So they're all fighting toe to capture that.
That additional market share that used to be owned by by toys, arrest. So that's that'll be an interesting battle this holiday, period.
But we're seeing things like thirty percent mohr toy skews than they've carried in past years.
[39:22] You have seen it. I spent a lot of time in my local target and walmart. And they're they're definitely kind of bulldozing certain areas and putting up more shelves for choice. It's going to be be interesting to see whatthat looks like.
[39:34] Yeah, it's. Interesting, like you have a utah me unique use case like you're looking for these constrain toys, like the star wars toys that go out of stock pretty quick.
And you've always had the smart strategy to goto, the less pop your retailer. So when everyone's in line at toys r us, you were in line at walmart.
Now, if wal mart becomes a primary destination, like, you know, maybe party city, that your new new hookup for star wars toys.
[39:59] My my secret sauce is kmart there's one k mart, left open in.
Uh, no joking. They always get a nice, plentiful set of toys, and no one else is in there. But me and a couple of little old ladies hanging out, they're not in the star wars where they're out there getting urine and stuff.
[40:17] I like it. They could get you a star wars sweater.
[40:20] I may occasionally not one over on my way to the star wars while it's totally accidental.
[40:25] I forgive you s oh in other news speaking of all these these retail own brands and what i call own brands which in my mind is ah evolution of what used to be called private label,
one that really caught my interest is kroger has a very successful brand called simple truth and it's actually the the largest best selling organic food brand in north america,
on dh to my way of thinking very wisely kroger has started to sell that simple to truth brand in china and hong kong on the various team all sites.
[41:07] And to me that's really smart like it it turns out it's really hard to be a retailer in one market and expand globally,
so you know best buys a super popular concept in the u s and they open stores in china and it doesn't go very well and targets you know very popular in us and open stores in canada doesn't go very well wal mart in brazilthere's tons of examples of,
retailers that are very successful in one market,
legal in germany trying to come to the us and when they try to expand globally,
it's very difficult but this new model of retailers having desirable owned product brands,
you know creates a new global expansion opportunity it's much easier to expand your popular organics food brands internationally than it is your retail concept internationally so i uh,
i don't think kroger will be the last retailer we see that, you know, takes there.
They're pop your own brand and tryto use that as the new tip of their spirit for their global expansion.
[42:13] Um, and hopefully that is a interesting topic to end on because it's happening again, we have run out of our allotted time,
but as always, if we missed something or you want to continue the conversation, please jump on facebook and you can correspond with us there.
As always. Have you enjoyed tonight's show? We sure would appreciate you jumping on the itunes and giving us that five star review.
Ah, there are a number of e commerce events coming up, so i think it's next week is the shop dot org's show in las vegas, so i will be there all week. I'm doing a couple presentations.
Eso if folks are interested, i would love a catch up and say hello. It shopped at ord on dh, then, because i can never get enough las vegas.
I'll be going back to las vegas in october for grocery shop, which is a brand new show focused on food and see pg e commerce, which i'm pretty excited about.
[43:14] Awesome. We look forward to some detailed trip report from those on.
Then we have a couple guests coming up, and then we need to get some listener questions out.
So definitely jump on. The facebook will be collecting some listener questions and trying to work that in, as we have a couple of guests coming on the show tio to answer your burning questions about retail e commercepayments, or whatever's on your mind.
[43:37] Terrific scott until next time, happy commercing.
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.
Episode 144 of the Jason & Scot show was recorded on Tuesday, August 8th from the eTail East tradeshow in Boston.
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.
[0:25] Welcome to the jason and scott show. This episode is being recorded live at the detail east trade show and rainy boston on wednesday, august eighth.
I'm your host, jason retail. G goldberg. Unfortunately, scott had a personal conflict and couldn't make it, so you guys are stuck with me, but to make up for it, we have to really exciting guests for this episode.
Tom patterson and aaron fujimoto are the founders of tommy john, a a digitally native vertical brand in the apparel and underwear category.
Tom and erica, welcome to the show.
[0:57] Hi, jason. Thanks for having us.
[1:00] I am super excited to jump into it.
I know you've listened to the podcast before, um, and one of the things we always like to start with is getting a little background from our guests about how they came into into your roles. So maybe tom. We could startwith you.
[1:16] Shirt mind was not a natural transition. I'm a former medical device salesman i got in underwear but frustrated with the fabric fit and function in my undershorts, buying fitted suits, starting my dress shirts, and icouldn't figure out why are all the undershirts bagging boxy?
So in two thousand eight, i had this idea and created some undershirts and started selling them online with aaron, and five months later, the follow it happened. I was laid off my medical sales job and i decided, you knowwhat?
I don't want to be this could've would've should've guy have this idea? I want to see how far it can take it and cash up my four oh one k savings used my friends that all the credit card companies that financed the startupfrom there, that is a very cool origin.
[1:56] That is a very cool origin story and it's crazy. If you had just gotten in a more casual job, we'd all be walking around with annoying t shirts that don't tuck in.
[1:59] You have just got in a more casual job. We'd all be walking around with that noise. You're totally right.
[2:07] Yes, say. Ah, thank goodness for the formal attire in the medical sales industry.
[2:12] There'd still be a lot of guys talking their undershorts inside their underwear, which is not a great visual.
So i think if i could be a part of saving that, i feel it's all worthwhile.
[2:17] No, and thanks for putting that in my head.
[2:22] Very cool. And, aaron, how did you come to the.
[2:23] Michael and aaron, how did you come from?
[2:25] So i actually have no business being in the apparel in fashion space, either.
I transitioned from a career with jp morgan as a financial advisor, and i got the entrepreneurial bug when i was,
there, and i actually started a small website selling organic products, natural prague, skincare, stuff like that.
And i had a lot of fun with building that initial website and choosing all the products and getting the site launched.
And then when it came to the marketing side of it, actually promoting the site, i kind of lost all interest.
But, you know, tom and i had the entrepreneurial bug, and we're always idea ting on, what can we dio that could be impactful? What are some of our pet peeves in the world? Would what are some of the things that wehate?
And this idea of a simple undershirt that would stay tucked in and was fitted to the body, was the idea that took off.
[3:18] That is awesome. And because scott is not here, i get to take advantage and just solve all of my personal problems on the show.
Some, some listeners, will know my wife is in the same industry as i am. So we always had this.
This ah dilemma that we, you know, both do our day job all day long. And then it's, the main thing we have to talk about when we get home after work on.
If i'm not mistaken, you two are also married, eh? So i'm wondering if you have any. Ah, tips or advice for working with a spouse, or how that, how that's going for you guys.
[3:52] So tom and i have always had complementary skill sets.
And, you know, he used his medical device sales background as kind of just how to get this thing off of the ground and use his skills.
Teo, you know, pitch to buyers and broken to our first account. Neiman marcus and i was much more behind the scenes and kind of more on the operational side. Basically, anything that could be done on the spreadsheet.That was my job.
[4:16] That seems like a good division. I have a similar division with my wife were very complimentary because she's talented and i am not so there's that that that was a shadow tow to my wife and her in laws of therelistening.
[4:17] That seems like a good division.
[4:26] No, my wife and her in laws.
[4:30] So let's, talk about tommy. John, can you give us, ah, feel for how big a company tell me john is today.
[4:31] So, john, you feel for,
so so. We're a private company, so we don't disclose revenue but were ten years old. We turned ten years old in april.
Um, you know, for us, you know, we now disclosing, but i can tell you, we've grown five times since twenty fourteen.
We just sold our five million pair of underwear earlier this year, and we open up our first or last fall.
We're gonna be opening up our second brick and mortar store later on at the end of this month in august in charlotte, north carolina is so a lot of exciting things, um, that have happened, and still to come.
[5:07] Very cool on dh. In the beginning of the show i introduced you is a digitally native vertical brand, this ah phrase that i think andy dumb done, the ceo, founder of bonobos, invented.
Usually, when we talk about digital native vertical brands like rightly or wrongly, most people sort of imagine that their initial model wass, we're going to sell direct to consumer in your case.
Well, i sort of do you think you're doing native vertical brand because you are all of those things?
I'm not sure that was your original model, right? Like when you first sort of i d ated the product problem and your solution to the problem.
Did you guys envision that? You'd mainly some director? Where you thinking about selling through a wholesaler?
[5:52] Not at all it was really built to be a wholesale business and with my background being strategic selling to get in contact with the department store buyer was very similar to getting a touch of the hospitaladministrator a doctor, a surgeon,
but i think what we found is you know, wholesale as it started to grow, we couldn't grow as quickly as we wanted to in two thousand twelve we really started focusing more on that direct to consumer channel building adirect relationship with the customer.
[6:17] And i think that was a really in critical part because getting the insights and the data i'm the feedback from the product as a really allowed us to continue to innovate and deliver a better product to the customer and ithink what we believe that tommy john we really focus on fabric, fit and function,
and having your ear on the floor at a wholesale department store is great feedback from actual in store experience, which we did a lot of in the early days and we still do,
but we also have that real time feedback online that's immediate ce we look at the omni channel experience as a full three sixty feedback loop that helps us continue to improve the customer experience improved productwhere you may have some challenges on fit,
fabric, whatever but also thinking about what aren't we delivering the customer that they want or maybe they don't know that they need yet that we're going to bring in, deliver, too the next two or three years.
So i think the digitally native vertical brand, i think i hope that term will go away. I think it would just be it's a brand.
The brands in the twenty first century have to be on a channel. They have to be at all channels, where the customer is the end of the day, and i think what you're finding is digitally native on ly, brands,
are kind of their growth is becoming very limited by not having that offline experience with what we talked about, over eighty percent of transaction still happen off line at the end of the day.
And i don't think it's goingto flip in the next couple years, the opposite.
[7:37] No, i would. I would till i agree. And i would at least hope the definition people have in their head. And i suspect this is what andy originally meant.
Will evolve. Like, to me, digitally native doesn't mean you have to sell online.
It means you were born in the era when digital was already an equal part of the eco system.
So you need to think about how you catered shoppers that air, using their digital tools to make purchase decisions, and all of those it's more to me. That's. What the d m means, then, necessarily, we have to sell everythingthrough a digital champ.
[8:10] Yeah, i totally agree. I mean, you have to be digital today.
I mean, if you look at a lot of brands, every digital is the fastest growing channel for pretty much everyone today, yeah, for sure and it's.
[8:20] Yeah for sure and it's funny like ah, i'm a fancy consultant and so you know, a lot of our clients have gone through this phase where they've hired a chief digital officer.
[8:21] Funny. Like what fancy consultant and it's, you know, a lot of our clients to the space, but he hired a chief digital officer.
Um, well, bye.
[8:30] And you know, we are i chuckle one of my own body my old boss is the chief digital officer at ibm i'm like, what is ibm need a chief did like who's not digital at ibm right?
[8:33] My old boss is the chief officer of ibm. I'm like, what is ibm needed, chief who's? Not yeah, right, like and so do i think, it's. What?
[8:40] Like um and so i do i think it's what?
Putting digital in front all this thing is one of those temporary things right?
And ah so i do have a point of curiosity though, so you have this original product inside that like, hey, you know, the ubiquitous product everyone's familiar with,
doesn't doesn't mean the need and you guys invented a great solution on that product and then you're going to go sell it into a bunch of retailers and the traditional wholesale model,
every week i watch shark tank and they make it seem like you can't possibly sell a product to a retailer unless you have a shark to make the introductions for you.
Andi, i have a hypothesis that that's that's sort of b s s o i'm curious like did you find like having ah great product did you find you were able the open doors and have conversations with merchants and sell it in or was itreally.
[9:36] Up for sure, i think differentiated product is one thing that buyers look for more than anything else.
And so we already had a unique product that really stood out from everyone else.
And i think what you see today is a lot of brands air focussing in differentiating their business model,
and the product isn't often of forethought where the product is really from day one b been the be all and end all to our to our business.
And if we don't innovate in the product and keep improving on it, people will catch up and we'll become stale and that's. Something that we've always really pride yourself on is.
How do we not be happy with where we are today, but continue to improve and, well, there's.
The iphone five six seven eight we've also had different interational of many of our categories and in styles over the last ten years and building the pipeline out very far, much far further beyond twenty eighteen.
Where we are today is a really important part of building a longevity and lifeline into the business.
[10:33] Very gold. Eso started the company in two thousand eight, predominantly with a traditional wholesale model in line two thousand twelve. You really turn on the gas about selling direct, primarily the website.
And then it sounds like last year you opened your first own store. Um, can you talk a little bit about, like, what? The mixes today of, like, direct sales versus wholesale?
[10:55] Yeah so we are primarily online so more than fifty percent of our our sales are direct online and we still have about over a thousand points of distribution through wholesale,
our first stores in king of prussia and that we call it a learning lab because everything about it is just learning,
first of all you know to sell men's and women's underwear in a retail space and men's underwear specifically that's a kind of a unique experience for most men,
they just haven't had their own personal space in a store where they can go buy men's underwear,