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

Join hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at Razorfish, and Scot Wingo, Founder & Executive Chairman at Channel Advisor, as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
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Jul 4, 2019

EP180 - Deloitte's Kasey Lobaugh, Surprising Consumer Changes 

Kasey Lobaugh is a Principal and Chief Retail Innovation Officer at Deloitte Consulting LLP, he first appeared on episode 68.  You can follow him on twitter at @klobaugh.  Kasey and his team publish some of the most useful research in the industry including The New Digital Divide which helps quantify the effect of digital on in-store purchases, and the Deloitte Retail Volatility Index which measures disruption in the retail industry.  

Kasey was last on the show for Episode 114, where he introduced "The Great Retail Bifrication." This time, Kasey is back with a new report, "The consumer is changing, but perhaps not how you think. A swirl of economic and marketplace dynamics is influencing consumer behavior."

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

Episode 180 of the Jason & Scot show was recorded on Thursday, June 20, 2019.

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

Automated Transcription of the show


[0:24] Welcome to the Jason and Scott show this is episode 180 being recorded on Thursday June 20th 2019 I'm your host Jason retailgeek Goldberg I'm here with your co-host Scott Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners listeners come with me into the Wayback machine or is Jason prefers the time travel hot tub
blue and we are going back to January 2018 when we release episode 114 if you remember that episode as I do very clearly the weight release their epic retail bifurcation report
Priestly this report has been a huge game-changer for me because my day job at spiffy
I used internally to help everyone on our team understand,
convenience oriented consumer evaluative consumer Sherwood partners and then also with potential investors because a lot of them say what is this convenience already consumed you speak of and I
I'm going to drop the very large report on them and then day. Don't ask that question again
so it's been super helpful to me so that episode is definitely burned in my memory
and is that the retail bifurcation report that they put out.

[1:45] 18 months ago is on the top of my digital bookshelf has been super helpful
now fast-forward back here to June 2019 Deloitte has updated their thinking with a new report titled the consumer is changing
but perhaps not how you think so we are really excited to have back on the show Casey lobaugh
who spearheaded this new report and was also instrumental in the bifurcation report and Jason is super jealous because Casey has a much cooler title and Jason Casey is the
principal with the white
and chief retail Innovation officer boom if I'm doing my words right if you don't count and that still three more words that Jason has in his title so congratulations on the title when Casey and welcome back to the show.

[2:36] Thanks guys it's it's a pleasure to be back.

[2:40] Yeah and let the record show that Casey and I are both paid by the word so his is longer title does accurately reflect his greater well.

[2:47] And I always like to say is I know that's my title because I'm the one that made it up.

[2:52] I like it,
Kasey thrilled to have you back on the show it has been a while and you know the show continues to grow so we have some new listeners can you give us a quick recap about your background in the space and sort of what your role is it delayed.

[3:11] I sure thank you very much for Slots of it's a pleasure to be back with you guys you know at Deloitte I'm a partner or principle within our retail practice and really I spend you know I've spent the last 22 years with Deloitte.
Consulting with retailers the entirety.
Unreleased operating the most that time on what I call The Cutting Edge of retail so you know back in 99 I was helping to in a launch are the beginnings of our e-commerce practice which of course later became,
a big portion of our business called Deloitte digital.
You know continued in retail store thinking about where we go next and spending a lot of time I really like the title of Chief retail Innovation officer for us isn't necessarily.
Focused on the.
Technologies which a lot of fun times the word Innovations revokes this idea about Technologies but we spent a lot of time thinking about the future of the industry.
And what's the drivers and what's driving the industry and so you'll see a lot of the Innovation that I'm strictly focused on has more to do with the consumer the changing Marketplace the changing competitive landscape and think about the dancing,
yeah retailers in that contact.

[4:23] That that is awesome and you know so you put this up report when I talk about tonight you published on the Delight website so I'm going to put a link to it in the show notes if you're not on a exercise bike or commuting to work
you may want to grab it and download it to have as a reference while we're talking otherwise I just enjoy the conversation and you can you can read the report later at your convenience
never run a reminder kcur base in Kansas City.

[4:53] I am but I like to say what you know I mean Kansas City because that's where my wife and kids live you know frankly I'm serving retailers across the US and and across the globe so I spend very little of my working time.
I in Kansas City now I do happen to be in Kansas City today.

[5:10] Nice and there's a rumor that just hold the light thing is a side hustle for you and that your main gig is that you're a bass guitarist in a row.

[5:18] My hidden secret but probably isn't that that hidden because it just so happens every time I'm on your show I have another show coming up,
I've got one next week I'll be playing up in Minneapolis and every time I play it's always related to retail the last times we play at,
you're at at at interrupt every year I get to participate in that event we actually started doing a bit of it internally as well with a big practice meeting next weekend in Minneapolis,
and some of the Praxis leaders.
To get together a band which I did and out into the practice and found a whole collection of musicians and we got ourselves organized and I get to play another show next week so that's my.
Secret retail side hustle and you know that I've maintained the last couple years.

[6:04] Yeah I saw that on Facebook isn't the tell listeners the name of your band.

[6:09] Oh that yeah the band that's playing next week I'll be playing with his the skews.

[6:13] Very retail friendly accept accept other people really like what.

[6:18] Right right at this is for our retail and consumer products practice so everybody there should get the inside joke.

[6:26] Okay good food so I'm super excited to dig into the reports I've already kind of read it several times but every time I talk to you I was kind of get a different flavor so,
what start time at thirty thousand foot headline why did you and your reports and what are the headlines for what you found in your research.

[6:47] Sure right about the time we were publishing the last report the great retail bifurcation I was proudly releasing it you know people within our practice and our clients were asking me okay what's next.
And as I try to take a deep breath and sort of think about that I serve a noodle Don well what did we learn through that report,
and how would we think further about that no one of the things I was trying to do is we try and think about what's the market talking about and what's the conventional wisdom,
that's floating in the marketplace and is there a reason to challenge.

[7:23] And that's really where I started at the time this idea of you know the changing consumer was really.
Is really into me it was obvious that was out there in the marketplace has the narratives you know,
these articles about you know how today's consumer is now in charge and the consumer is changing or more importantly or more more interesting they might be the millennial not have different the millennial it so we hear things like consumers are shifting from products
do experiences or we have to we have to learn to serve the the time starved consumer.
You know or the narrative that just comes around your consumers are going to physical locations last
personalization is this incredibly important thing to Consumers all of those things are just things are out there in the marketplace that you'll read about okay,
let's talk about this change in consumer and that's really what we did we spent about 10 months going deep.
Trying to figure out if there was Data either to support or to help us you know,
think about those questions maybe in a different way and through that we came up with really fat I'm just fascinated by having the opportunity to do the the study and discover,
bet I clean most of those things that I just mentioned within the data just doesn't fit the data doesn't support that those are true.

[8:47] And frankly there's other things that are really powerful in the date of that nobody seems to be talking about some sort of the combination of those two things that we decided to you know really spend some time for the shaping the report.
I like I like this quote you know that says change the way you look at things and then suddenly the things you look at change.
And that's what I feel like we did to this report is for his thought about it and said you know how do we go look at this differently so hopefully it hopefully that makes sense is a TF.

[9:18] No it totally does Enzo a post of ask me any like I've tried to explain like summarize and save some for example a super common thing that you hear.
Abundance and the media talking about our how different Millennials behaved in previous cohorts that like.
25 year old Millennials like to do this and this is how they spend their money and you know and that's very different than how gen-xers are boomers did at 25 and.
Like maybe a signature example is Millennials are spending more of their budget on entertainment and less on material Goods because they.
They index towards experiences over possessions.
Example is a common, seeing you here in the market and what your your data found is actually that.
More wealthy people tend to spend more money on entertainment and it just so happens that Millennials you know her are a high and then are getting their wealth much later do I
sort of have that right that the wealth is dictating the behavior much more than the age cohort.

[10:32] That's right, take on the first point because that year that said we took that head-on and said so is it true
that's why we started with is it true that consumers are spending more on on entertainment or you know things that are more experiential let's call it then then products
and so we looked at share of wallet data from the Bureau of Labor Statistics we looked at it over 30 year.
And then we started zoomed in and said okay let's start start at 30 and then assuming at 20 but I frankly it doesn't matter which way we looked at it what we found was that relatively speaking.
Most categories of spending haven't changed much.
With a few exceptions the first of all we talk about entertainment over that. Spending on entertainment went from 5% of the wallet down to 4%.

[11:26] The same proved true if we looked at at at Millennials or poor people under 30,
because obviously 20-30 years ago they weren't Millennials in that age group of related age group and they spend less of their wallet
an entertainment today than they did 20 years ago and even less than they did 30 years ago that was the first shock is like that's not true we're not actually spending more of our wallet on entertainment Millennials aren't spending.
Secondarily though there were a couple of categories that were different as well the first one that you know I think people point at which is true is apparel.
Terrell is actually dropped pretty substantially in fact has dropped roughly in half in terms of percentage while it being spent on a Tarot.
Also gone deep and apparel and what we discover is people are not buying less Apparel in fact apparel sales are growing at a unit-level roughly on par with the growth of retail.

[12:23] However the price for unit has dropped substantially over the last 30 years
. and I personally would have triggered that the two facts want one you know is that clearly there's deflationary pressure,
unnatural prices you know driven by off-price driven by some of the fast fashion introductions that have been on board but also by cultural differences so we're buying less Formal Wear than we once did simply because the entire that many people wear at work
I no longer you need to get suit and tie in there for the price points come down.
The idea that we're buying less apparel or it isn't true that the idea that we're buying cheaper apparel or spending Less on a feral is true.
The idea that we're shifting at the entertainment is not true that leaves open the question okay well where where are we shipping that money to.
And it's true for consumers it's even more true for Millennials is that our money is Shifting to non-discretionary expenses.
That's because there's been a Skyrock skyrocketing of inflationary pressures on
things like health care of course like education which gets more pronounced in the younger consumer things like fuel travel housing excetera so it's really this shift,
of our wallet towards non-discretionary versus a shift from let's say stuff to experiences that a lot of people in the media might want to talk.

[13:50] Got it and I want to get some point we'll come back to the apparel point cuz I think that's really interesting but on the more macropoint,
there's a bunch of useful information in your in your report but there's a few things that are mildly depressing and in this deal sound like.
Like so you know there it is.
Condom non-discretionary cost that are that are increasing in share of wallet like healthcare and in housing.
And then like arguably You could argue whether education is discretionary or not but regardless,
more people are getting educated than ever before in that cost is significantly higher and so that like that's a feels like a a significant contributor to
you know Millennials having a significantly lower net worth you know and often more debt than previous cohorts did at that same age.

[14:48] Yeah that's that's absolutely true I mean since 1997 the percentage of college graduates has increased by 46%.
2 roughly 35% of the population that's what that's up from 24% of the population in 1997 so that's a substantial increase.
But this is coming to cost right because student dead you know has risen 160%.
Over the past 13 years that's for consumers that are under 30 that the net worth of consumers under 35.
Has decreased by $3,890 and that's a 34% decrease
from where we were in 1995 that's substantial right that's a substantial decreased you know on network so one of the things that I think gets lost you know is this idea that that millennials.
You don't behave differently because they are culturally different.
That's what people say but what gets lost is the idea that there are real Financial constraints
on the millennial population that an event likely have a relationship to major life choices you know whether or not they're ready to buy a house whether or not they had it there in the financial condition.
My house whether or not they're ready to get married whether or not they're ready to have their first child we talked about those things we know of course that the Millennials you know art are doing all those things later.

[16:15] But sometimes those are spoken about is if the millennial is just as different animal they showed up on Earth we can't figure them out they behave so completely different right but we don't talk enough about the eat.
We talked about the great retail bifurcation is that while yes median incomes are up.
Across-the-board median income is up however when you break it out by income groups what you find is dramatically disproportionately.

[16:47] Income gains have gone to the top 20%.
And frankly the the lower 80% or either just slightly better or or not much better at all than they were 10 years ago sobriety percent of population we've sort of got this this lost you know this lost decade.
And when you apply non-discretionary cost Rising on top of that it only gets worse right when you really look at who has more discretionary money to spend today than they did 10 years ago.

[17:17] It's generally only the top 20%.
So now you later in Millennials a couple of things to know about that is we know that the millennial generation is dramatically more racially diverse.
Then he needs generation in history in fact if you if you look closely enough you'll find that the millennial generation is 44%.
Is non-white and that's compared to only 25%,
for the Baby Boomers that's one of the things that shocked me but you got to layer this in and should have recognized that when we're talking about the top 20% in a growing their income you know those tend to be.
Older they tend to be Caucasian you know by and large so we're talking about a more diverse.
Younger generation who hasn't participated in the income gains however they taken on student that you know at a rate unit that's never happened before you know in the history of our country and their left in this economic position
it doesn't get near the attention doesn't get near the attention if any real attention relative to this idea that the millennial is just a different animal making different choices than,
in their father.

[18:32] Call Sue.
Disconnect us back to the other report is is the convenience oriented consumer still alive and is that still a thing or no there are no longer there or help us reconcile their students.

[18:49] Yeah you know that that's a great point that I've been thinking a lot about the first saw in our previous for the great retail bifurcation we did discover that there there is a collection of retailers that appeal to those consumers that
where price is incredibly important to them
and that relates to the income to the non discretionary that you cannot make situation I just talked about and there's another set of consumers let's call those consumers on the high-end high-income consumer that is free,
with their money and their choices to make different decisions than just focusing on price and they're focusing on things like
convenience in so without a doubt that bifurcation of the economy still exists and is driven by consumer,
economics but I actually hold that up cuz you use the right word sort of thinking about convenience.
I'm thinking about you know value let's call it value and convenience because there's another element that's out there another.
Conventional wisdom in the marketplace and that is that the future I heard this when the future of retail is all about experience.

[19:57] Kind of depends on how you,
Define experience do you want to Define it really Bradley which by the way you know I would Define The Human Experience very broadly to include things like a do I have enough money,
to pay for lunch in a bunches for my kids this week.
But a lot of times in in the in the media and the Press are in the in the conferences will go to experience gets focused more on like the in-store experiential factors
okay so the future of retail is experience sometimes gets painted that way but when you really look at what's driving the market today what you find is.
Value is driving the market without a doubt we are seeing you no continue,
great success of the off-price sector we see continued really strong growth in the dollar store sector but we also see.

[20:49] Relatives of convenience for seeing a lot of movement on the convenience front right you know whether it's the rise of the convenience stores,
which is one thing that doesn't get talked about very often they're having this great success meeting of the convenience stores are or its delivery or in a click-and-collect are you name it is 4 to get two more candy exact do I look at the market.
What's driving the market is value inconvenience but somehow we've gotten ourselves sidetracked with this argument about the future of retail is experiential.
By the way I don't I don't disagree that for certain retailers that makes a ton of sense but too often it spoken about as if,
you know retail is one giant market place where you know singular Concepts will went out.

[21:35] Yeah I know totally nn.
Like obviously a lot of the the future of retail is experience come from vendors that are selling in-store experience.

[21:48] Yeah you're right here you're right.

[21:49] There's there's probably some some self-interest there right like yeah if you want to go back for just a second though to your apparel point because.
I've been watching this for quite a while and it's super interesting.
I have a bunch of data that sort of mirrors your conclusion like did the number of items in the consumers closet.
Is very consistent overtime but the value of those items is consist is significantly low or today.
And and it's like.
Some my hypothesis like a lot of the production for apparel has moved like over the last 40 years has moved offshore has gotten dramatically more automated internationally is it,
less expensive to make but it it actually in most cases is higher quality and more durable so it's like you have to replace it so I pay,
less often than then you you did plenty or thirty years ago and so you know when you look at a lot of the retail segments that are doing well and some of the ones that are struggling ones that sell a lot of apparel / index in the struggling category and
and my hypothesis is like this this is the fundamental reason why we wear more casual clothing in the clothing we buy cost less than it used to.

[23:12] Yeah and I think those I think all those points are dead on I mean I couldn't come up with a chart that charted whether or not there's more naked people that I'm seeing on the street.

[23:22] I don't know if I'm wishing for that or not.

[23:23] People are still wearing clothes right and it's not like you know people are wearing bell-bottoms or you know whatever we wore in the 90s,
so I think your I think your conclusions are are right on I think we've got to look deeper at you know the underlying.
That's why I like to look at the underlying economics the underlying changes that are really changing the competitive environment honestly I think the consumer
animal anyone in particular is getting blamed for getting the short end of the stick they're getting blamed for way more than they really have control up you no control over,
the other thing I'd say is too often I think people speak about things like some of these things just showed up overnight when in fact you know
everything we've spoken about so far could be seen in the trends 10 years ago 15 years ago these are not new phenomena that show that showed up in in in in the marketplace you know yesterday but I think that.
Oftentimes we speak about it like that's the case you're even the trends around like Millennials get married later you go out go back to Generation X and you would have found that that Trend was apparent than two,
we didn't just suddenly show up and what you're talkin about relative to apparel also did not suddenly show up you can track these Trends back 30 years.

[24:45] Yeah and yet no CEO from an apparel company has ever mentioned that for missing their tops.

[24:50] You're right right right the weather about that.

[24:54] Iceland.

[24:57] Too hot to cold.

[24:58] Two parallel retailers are in in a bad position you know we if you look at it kind of the q1 results mall-based retailers are really struggling,
do you think this change in consumer behaviors mean that malls are pretty much just.

[25:17] Yeah I think the malls are struggling and I have course when you talk about malls there's different kinds of malls and I think there a certain kind of malls you know certainly lifestyle malls have been better than no beer C malls
I don't think that malls. Are toast I think there's continued Evolution what's interesting to the consumer fairly appealing to a higher-end consumer is helpful
but I think that the mall as we kind of understood it in the 80s and 90s you know is likely,
is likely you know finished its productive life that's that's more opinion of mine then it is anything I saw it you know particularly in the day.

[26:02] We did have it read it a little interesting data related to Traffic so damn it in are we got this Cancer Center for Consumer insights River Ford Terry B.
Terabytes of data that that cover many different kinds of data including credit card transaction of a used to do a lot of our studies we also have location.
We have quite a bit of location data related to people's cell phones where they're going how we can look at and understand traffic patterns that's also within our data and when we when we looked at the traffic data part of the question we had was like.
Are people going less places that was kind of a question we started with and the answer there was no no actually infect overall
but traffic for our measurement was up 6%
let's foot traffic not just to retailers by the way we measured it broadly let's call it consumer foot traffic so we looked at convenience us are fuel we looked at restaurants we looked at entertainment,
and we found overalls but traffic was up between 17 and 18 6%.

[27:06] Not only that but retail for retail foot traffic was up 2% now within that if you dropped grocery out.
It was actually down 1% Okay so
you bet traditional locations like department store or Mall you know definitely that the traffic was down but another interesting fact that we saw was the concentration there's this amazing concentration for those stores that were losing
traffic 90% of the Lost foot-traffic were concentrated in just 16% of the retail stores.
And meanwhile 22% of the games and foot traffic are sorry we're concentrating just 22% so that's the vast majority of the games 90% of the games,
or concentrated in 22% of the stores track,
oh yo largely this idea that people are going less retail you know it isn't true.

[28:01] And to wear it with the to the extent that it is true it's very concentrated on a small number of stores and let me expand on that data because I think the traffic data is also interesting this question about our,
I think it's a bigger question about where are people going and how is that changing now fasten a I talked earlier about convenience we actually found that convenience trips.
We're up 16% year-over-year strips that we would attribute into categories like like entertainment R actually up 8%.
So there actually is foot traffic you know it's happening and it's happening in in different places grocery last year you know had had solid traffic convenience stores in particular really solid and trips for fuel.
We're really,
solid as well there's some really interesting data in there by the way within our Center for Consumer insights were able to slice and dice this data incredibly granular level so for many of our clients were able to dig in today to not only about themselves
but their competitors to really understand how particular consumers are changing ribs with slice and dice it by that he cannot make factors at the sugar.

[29:11] It seems like people are going to the mall for the Apple store since Ali then they're getting getting their they're delicious to bison and kind of leaving and not visiting all the other certainly not the apparel stores on their way out.

[29:22] Where does a lot D in written essays about they're going you know further massage and they're going for their Zumba class I know do people still do Zumba Jason your you do Zumba right.

[29:33] Yeah and like their stock just crashed just from you.
Zuma country doesn't work.

[29:43] Goat yoga is the thracian.

[29:45] Goat yoga hot. Yoga.

[29:48] I go get the other goats have to be hot.

[29:51] My like top-line take away from from your traffic story was was sort of going back to that bifurcation thing that it's almost not useful to look at.
Overall homogeneous traffic because there's there's like significant winners and losers in the traffic game.

[30:10] That's right that's right you really am an across-the-board what what all this tells me is that you know there's one element which I called the diversity of the consumer is skyrocketing,
and not just diversity you know a long you know that that's a racial lines but economic lines you know as we look at it we looked alot in Geographic and how Geographic Behavior was different,
there's just dramatically more diversity within our consumer base
yeah you got it you've got to look at it through that lens you got to be willing to slice and dice you know to get inside the insights,
otherwise you're going to deal in these macro topics that don't mean.

[30:51] Yeah I don't want to explore that that diversity of audience more but it just a couple of a sort of wrap up questions on the on the traffic topic,
another interesting thing that you you looked at that was super helpful to me because I talked about it a lot and tried to find a good day to set.
Is the whole Urban vs rural thing.
So you know one of the hypothesis would be like we built all these malls in the sixties when everyone was migrating to the suburbs there's all these Regional malls out in the suburbs that are performing well maybe that's because
you know populations are starting to migrate,
back from suburbs to Urban City centers but when you look at it you know the sort stop by and government data.
It doesn't really support that like like overall people are still migrating
from from City Center to suburbs as they get older and more wealthy but if I read your data right like you you broke it down and you discovered that like.
It is true that younger audiences are tending to to aggregate in City centres you know maybe for Economic Opportunity.

[32:05] Yeah that's right so it at the at the headline level you're right we've got the data that says people are still moving to the suburbs and this is again the problem was sort of looking at things at the macro level cuz that would just say okay well nothing's really changed
but then we dug deeper and we look specifically at day that population 25 to 34 and what we found was there's a dramatic reversal.

[32:28] A behavior that we see there so from 2000 to 2009 you know we saw up a pretty significant shift away from City centers for people of that of that
however from 2010 to 2014 we saw a dramatic reversal what we saw was you know was that there's an 18%
people moving to city center so without a doubt people are absolutely moving to the end of the Revitalize City centers and this has to be related to this idea about are we buying homes,
well we're not buying homes you know what but it's a little chicken in the egg because you know you might argue it's because.

[33:10] These consumers are just different they don't want to move to the suburbs and buy homes or you could look at the economic data and say
well they actually aren't at a financial position yet
to buy a home and move to the suburbs therefore they're paying rent and they're doing so in the in the city centers where you know where there's jobs or should have more educated consumers also the more educated and Workforce consumers
there's also a concentration we talked about the only ones really participating in the economic growth
are the high-income consumers okay well there's a concentration of where is high-income jobs are located,
they tend to be you no more urban you know oriented and certainly you can pick out a few cities or what you could probably,
there's a lot of concentration here so there's reason why you have a consumer who has you know this increased debt you know who is in the economically efficient to move to the suburbs is actually moving to the city centers
not just for a cultural reason but for economic reason.

[34:13] Yeah for sure the the other thing that's interesting to me about the traffic data because like this this is befuddled me for a while and I still don't think I have it completely explained but in my role I get to.
Do a lot of serving of customers and hear a lot of voice of customer and ate a super,
consistent thing that consumers tell me and I highlight tell me because
like you know I always ice two things consumers tell me with a grain of salt is that we're more time starve than ever before that we have.
That we have less time and.
Like I believe that they believe that to interesting things in your data number one on average were working less hours than we used to.
I have seen another day this as well which sort of makes you wonder how it seems like we should be slightly less time starved if we used to work 40 hours and then we'll work on 33 hours but the other thing is.
Like we're time starve so we Supervalu convenience, like we're buying our groceries for more stores we're doing more Church Street trips.

[35:22] Right right right.

[35:23] Then we used to and you go in a minute if your time starved and you value convenience wouldn't you go to one grocery store and get all your stuff rather than going to six grocery stores.

[35:33] Yes and I can't I can't argue for the craziness of you know what the work where the data doesn't serve stack up but you are absolutely right here that says
yeah wait wait wait we took that answer okay and everybody's fighting for this time serve consumer so tell me about it.
Of course what we found was since 1960 there's been a 9% decrease in overall,
hours worked per person that's a considerable time. It's also a pretty good chunk and decreased during that same. They're working age population is increased by by 44%.

[36:08] And the labor for the labor force participation has increased by 9%. We're actually have.
You know more people participating in the workforce you know it's up significant of course during that same time. You know are our labor force you know really had the that you increase the number of women that were participating in the workforce.
As a as an economy we're working more,
okay but per person were working less we look at it like particularly around discretionary time and there has been a 9 minutes per day increasing discretionary time in the last 10 years,
that's over an hour week of additional discretionary time that we have you know to spend so it doesn't really add up that that.
You know that people are time starve and have had last time except to the extent that maybe they have more options.
The whale said data around you knows the amount of time people are spent you know I'm retail trips.
And we've seen you know of course we've seen a decrease in the amount of time being spent shopping obviously you know he timer says that as a major you know playing that as well.

[37:16] Yeah no my hypothesis is that at least part of it is the expectations are higher so what consumers are expecting to get done in a week.
Are higher and therefore they feel more time start to get it all done in the same thing like,
expectations about quality of the food you serve your family is higher so you know it is no longer acceptable to just go one place and get one quality of food like you have to go multiple places and so it's it's all in in
in context to expectation.

[37:46] Agree with that. I'm not sure I completely agree,
you know with this idea the I just the one point you made around quality of food being hired that I actually think that there's cuz I hear this lot from the our grocery clients this idea that the consumer is more health-conscious than ever.
And I would lead us to believe that maybe maybe a consumer,
it's more health-conscious but I'm not necessarily sure that that all consumers more health-conscious right because we while we've seen an increase in,
life expectancy we've actually seen a dramatic increase in the LBC rates for lower-income consumer.
So by the way I read an article does this isn't included in our reports that talked about the sheer magnitude of grocery sales that now happened through dollar type store.
And so I like when people say they don't shop the center aisle anymore they're only shopping the outside aisle I was trying to go well how does that does that reconcile with sale of groceries,
you know dollar stores.
Again back to the bifurcation week we can't think I'm going to win these platitudes of the consumer being a singular consumer comes back to the idea that there's traumatic for diversity and we have to dig into that.

[39:11] So let's dive into that I will say it is funny like if you look at Fritos sales.
Over over the last 30 years I can consumers are not more help awake but if you look at organic produce sales you would say they are so it's.

[39:26] Right right right.

[39:27] For your point like it,
that it's dangerous looking at averages and is a smart analyst I work with point that to me all the time on average nopales Platt.
Doesn't paint a very helpful picture of Nepal.
The blank going back to this like the audience is wildly different today than they've been in the past and that you know traditional we had pretty homogeneous groups and pretty report like there's much greater diversity
talk to me about like how that plays out like you in the report highlighted that that some of those
does groups have disproportionate Economic Opportunity for retail growth in and using some interesting things about a various retailers have done trying to win some of those does diverse group.

[40:18] Yeah we know we can talk about the consumer and the changing consumer without talking about e-commerce however what what what I didn't want to say what we know in the report was Haiti Commerce is growing,
I probably wouldn't I probably wouldn't shock anybody so we sort of tried to do the same thing and dig into that gross you know through
you know an ethnicity lands Inn, generational and something jumped out of me that was really shocking I mean it wasn't the more I thought about it and I had to do with.
The growth rate of different populations like how fast are those populations coming online and I use I use an example here if I look at.

[41:03] By income,
so that the consumer who is between 0 and $35,000 per year is actually there their kegger of online spin is 14%.
That's pretty significant and then you compare that to the high-income lose only 7%.
Of course that's in verse that that's in burst to the share that they already spend online.
Another words the low incomes consumer spends less online but the growth of that spending is is no doubling the pace of the high-income consumer.
And that's honestly what we found across the board when we looked at at nicity what we found is the lowest penetrated,
you know the African-American is is growing
at a rate three times that of the highest penetrated coworker which is Asian so they're growing at a 15% tiger Asians growing at 5%,
same thing at income and same thing generationally so that the millennial who's.

[42:04] Already shopping online more is growing at a much slower rate than the baby baby boomers are who are growing at 11% cater,
you know these new populations that are are joining another e-commerce shopping trends
and we asked a question about okay well let's look at our credit card data and let's see if we can assess you know who's winning and losing.
As it relates to that new population coming on I'm coming online to particular we looked at we tried to compare in a Walmart.
An Amazon we asked a question you know who's winning and losing with these various populations.
And you made me it's surprising but we found is generally speaking but first of all there they're both winning.
However Walmart seems to be out for me okay for all of the co-ords except for and I don't know why this is of the African-American cohort the tins to the chip in favor of a man.
Just interesting that these populations are coming online,
and we look at where they're going in some ways you might think that they're the kind of willing to and and and you know our shopping list the brands that that appeal to you knows their needs and the things that are most important.

[43:23] We can talk about this for hours but we want to kind of at this point could it a little bit and
try to talk about a couple scenarios so and I encourage readers
this is not all the topics in the data so so I definitely encourage you to download the report and read more so there's definitely a lot more there than we talked about
let's talk about how retailers take this data and make it actionable and I thought of fun framework there would be just a couple scenarios that we know are our kind of
you know Persona is a folks that listen to the podcast so so,
first scenario is you know I am a senior person at an omni-channel retailer feels like I just got my head around
you know some of the trends you talked about 2018 and in here hear you talk about you know all these new trends that are happening.
How how should I adjust this report in or what are some examples that you've seen a retailers of doing something in reaction to the.

[44:25] Yeah okay that's a great question I try and think a lot about that when we're developing the report and first of all week we developed the report in a way that has to be applicable to a broad set of clients we think we do that but we also have the ability through Center of consumer insights
to go much deeper and get into in a meter category-specific at a lower level or our clients to set the where absolutely doing that on the backs of the roof.
But more importantly I think that's what we were this idea about this growing diversity that's coupled with.
You know what the reduction in barriers to entry in our industry so when you take this growing diversity with you know,
increase your segments with very unique needs and you couple that with lower barriers to entry meaning we have more competitors for able to
very specifically Target those retailers have to start to think about how we compete differently,
the problem though that many a large omni-channel retailers might have as we come from a place where we have this giant monolithic value proposition and we like to say it has its really try to appeal to everybody but the reality is that you know.
You're one giant value proposition that kind of headset what was the traditional middle-class you know consumer,
what we'd actually got to begin to do is think about how this implies we have to compete differently and what I like to say is the market is fragmenting.

[45:51] What we got to do this we got to think about how do we allow the fragmenting of our offers.
And I just offers like marketing offers I'm thinking about you no offers like.
Store formats store locations maybe even brands or products that we carry you know price points the difference between value and convenience and where you employ that and how you employ.
In in there certainly are examples in the marketplace of a retailers that are heading down this path of of looking at you no different models that they either have under the same Banner or even different banners that they,
yeah they leverage their scale but take advantage of those different.

[46:31] You know I take away from all of this that says we got to think differently about how we target consumers because of the fragmentation is the diversity that showing up in the consumer an application back to how we operate.
Our operating model and how we think about going after the consumer the second thing that I'd for the Highlight here is that you know the consumer in some ways,
isn't changing in an otherwise they are changing but it's not because they're just culturally different necessarily but because they're under a lot of pressures,
and so and by the way those pressures as I mentioned have been in the trends there's no secret in the pressures and they've been let you know if we're paying attention to the trends we're in we're digging in the day you'll see that these have been.
Their long lives friends are we paying enough attention and thinking about how we evolved what we sell.

[47:23] Right or do we Define ourselves by the categories that we Define ourselves.
Do we do we think differently about the services that we offer are we evolving ourselves at the rate of the consumers needs,
you know are we really thinking about what that Evolution means to us cuz I often times I get this question I got this lot on the great retail bifurcation like what what do you do if you're stuck in the middle.
And the answer is don't be stuck in the middle.

[47:48] Get out of the middle.

[47:49] That right there is no marketing message that changes that it actually means you have to you have to recast.
Who you are what you offer and to whom you offer it to.
But you know that's that's the evolution of business frankly if you're not going to evolve the marketplace will evolved and we have over a hundred years of proof of it.

[48:10] Great answer,
turning our attention to the other side of that that value equation the Brandt the traditional brands that like,
you know maybe I'm doing as well selling through those the traditional retailers as they used to an anemone cases,
are now starting to evolve a direct-to-consumer strategy is there any take away 4 for the brands in this report is there is there something you think they should fundamentally be thinking about differently.

[48:43] There is no I I would tell you that there's a there's a phenomenon going on right now I call it the rise of the brand.
Now we don't really go deep in Stanton to the report but you can certainly see that that that those in a consumer products companies that have invested heavily in
in a brand that's a Lifestyle brand no excetera you'll discover that they end up with a lot more in a pricing power cuz it's kind of it there's two things happening at one time there is the commoditization of retail.

[49:17] There's the rise of these Brands occurring at the same time well if you're a retailer that's playing on the commodity side
you're actually you know having deteriorating margins,
if you're a brand you know and there's good examples to bring up there they're certainly athletic brand but there's a there's a great
you know Lifestyle brand out there that deals in in your coolers and and you know outdoor for the products you know warming cups excetera
you know that is done a tremendous job for the building this Lifestyle brand around a product or a category product you you never would have thought about right and with that comes the power that allows you to go direct to consumer
is your brand is important enough and also comes with a magic thing that I like to call marjon now,
not every consumer Products Company out there as a brand that allows them to do that,
either you can imagine as you're standing at you know the checkout at the grocery store there's a lot of products that are are trying to be sold to you at check out right
and they'll have a brand associated with them but they don't have the Lifestyle brand they don't have the wherewithal that some of those brands that I mentioned you
it's interesting just to watch the evolution of the marketplace in the rise of Brands as a counter to the commoditization of retail.

[50:33] Some Brands we'll figure that out and figure out how to do that other brands you know frankly either don't have the permission or or maybe aren't the kind of category,
that can invest enough to to develop a brand you know in that way.

[50:47] Go to the end of the third type of listener Persona we have is very entrepreneurial online seller you know maybe
a year or maybe five years ago their son books and then they were sharing song apparel and now they're looking for that next thing to sell as I listen to you talk about
yeah these underserved demographics coming online now that seems like there's going to be a whole set of products there that would be interesting in any
anything for the data for kind of that were entrepreneurial kind of set.

[51:15] Yeah I think that I think the data feeds that you know massively is what we basically says there's this increasing diversity of the consumer and diversity along many different
you know,
taxis if you will you can think he cannot make diversity we think Geographic diversity we can think about in a different languages just different needs or the ability today of a you know an entrepreneur to start
a company be very smart and targeted about who they're going after you know and be able to penetrate and and serve that market in a way that the the mega companies are unable to because they're not that specific.

[51:54] Is phenomena
and frankly I call that the you know it's death by a thousand paper cuts for medium to large retailers or made a large you know commoditize retailers right
great story my daughter is in a 13 she plays basketball and there was a advertisements that came up on her Instagram,
for a company that deals specifically in basketball apparel
with sweatshirts with these you know crazy basketball sayings on it and know this is found her and she is a niche market that has this incredible Mead and Frank said we couldn't go to you know how we couldn't go to the mall,
and walk into a department store and find you know the sweatshirt that has in a basketball smack talk on it but this company found her,
and they're able to going to be very targeted about it I think right now they think the time is so right,
for companies to be able to do that I think that the research really shows that and the challenge for the bigger retailers is.
How do you become that.

[52:59] Instead of saying how do I have my big monolithic value proposition that tries to appeal to a big fat middle-class how do I actually allow myself my operating model to fragment.
And go after these pockets of opportunity that in and of themselves are small you know that historically you know the big retailer would say my scale wouldn't allow it.
How do you do that at scale that's the big question and frankly you don't or maybe maybe that's where.
Topic of personalization that the market seems infatuated with for the last 20 years maybe that's where that actually has some applicability.
Where is the market largely hasn't figured out where you know the applicability really is you know just applied to the traditional.

[53:46] Yeah I know for sure like I I would argue that both
of the the scale that you just described and the Serta innovator's dilemma that we've you and I have talked about on past shows like both make it hard for your sort of the the big incumbents
react quickly to new insights like this and so it does seem like there's an opportunity for more entrepreneurial companies to be more agile.

[54:12] And there's a question if it can you do that at scale is there a way with automation for you to identify pockets of opportunity to you know acts against them and an aggregate
you know do that at a large enough scale that makes sense and I don't know what there's there's no example yet that exist out there but,
at the end of the day if if the large companies are unable to do this the market will do it.

[54:36] No it is interest I mean there's a micro versions of this we face all the time but like imagine you're a retailer and you're you're you're trying to reach a bigger audience with a
a message that will cause them to buy from you like his historical you can buy that audience on television and you could reach a ton of people
today we're finding that that gosh you can reach a thousand people on Instagram that will have a way higher
likelihood to buy your product.
Through some kind of like micro influencer campaign right and like the cost to acquire each of those thousand consumers to be much lower than the cost to acquire them on television,
the problem is you can't buy 10 million consumers through you know a thousand consumers at a bite.

[55:29] Right right right that's a great story but I don't need a thousand consumers I need to know Millions.

[55:34] Exactly yeah so that that's going to be a good challenge will be.
So you know historically like these these demographics and age cohorts because.
They were originally the only things we knew about the audience's we could buy so when you bought her a radio audience are you bought a television audience age and gender where the two things you knew so marketers to learn how to do you know.
I second that the audience based on age and gender.
Is that model now Antiquated like should should marketers just be moving away from the whole notion of age cohorts and should we not even try to invent something after Generation Z and should.
Instead they be thinking about economic cohorts or behavioral cohorts or something else or what.

[56:32] The answer to that is yes but I'd actually take it one further because with the you know the kind of analytics that that are now available
you know I keep talking about that in our Center for Consumer insights our ability to slice and dice and ask questions and dig deeper and
you know on the Fly try and figure out where the pockets of opportunity exists.
That's the guy that's the key question where are the pockets of opportunity and how do I identify those and most organizations are not yet good at this most organizations don't either have the data.
They don't have the operations and place that allow them to ask the right questions of the data they may not have the right staff on board to help them slice nice but this you know in this market place that do balding with this increased diversity in this increased competition,
identifying pockets of opportunity is going to be a competitive Advantage so we shouldn't be buying and thinking segments we should be thinking about.

[57:36] How do I go at the data over and over and over again.
With different slices you looking for those few nuggets of gold that are in their last 10 months.
Doing that in this report and a lot of the questions we asked of the data didn't tell us much and those aren't in the report.
And we kept asking questions and digging deeper and saying this is interested what if we asked it this way and that's where we come up with the inside so that's that's the mental model have to ship shift is just how do we think different about,
operationalizing the Analytics.

[58:14] No that's that's great advice and that's going to be a great place to leave it because it's happened again we wasted a perfectly good hour of our listeners time so if you have a burning question that we didn't get a chance to ask Casey or you want to discuss anything that we touch down on Today Show
feel free to hit us up on Twitter or leave us a note on her Facebook page and what will be thrilled to get back to you
as always if you enjoy the show the way you can repay us as by jumping on the iTunes and getting us that five star review.

[58:44] Kasey really appreciate you coming on the show one last question if folks want to kind of follow your thoughts online about all this what's the best way for them to follow you.

[58:54] Oh sure thing I saw on Twitter and I've actually continue to to your Tweet out different insights from the airport it's at k l o b a u g h.
And of course I'm also on LinkedIn at Kasey Lobaugh.

[59:11] And then he directors down if you're driving will get both of them in the show notes and until next time happy commercing.


Jun 28, 2019

EP179 - Edge Ascential VP Chris Perry 

Chris Perry is the Vice President of Global Executive Education for Edge by Ascential.  

Topics covered:

  • Digitally Native Brands
  • Brands Going Direct
  • Crazy things CGP executives say
  • Amazon

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

Episode 179 of the Jason & Scot show was recorded on Monday, June 17, 2019

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


[0:24] Welcome to the Jason and Scott show this is episode 179 being recorded on Monday June 17th
2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners listeners in this episode we have a real special treat for you,
they're all special treats but this is a special special treat I'll explain to the short story
for a while I ran had the dubious honor of running a full day Amazon seminar at internet retailer their seminar at their conferences called IRC
and a few years ago that we're always looking for folks to get this and fortunately at televisor we have this ability to see what our customers are doing so we had this customer Caldwell pet
and this is very competitive pet category and they were just absolutely destroying the competition on Amazon so we dug into what was going on there and found that
architects of that strategy and success was called Chris. So we scheduled at all called to talk to him and talk about so we can get internet retailer and we're blown away by his ideas and thoughts about,
consumer and add know how to succeed on Amazon etcetera.

[1:41] He he gave a talk there and that was a Smash Hit and then I like to think maybe this had a little something to do it but then he was pretty rapidly there after recruited by Kellogg's those are
does that is not the business school but the cereal lego my eggo folks and did a great send there and now he is with Edge by ascential,
his role includes evangelizing.

[2:10] Thank you so much it's an honor to be here.

[2:13] Hey Chris we're thrilled to have you and you know as usual I like to to correct Scott's introduction I do feel like there are a bunch of people that work at Kellogg the Gathering NBA from the Kellogg School.

[2:23] I'm sure there's a Kellogg squared group that has doubled up there I was not one of them but I was excited to be at the one.

[2:33] Pretty much took up about 50% of my pantry so.

[2:36] The more delicious one.

[2:39] You gain if you do gain the Freshman 15 when you start working.

[2:43] Yeah yeah we'll have to explain that because I hear the culture may have shifted a little bit that the free snacks might not be flowing as much as they want it but.

[2:52] I think there's nothing they were trying to help us with their waistline but they still had the Kellogg's Cafe that had like an endless cereal and it was just an easy for me it was always easy cuz I don't normally eat a ton of breakfast when I got the office it was such a,
such a such a treat but I could see if you were there all day long in the in the main headquarters that could get a little unruly on your eye.
On your way to climb so.

[3:18] I I get it and Scott and I are big proponents of selecting your your career choices based on their snacks so.

[3:25] Exactly.

[3:27] We're totally sympatico and that's usually how we like to start the show is to actually get a little bit of a background about the Guess Who Could you tell us what you did before Scott quote on quote discovered you.

[3:40] And that was that was the.
Climax in my career right there so since then I've fallen quite far down to edge by so I'm just getting up.
But bite my Journeys been kind of an interesting one after,
my MBA program was I had the awesome opportunity to join Reckitt benckiser or RB is there now called I'm going to have them for a while,
RB is a very unique culture honestly one
it's it's it's very it's a very tough environment but I kind of treat like the Marines in there not cut throat against each other their Cutthroat against competition externally
and so I mean that has no oil pressure and a pace but not everybody can have,
but it but for those who can it really teaches you the ropes and they're very lean,
you get a lot of autonomy and you get to take ownership of things that you would necessarily get to and some of the the larger more bureaucratic,
cpg organizations that so I really lucked out.
With that experience and ultimately was I first started out in Brandon really thought you were coming out of my NBA.

[4:52] Brand management is my specialization year than I thought that's what I was going to do it there were very clear tracks and this is right is obviously digital was becoming a Hot Topic not that it wasn't already present for the Hot Topic,
it marketing and soda,
net-net I've been asking how do I take a rotation and digital or something again that's kind of going where the puck is going for the consumer and there weren't any things at the time and,
and in ultimately this special project kind of came up and I was
laugh when I think that it was called the special project like it would end one day and it was called E-Town which was obviously what e-commerce was and in so we were the whole company was essentially a ask for volunteers,
at a town hall and when we ultimately when I looked around and she would raise their hand there like three of them that it actually volunteered as tribute in true Hunger Games fashion,
I'm for the special project and so it was,
and I can tell you to this day I can I can name the people I won't do it on the show but I can name the people who pulled me aside and said that I had ruined my career and I would never get back in the brain,
I would never become a senior leader because of this specialization I've gone to Niche this wasn't going to ever turn out.

[6:08] And it's so funny because most of those people have either already shifted e-commerce or asked me at some point later having forgotten what they said to me.

[6:19] Ask me how they could break into e-commerce until I say that humbly because I was so we don't know where the future is going to go we just have to go with us and talk to you later,
I never look back and then honestly wreck it was such a wonderful environment for testing and learning because they literally would point at
the future and say go get it here is some resources and you got to go fail and learn and then optimizing and succeed and so
kind of call that original group of about 20 of us that openly that's three built into,
the racket Mafia cuz that was the original group that got to really learn and hone their e-commerce skills and literally we've cascaded and then thrown to the,
before Winden I'll leave ye Commerce across so many different cpgs and solution provider so it's it's it's so it's so cool to see all the tabs,
really that just led me ultimately to a new opportunity wellpet we're obviously Scott you discovered me and then and then,
actually I took a very short stint before Kellogg's at Planet retail RNG which is one of the companies that became Edge and I kind of pause that's after when Kellogg's do you want one of those too-good-to-be-true opportunities and then to Kellogg's and then,
ultimately I was asked to come back which I was an honor to come back to what became Edge by ascential.

[7:42] Which is the combination of clavis Insight one click retail brandview and plant retail RNG into one company on last August and and the rest is history and so I might just have been very blessed in my career I mean everything happens for a reason,
I'm not going to tell you it was all sunshine and rainbows but it was it it's been an amazing learning opportunity and I and I really do feel personally and professionally the e-commerce was an accelerator for me,
but really got gave me the opportunity to do what I feel called to do,
as a career and I don't want to sound corny but I really do feel like leading change was something I was,
I am a mini of us including you were meant to do and I think we're doing it all of our own unique ways.

[8:28] Awesome and I think you mentioned me off the air that all those e-commerce naysayers are now the leadership team at chewy is that.

[8:37] Chewy was a very is and was while I was working with him a very formidable.
Retailer partner but also competitor in the marketplace I mean when you think about it that they got ahead of Amazon in one of the leading categories before Amazon and I only say,
I'm sure Jeff Bezos has a drone outside my house watching its moment as I say this but we got ahead of of Amazon before the eye of the smile of Mordor as I like to call it.
Saw them in and they are leaving in Texas which is and have a really really unique value proposition I me when I drive down our,
Street here in Boston of the street I see the chewy box in a lot of people's doorsteps and then they're going to recycling and so he's really made their Mark and my hats are off them and they were tough Partners II,
they were the human version of Amazon is I I kind of would refer to it as well pet but liquid comes with a lot of emotion but but versus automation but it was a.
My hats off to them for getting to where they are today.

[9:41] Yeah yeah even more impressive I feel like they the captured more market share not because the smile of Saruman wasn't looking at that category early I feel like,
Amazon through Quincy was in pet super early and yet she was still able to come in then.
And that do that so definitely impressive you you reference Edge ascential and it's essentially a rollup of a number of,
data Insight tools for e-commerce if I have that right can you tell us a little bit about what your your current role there is.

[10:16] Yeah I know and it's oh yes we we we rolled up for companies to essentially try to create what most practitioners myself included,
I would say we were suffering from in the marketplaces that they're there was never a lack of different solution providers but you kind of had to.
Hackensack everyone together on the internal side and there weren't a lot of players who had all the capabilities brought together Sunday we're not we're not.
The full full service provider on every service in and in offering available but we have a lot of the winning brands that brought the solutions together and also have not only just the day that an Insight side of the advisory dedication side and that's where,
that's where my role really kind of flourishes I have.

[11:03] As a practitioner I had the opportunity to practice e-commerce and help others in e-commerce from a from a Consulting standpoint but also,
I've made it a point I'm to go to a ton of different events over my career to date both for learning but also for networking and a little bit of retail therapy,
I'm as we are facing challenges in the space and that kind of gave me a a certain.
Perspective on what CD better about the education available in the market and so one of my major responsibilities is needing our executive education programs which include,
are share groups in Oregon, share groups in North America and Europe are University programs are online learning and as well as our what would I,
I think my favorite is Ari hackathons e-commerce stomachs and focus on Amazon and or Walmart or digital shelf or other retailers globally so,
honestly I think if I had to equate my job does a nerdy analogy I'd say,
I'm at this point I've left the war front but like Captain America I'm going to sell war bonds back at home so that I can arm our soldiers on on the front line,
with with weapons that will help them win the win the fight in an e-commerce driven world.

[12:25] It is definitely a nice fit cuz my mom my wife or teacher is my father's is a CEO of a company and very inspiring leader and I think that was always called upon of Empower people to become better at what.

[12:37] Very cool and you got a D credit for working in a Captain America Sacha Avengers reference so.

[12:42] I'm trying I'm trying I have a little check.

[12:46] Jason Scott Bingo we have to make the hardest square is making fun of Jason so I will get there.
Let's start a conversation the top there you've done a lot of really good thinking and execution and,
the trend of Brands going direct to Consumer ecology to see and then sometimes inside of their digital native vertical Brandt's we have like the old school folks like the Kellogg's Etc
I really trying to figure it out and then you have somebody smokes or kind of born and bred on the internet at a super high level 30 thousand foot,
where do you think we are in that that cycle and you use whatever analogy you want to baseball or Avengers.

[13:31] Movies yes.

[13:34] Don't know yet you know what's funny I mean.
DDC will be brought here cuz to be honest your point it digitally need a vertical brands or just digitally native Brands kind of sick.
Underneath one layer under need to see an arguably what even goes back a little further d2c is kind of sits under Challenger Brant right because technically.
Adidas the brand challenge the assumptions of how one has to go to market and that has become kind of commonplace now among DC brand that's not the part that you're challenging anymore but,
it was to go to market in a way that it wasn't their traditional brick-and-mortar selling into,
selling into a planogram model and in so you know I'd any Challenger is a nice umbrella term for this but but obviously.
From a digital lens I think in all fairness in an e-commerce years DTC is is is rather.
It is rather old I mean it's it's not new anymore it is maturing,
I'm into a new stage or new stages I would say those kind of dough pulling back a little bit looking at things relatively like it if it's still in a rather early adoption saying so you know,
yeah that the Dollar Shave Club Unilever acquisition I like I kind of look at it as,
Saddleback innovator I'm the iPhone yeah I'm going to be the first one to an iPhone and I sleep outside the store even though we're still in the early phase we're not everybody has d2c or is fully.

[15:04] You're mining the value of what do to see could be at a macro level but I do think you don't number of Articles out recently that I thought we were,
you're quite insightful around me or just the fact that you are the barriers to entry are still low for e-commerce players know to go to market digitally but the cost of customer acquisition,
the share of attention in in the means to get that with all the other people trying to capture their share of voice,
investment funding availability and also the prerequisites and requirements to get those,
on this funds from investors is becoming more competitive and either when you think about DTC Brands going through.
Like a Marketplace platform like Amazon to get to Market Amazon isn't just letting any old Cellar in the old Bender launch without a number of.
Formalities in and policies and processes that I help pay for my room and board and books,
am I selling books in in my college days on Amazon and on eBay's with I could be a seller at that.

[16:15] I would have been doing it all over the years ahead I'm not stopped on my own just cuz I would have been one of those piddly sellers out of my garage and maybe a formal style.
Samsung filters that are being applied that make it a little harder for a g2c brand to go to go to market but I do think there's actually several factors that are kind of.

[16:35] Shifty that letter keeping d2c an option in something that will continue to expand so you know.
Just like I got to listen to mount the state just to stay linear in my thinking but I think the nature of digital in the reality of kind of finding a minimum viable audience doesn't actually have to be that big to get you off the ground,
maybe this is tree funding but no just to get something going enables a lot of new brands start.
Based on the need state or a consumer problem or a desire I'm the marketplace model in and of itself has a lot of power in ultimately enabling,
Champion Brands and retailers to in sellers to go to market I mean especially look globally,
the C2C Marketplace is huge in Marketplace China,
we're getting an individual has the ability to be selling directly to another individual are they easily like to eBay eBay seems with Wayne the little bit.
In in the US but it's huge in other markets that that model so I think traditional retailers are seeking new undifferentiated an exclusive offerings. Asleep driving demand again look at a Target,
really bringing using digitally native brand influencer Drive what they carry in store so so going D2 seed has a lot of potential benefits even though the definition might Morris little bit consumers are always going to be looking for.

[18:01] New experiences and experience exclusive use of Brands going kind of.
Leveraging pop ups in Flagship stores in partnering to create experiences and solve new problems are going to capture attention actually think we can talk to this little bit if you have some thoughts cuz I love to hear it.
What's interesting is.
I will see and ebb and flow happening here so e-commerce was the way to go to market when you couldn't get into brick-and-mortar but as e-commerce continues to grow and real estate.
Independent landlords are ultimately looking to fill space and create.
You're the need for that physical real estate to be maximized it may ultimately kind of pendulum swing the other way where Brands actually can use,
physical retail to drive DC sense of capturing attention and breaking through as it'll be kind of interesting to see the physical Marketplace.

[19:01] Resurge as experience has become more important but against everyone's looking for gross everyone's looking for differentiation everyone's looking for a reason to capture demand and I think it's always going to open up.
Add or 4D to see whether it's digital or physical or both.
The energy to enter the scene but I think there's still early in the stage because ultimately you don't need a lot to get going.
As long as you're willing to be in it for a long time.

[19:32] So like,
clearly for one of the things that has emerged as the barriers to entry for these Challenger brands are our lower costs or lowers you you sort of highlighted there but it does feel like we've evolved like it like.
45 years ago you can be a challenger brand and you could slap up an e-commerce site and
that was going to be a competitive Advantage versus Dean Cummins but didn't know anything about e-commerce or slap some listings up on on Amazon or Alibaba and you could do customer acquisition on,
on Facebook and you know again that incumbents we're not likely to be digitally Savvy it feels like.
The incumbents have.
Now develop digital skills like you you know I yours your stint at Kellogg feels like an example of an incumbent it was hiring digital specialist,
to build up those skills what are the show in the sort of evolved Market if you're a new Challenger bringing launching today what weather the the sort of big challenges you have to overcome to be successful.

[20:39] That's it that's a great question Hut in enter point I think that IQ and the appetite is increasing across-the-board whether you're the incumbent or the,
the past Challenger or the new Challenger I think the the challenges you know Jen are.
Yes the cost of Entry is low but the,
but it still to truly get scale quickly which everyone wants those success stories you're this quick no overnight success stories those are harder to come by again lotto tickets aren't bought every night,
that that that win but I think I would say from a.

[21:18] When I think of the challenges that some of these brands have I think it's he gets more of the investment dollars which began as more and more of these Brands emerge and have.
Similar or equal propositions it's it's obviously how do you stand out how do you how do you capture the attention of the investors you get money that you need to kind of build sale to go through really need to make sure you have a plan.
Yogurts with an oral icycle that ultimately get you the returns me know it as a start-up you're going to probably lose money up front but how do you do have a logical.

[21:51] Reasonable path to sustainability in and what is that and what is that taken in again I think I think even investors to be honest are wising up and it's not just oh my gosh this looks like it's going to be the next.
Biggest thing since sliced bread on it it's like we're now they know some criteria that we got checking against I think the challenges are getting the scale of resources investment.
Where are these Challengers often still have a significant.
Advantage over the incumbents is agility and I say this in the sense that and in generally also a there closer to the founder story,
we're in a night maybe it's not Sounder but its Founders or it's the people who found the pain point and try to solve it it's there's all these things that haven't been solved by the incumbent,
and sometimes these are like 10 points against the consumer didn't even know like against the way Steve Jobs but it said your customers don't know what they want to show it,
they don't always know that that team Point really mattered until they were given an option.

[22:53] But it's the way they order or the way you're the way it is fulfilled in the product itself with experience that follows you know,
and I think these these Challenger Brands often have designed.
They're offering and how they're going to get it to you for the consumer so Julie was customer consumer first but then they have the ability to get irate that on a much quicker timeline because that is their business model where is.
Combat if I'm selling one of Kellogg's brands are well pets.
Online it was designed for Amazon or for g2c I've got to go through a lot more hoops and months of.
Change management in transition if I can sell it in ultimately just to watch a small what looks to be a very small change my product titles or something I can change digitally fit actually.
Inherently change the product that takes me.
Anywhere from 6 to 12 months minimum versus a challenge and it might be able to flip a change around in weeks near depending on the change.
I think you're definitely or challenges for the Challenger no pun intended but I think there's I think they actually still have the benefit even if it.
It's harder to get the money to stale quickly cuz they actually have the solution which is the substance over over slick presentation so to speak.

[24:18] So look what I say you're a brand that's been around for a while and you're just dipping your toe the number one thing I always hear is channel conflict with butcher you having kind of I'm sure you've overcome this one several times what's your what's your take on that.

[24:33] Social conflict should be part of that initial discussion and I actually.
If I take one step back so what was really interesting to me and again I'm by no means I'm not.
D-ind Aldi Aldi to see expert I'm just a nerd you asked a lot of questions and usually L talks people which which sometimes is good when you're negotiating with Amazon.
What would I say to a lot of people.
Read about Soto again I joke sometimes and I say this with humility but I joke a lot of people will say I read something about d2c we should launch it right away how do we do that we can just slap it on her brand what's right and no no no.
Yes we could go we shouldn't and yes there's some Logistics and Technical.
Geotechnical factors and some legality need to think about and retailer record those are all the operational.
Models and processes you need to file what you launch D and operate DC and those do matter once you decide certain questions that end in but you had the right answer these first why are we doing.

[25:40] That could be a number of reasons I'm doing this for market research I'm doing this to be closer to my consumer I'm doing this for data I'm doing this for capability development I'm doing this because I can't get this product to Market any other way,
Adidas C model or the Digital model makes more sense testing and learning and there's a number of good reasons to do D to C,
baby multiple reasons why it's doing it because you read an article about it or because your boss told you so outside of just that you should do that for the sake of your job,
is it the right reason right there it's the why no start with Why by Simon sinek is his very first.
Very important First Step II is what can we and will be launched as a value proposition that is both differentiated.

[26:26] Superior to the status quo.
An ultimately viable for our business and Bible means a lot of things right and relevant strategic actually solve the consumer problem is sustainable scalable.
We have to answer that first because anyone can sell their product online which then becomes a potential Channel conflicts your point so what was happening a lot of times is the question immediately went to.
Should we sell online yes okay.
Won't that be a channel conflict will yes because they haven't come up with the value proposition that actually is differentiated from how we sell currently online with the other retailers right there and that's where the pricing a product online.

[27:11] At the same or competitive or lower prices I'm competing with my with my partners and likely undercutting them likely starting a price erosion War.
Again but if I thought through what can I be selling this different right when I think of like you know you're picking on Brands but they do a good job in a luxury I think there's a really great job they obviously sell K-Cups in the Keurig machines.
Across all of retail brick and mortar and online but they have a community online a very large substantial meaningful need to see operation that caters to the special loyalists audience and they got to sleep.
Walgreens mini packs any flavors that sings with them until there's a reason to be there.
And it doesn't immediately can split with all the other places in there not being competitive undercutting price and channel.
With with their core offering but they can do something unique in test before they watch you in Mass retail with new Innovations I think it really just goes back to.

[28:15] Do I have a value proposition again that's different that's better and that is by.
That sounds really simple it's not simple but but you can bet your ideas to ensure that they don't cause Channel.

[28:29] Fair enough the I want to dive a little bit more into the psyche of those cpg execs and the reason I'm asking you this is because I feel like you do,
I posted some really funny memes cpg exact say the craziest things.

[28:50] You did not put those until after you left Kellogg.

[28:53] I like I didn't intend to be fair that the nice thing is.
They're not all from Kellogg's made they were actually kind of compiled from peer feedback across the board in again.
As a disclaimer just because I think it's important the people I've worked for yo senior and executive leadership at all the companies I've worked for Kellogg's wellpet.
Record obviously Edge and Planet retail prior to Edge they are all extremely smart in most cases they're smarter than I'll ever be.
What is interesting is that when you represent something different,
and honestly e-commerce could you to be mad libs and you can replace it with insert change here,
there will be a time where something happens in the marketplace,
for us where we go all that'll never work and that's actually the next e-commerce right so there's going to be a day where we have to be humble enough to know that they'll be a nerd named Chris Perry junior will make fun of Chris Perry senior because he said something.
Just as silly as some of these but what's funny is that we've all been fighting the good fight these leaders of change this community in this movement that we are and we've all been facing kind of the same common.

[30:05] Nice sayings if you will come in a lot of that is just because the model A brick-and-mortar and traditional brand has an incentive,
all of these organizations to Pivot their thinking and behavior and so they're not stupid people they're not they they're actually extremely wise and smart people it's just that this.
This is the first time this changed let's be honest most of them have been operating within the mature.
You're the CasCal stage the brick-and-mortar retail so they've mastered that they are masters of that it's just this is that small disruptor that hasn't,
only tipped everything on its on its,
on its head but will when it's just to get some of the ones again in everyone who's been in the space can appreciate this yo just somebody's I just pulled a couple II put 30 out of the 30 most common,
darndest things that cpg exact same but you know I got one related I just read
this is a cpg exact speak number 19 I just read an article about d2c and it's impressive but we should just add that to our brand site right,
number three.
Hey Chris I think we need a strategy first and that's just after Chris has presented the strategy to them.
Just because you don't understand the strategy being presented to you doesn't mean you need a strategy you know number 16 do you want to double down in e-commerce what can you get me for 50K.

[31:33] That sounds like a real double down to me you know you'll be happy to know we added we finally out of the e-commerce team the end of the 2019 plan agenda you have about 30 minutes to present at 5:30.
Oh I'm sure after 9 hours of discussing the past will be ready to focus on the future right you know I mean honestly.
The best ones ever were and honestly some people said no way you haven't been out since I've been asked multiple times in my career,
and I know others and actually said they had it as well Chris I can't seem to connect to Wi-Fi can you help me,
no no that's it I just thought that was fun and then the best one of all was our CEO would like to talk to top with Jeff Bezos can you set this up.
Yeah let me just text him honestly dessert painful in the moment funny.
In solidarity with our community.
And they're not meant to make fun of anyone person cuz we will all be guilty of we probably all said some of these things to something different we didn't.
That we didn't understand or accept but my goal is not to make fun in and and slam these people it is to raise awareness in a comical way of things that hopefully we can.

[32:44] LeapFrog right no knowledge gaps we can LeapFrog so that we can accelerate the change and win,
In-N-Out honestly that the feedback I've never gotten this much feedback from anything I posted that you tell me something about the continents there before that I need to do better,
but with people really related to this really resonated with them and so if you haven't had a chance to check it out to get it it's just a little ebook I put together.
Different relations and I'm sure you'll relate to all the things that have been said so.

[33:11] Yeah yeah I really enjoyed that it wouldn't be a Jason Scott show if we didn't talk a little bit about Amazon and we kind of what kind of nibble around the edges and when introduced you have talked about how
when you're at wellpet you you're really out there,
crushing the category were some of the strategies that that use then or that you see now that you know someone's new be at a challenger brand or a well-established brand to
having success on Amazon.

[33:40] Now that's great in annual is itsfunneh it in retrospect it's not that revolutionary thinking but it but it is but it but it works so I think that's an excellent actually kind of funny to just it just is a.
Preface to this is I found it.

[33:58] We always go back to fundamentals and in the fundamentals really matter and then we'll talk a little bit to this but like,
at the end of the day I could do I can drive millions and millions of dollars of an age of Maisie demand-generation to acquire customers to a page that has no product in stock.
And then I don't convert right so so at the end of the day like the core operational supply chain Marketing sales fundamentals all matter online and they matter even more than ever before because,
the real time right in once I sell my product into the shelf on a planogram I've got 6-12 months depending on the retailer,
just sit there and so I mean obviously it's the in-stock still matters but I don't have to worry about my packaging changing or the UPC chillogy necessarily,
you outside of brand teams going up to they always do when someone new comes in and wants to change everything but,
but by the way I approached it and I was considered the Jeff Bezos has a flywheel model is Unstoppable flywheel that you drew on the back of the napkin.

[35:03] Arguably we at least need our own version of a flywheel that we would put on PowerPoint.
It's just a frame how we want to think of it and that's really kind of this came out of Wreck-It on this was thinking that came out of bracket and out and I'll give credit to.
San Diego trt who is now the SVP of ions,
he was our fearless leader at Wreck-It over e-commerce in a number of other digital Shopper initiatives and he kind of coined the bill Drive earn.

[35:36] Freezing fruit for our strategy and then I kind of put the flywheel visual together to kind of bring it bring it to life and so together.

[35:45] Together we form Captain Planet but with with the broader team but I think it was that idea flywheel thinking
because it's an Infinity Wii U no sound on the left side you got build in or the foundation right you got to build the number things internally capabilities,
the content that. The portfolio and intended to get to build all of it you got to get the right resource sponsorship,
on the right measurement capabilities or at least to get started and then you ultimately go from build into the right side of the of the infinity a bright as you swoop up in the drive which is all of your marketing and your demand-generation your promotion,
subscription programs like subscribe and save that you would be in again that would create momentum and then is that is that.
Infinity loops with swings back up ultimately going back towards build what you're actually creating is a is a dual cycle that pumps itself right there.
Ideas to get the kind of Perpetual Motion right where my I'm disproportionately earning from the building in the in the driving that I'm then I'm delivery.

[36:55] And what I love about that visual is it in send you a text that you're never actually done.
So if I create amazing content and get my products live and I'm driving to version something is going to change as I'm selling more and Rising that requires me to change my content yet right I'm never really done my contacts.

[37:15] A lot of people like to think they may check content in a complete yes for like a day,
and then you need to be thinking about how you're going to refresh that so your bills include everything from assortment right at your supply chain in stock in your your your availability your SEO.
Search engine optimized portion of your content where you where that role is being served but also the enhanced content and images in a plus ages but really,
it's thinking about I need to show up high in search so I actually get considered but once I'm in it,
did I actually talk to the human being looking at the page even in 3 seconds and and that's actually not like a lot of people gain go to content and I have the key words in my in my in my page but they don't go,
why put the key word which is the feature but I didn't talk about the benefit that was really why they were buying.

[38:13] Right and it's little things like that obviously really matter. Just making sure you're selling on the white platforms right so you want to,
really has been it is the majority of sales as they kind of try to figure out what's fresh Prime now and Pantry are ultimately going to look like whereas,
you know I'm like a Walmart obviously ogp which is online grocery pick-up is UPS in emerging
opportunity in one do you want to make sure that you're also winning on not just

[38:47] And that's kind of the bill bucket the drive is again all the promotions right there power coupons Deals Deals of the day,
I am your AMS search no paid search on the display no advertising.

[39:02] I'm both on-site and off-site right in and earning is all the things you earn right to share the growth.
The sales that the additional reviews the captaincy you might gain a new opportunities that come to you first to your winnings I think it's a way of approaching at the face of how you approach the Indian model,
it kind of feels overwhelming cuz you never get to say you're done but it needs that you never stopped working and that's how those calendar Brands think and so I'm not I haven't had.
The honor of being a part of a digitally native brand but I've had a,
I've been able to be intrapreneurial and it work if it proved itself that record proved itself that wellpet and when the Kellogg's Team all I was there was pivoting in that direction we're actually seeing the same results as well even though we were part of a much bigger.

[39:49] Colts let Serrano people love both high-level and we are strategic stuff and Tackle 120
nothing really good job getting people to review your products on Amazon which is that social proof there stated that shows what you get something like 7 reviews of product takes off any any
tips or tricks for folks listening on on how to kind of get reviews going.

[40:14] Reviews are tricky only because Amazon I would say such restrictions I'm fairly so I mean we don't want steak reviews right but I mean that's that's been a real hot topic.
Over the last couple last year plus but I mean it's always been an issue but I think as they started to crack down.
On counterfeit and bake reviews obviously just making sure that their site maintain stuff you're the number one search engine for products kind of authenticity and Trust,
I think we're one little tip with reviews cuz I think your points you need to have a certain number of reviews in this varies between god scene,
21 up to like 40 to 50 or kind of just those gut-check like you you don't feel like they're enough people who can be staking you out who could have it wasn't just Chris Perry's family that filled out the reviews,
has a really large extended set of cousins ultimately it's it's.

[41:08] What you want to do a couple things that reviews one ultimately you're doing all the right things telling you will obviously generate enough sales at the normal percent of.
Reviews that would come through for most products will ultimately come through for you,
there are some different tactics if you're like a three-piece seller where you actually send the box in the package through I know there's some three pieces that put in little cards or follow up with their Shoppers to encourage of you so there are some opportunities,
but just looking at it from 1 p.m. 3 p sample.

[41:39] If you have a great product people openly going to review it and but what I think is important though is to Spur that flywheel to spin faster to get more people to convert Morse of the day,
experience your product and then review it more,
it's using the reviews to inform your content and I know that sounds really basic but people don't do that so and I can give you it like this is kind of a funny zample but I was in the market for a pair of gym shorts,
several months ago and to be sure I haven't used them yet so I'm the wrong person to be the spokesperson for the brand but what was interesting was,
that the reviews and the Q&A really revealed some some say some confusion points about the product that the product.
Wasn't answering even though they asked said really decent content for all the other features of the product,
what was in and it was kind of funny that I would say I spent a long time buying shorts just sounds funny but but I didn't have I gone to Kohl's it would have taken me like 5 minutes to buy there and it would have been all subconscious quick things I made the decision on I would have walked out,
because I was looking reviews the way I normally do on Amazon for things that should have been low involvement it became very high involvement for no reason it was because of content didn't tell me.
What one of the issues was how are there pockets.

[43:00] How deep are the pockets will I lose things from the pockets to some people are telling me that the pockets were big enough to hold.
Two to three your tennis balls without losing them some said they lost their keys I'm trying to understand like how many keychains did you have,
summer saying that they that they like why why are these 80s shorts falling but no above and he's one 80s shorts but why are they why KD shorts and falling above the knee or other people are saying that they're so bad you they come way below
obviously that's probably an issue of pipes of the people for the reviews weren't speaking. So it was in there were a number of other issues of whether they received through and whether you should go commando
honestly all the issues that weren't being addressed by the conscience if that product he didn't actually.
Had only tens of reviews had wanted to get to a hundred or whatever was.
Competitive consideration number right for for their category they could have driven more conversions we should have got more sales would be at more reviews inherently without having,
talk to me about the future that everyone was asking about and so I think that that's.
That's a tactical I would taste like you to be very unique to every product like till size for vitamins and Medicine.

[44:17] What's show me how big it is don't really don't don't nnn-no and I know this sounds silly but like he was real tactical don't put a pill next to a penny that's gross I'm not going to eat it.
It is size it is size compared to Bill I come on like I don't I don't I don't want to swallow that.
Light sensor like Mucinex is part of Wreck-It job of having like a hand a beautiful clean hand hold until they give you a very good sense of how big,
that like I was a best-in-class of how tactic like the boy that was a question that was coming through that they probably have conscience or.
Yeah because normally at XXL if you would have been able to see the pill in actual size on the package.
And it wasn't coming through digitally so I can go nerdy in this all day long as I love I love the content side and reviews side of things which again seems cliche now cuz everyone knows to do it.
And so I think that's a huge opportunity to drive conversion which then ultimately get you.
To review my new reviews to drive more sales to get more reviews.

[45:25] Yeah create your own flywheel and by the way I feel like the hand is a good tool for scale but I feel like comparing it to a skittles would actually be best.

[45:35] What would actually did that that's funny you said it cuz I actually that's very astute point cuz I was in what if you had a hand holding like an Eminem or your point of Skittles I went Eminem I'm a chocolate guy and then and then you had to tell me.

[45:47] We have a lot of westerners named Jeff from Seattle so that's why I.

[45:58] But it just takes away the gross Ness of a common items found on the streets of New York on so I think that's,
no not to me but I'm just just Urban streets.

[46:11] Yeah I know you brought up an interesting point though so there's a lot of things that we traditionally like.
Would have made a purchase decision VR subconscious,
like often largely based just on on brand recognition that we now like because there's so much more data available we turn into this so I can,
much more considered purchase and there's actually a professor at Stanford that writes about this he calls it absolute value in essentially his premise is,
that when there's not very much information where it's hard to judge the quality of product that we use brand name as a surrogate for quality,
but when objective,
information is available about a product as it often is online now the brand name actually is much less important because.
Shoppers have easy direct access to all the real attributes of the product so when you know ratings and reviews being a,
Marquee example when you can read a bunch of ratings and reviews that they are products good or bad.

[47:15] The brand reputation isn't as important and the reason I bring that up is because that sort of ties perfectly to one of the big evolution,
in the Amazon Echo System you know where it where it increasingly saying Amazon watching their own Brands and
serve going head-to-head with the traditional and coming Brands is that a new fear that like you get from from the clients and Executives that you're working with is like what what sort of strategy should,
don't have against Amazon private label.

[47:49] That's a great question I'm I think so private label has always been around obviously in retail and II as a,
your practitioner in the space do support private label cuz I do think it's important as a retailer strategy,
not to put all your eggs in one basket or you know a few baskets nearby category it help to profitability I mean to give you a unique offering I need to be honest like my wife and I,
from brick-and-mortar standpoint always shop Target before we had kids and became more and more.
UE commercialized I guess but honestly I loved I've always loved targets
open up Brandon all their private label Brands investor with a high-quality again the brand Equity Park good bad or indifferent isn't always tied with me.
Your private label bits but they are valuable I'm Brands and and doodoo outfit our home but I do think that the challenge is.

[48:47] I think this is the part where you obviously politically no from from the government standpoint I was a lot of issues have been raised recently not just about your Amazon or anyone retailer but I just generally DC.
Mega Omega organizations that have these ecosystems do they need to be broken up are they dirty too much power and I mean that.
Subjected to a lot of different people but I think the scary part for a bran.
If I were a brand today as I've been recently the challenge with an Amazon or a retailer as such.
With private label is that it's not that private label.
Why did you stew sat next to your product on shelf it's that it sits in front of your product,
and so I think that's the scary part is that it's the way the digital shelf works there are only so many top search results there are only so there's only so much above the fold one,
and as a lot of data shown people don't really scroll and so winning the top box your top top search results being,
above fold really does matter both from a paid & organic standpoint and so when a retailer of whoever that is.

[50:04] Is launching and expanding their private label and private brand with all the cards in hand and is putting essentially the proverbial product in front of yours I mean that would be like going to a.
A mass retailer in against sitting at the back of shelf with all the private label in front so you can really see him,
but I think that's that's where it's scary because now the choice is gone but then again we're so used to the digital shelf morphine in real time
it's not that my grandma doesn't matter anymore than she won't seek it out but knowing that so many searches start unbranded as well.
That that means it's so many searches will defect to what.
Again like a Google and Amazon is telling me is the most relevant search result in that case and I'm going to dine a likely choose at it again think about it you can't be voted president.
If you're not on the ballot and or you don't get enough right in right so it's hard to be a riding so as long as you're on the ballot you you have a chance.
And so I think that's the challenges when the private label private Brands kind of automatically get on the ballot and might be bumped up a little bit they have disproportionate.
Game to win versus the brands who don't have all those.
Merchandising capabilities may not be able to see you again you don't have all the parts you know what the cards are and so it is playing he'll poker without.

[51:27] Without all the way without a full hand of cards and I think that's that's what scares me that I seen a lot of our data the day that you from Ed date I've seen is shown that you're obviously,
why the proliferation of brands from Amazon specifically is quite large and number it's not,
most of the dollars have been coming through an Amazon Basics and and.
I ate some of their core the other original brand is not all of their proliferation brand for the same as their testing and learning Real Time by category,
and just announcing that they have a product in a category usually causes some sort of Market impact which may be what their objective is so I think that's the scary part is just not having.

[52:08] Not having a lot of control if you will but that puts on his back on the Brand's I mean we have to do we have to create demand and then seemed to me.

[52:17] That that makes no sense I feel like the poker metaphor is a little bit of a sore subject because there's this this rumor that Scott runs a big e-commerce poker game and I keep trying to get a bite and it keeps pretending like he doesn't have a game.

[52:31] Why haven't been invited either.

[52:33] There's no game
cool private label is a Hot Topic and another one that we're seeing kind of topical in the news is the delivery were so it's you have Amazon just recently kind of ratcheted up
Prime to one day Walmart is good people putting stuff in your refrigerator wearing body cams what do you think the delivery Warriors go as us as a cpg guy.

[52:56] That's a great question I to some of this is a little.
I would say I'm looking at my crystal ball and try to forecast for the future will go without having the DeLorean and being able to go there myself but I.
What's what's funny is I'm excited to see for a number reason I'm excited to see a lot of the grocery and mass retailers expanding their fulfillment options either through partnership or their own capabilities against switching flag,
you're Walmart and Target and Kroger and all these different retailers Regional national park with instacart or shipt.

[53:35] Target acquisition so I'm excited that everyone's expanding and to be honest what I would have seen in CPT book firsthand and through our clients and partners is that the clicking flecked expansion is what's triggering,
executive leadership in a lot of these companies to visit their thinking and I only need that right so we need a bridge of behavior both for,
cpg brand to act on the change but also for consumers to kind of take one step away right so I may not there may have been a lot of various the Y as a shopper I didn't buy online.
Especially groceries but but,
the pickup option is like one baby step of comfort right well I do I do kind of hate the hassle of going in the store wouldn't be cool if on my way home I could pick it up right so that's all,
what's interesting is kind of whether they mean to or not everyone's up in the game in the focus on ultimately figuring out how to make delivery.

[54:37] Work at scale and then we'll have to figure out the sustainability of it and that's why all these cool models are popping up.
Ultimately get us toward the future state of iterating making everyone Foster Gauntlet in and it's moving the needle faster towards something that ultimately.
It is long-term what's going to happen I mean let's be honest there will be a desire for retail.
Engagement right to go and experience something there will be physical Outlets whether their pickup were actual stores at the store is not dead on there will be showrooms there will be stores with sinners in the different ways.

[55:14] Newer harmonize retail is it being called will will come to light but at the end of the day and I'm I'm being silly but is.
When you save me the shopping time was the commute time really the part I wanted to cherish know it wasn't I actually really,
the bridge is like oh I've seen you save me the shopping time why don't you and in an ultimately is all of these players figure out how to,
bring us in the memberships cut the cost to be competitive and obviously get a Competitive Edge versus their players all the while trying to make this sustainable,
the bear is going to keep lowering it and obviously ultimately I think deliveries where the wind is going to happen so.

[55:58] It is exciting to see this more than anything was in fridge and I'll and I'll pause after this just to get your thoughts,
Walmart patented 2 years ago this concept of an in Home Consignment base pantry.
Which I actually think this in fridge delivery gets his very very close to which is kind of interested so I can have like a Peapod deliver it to my door or to my counter.
While I'm home Oregon or shipped I could have Walmart in these test markets but ultimately rolled out come when I'm not home and put it away from me.
I could also then have a Walmart or whoever the next player who throws the gauntlet.
Manage my inventory for me so there's the last mile solved and infrastructures I just have someone driving.
Check on all the homes are not sin or complications of patients here but why wouldn't I just have the person,
service that comes and checks and manages obviously with a i driven based on what I'm consuming and what I'm not and managing my my my fridge in my pantry for me and in replenishing it real time.
Relatively Rich I'm on a weekly or every other daily basis right and two months that trust has been built up this to become.
This is how I don't have to worry about delivering anymore I'm just I'm just sending a person at scale around neighborhoods to manage people's products you know in NC.

[57:20] I don't know how quickly that's going to come about but Walmart has that the patent they have.
I'm sorry testiness they have the scale and I was your day are doing this in order leading in the space big Amazon's The Targets in the world at looking at this as well so this is what's exciting to me is like so many new kind of models,
this delivery worst pushing us towards because the solve the cost of delivery.
What if I just have the product already sitting there and it's not really mine until I buy it so.

[57:53] It's kind of interesting. I think about these things just I'm sure you guys.
Take five little rationed out from that so I would love to pick your brain on another.

[58:07] No no no it's it's interesting and you got bonus points for working a back to the future reference into your answer.

[58:13] I got the DeLorean sticker on my laptop at 11.

[58:16] It's a little sad for me because I do lots of decks and I always put a picture of a DeLorean in there when I when I'm talking about the future and then the millennial designers in my company always replace the door and would like a hot tub.

[58:31] Apparently.

[58:32] I would like that was at Westwood status with when you say hot tub and I didn't think I was old until now on my mind went to when the moment's right Cialis but that was where you at the two tubs but that either way.

[58:45] Well I'm not going to delve into why that's where your mind went.
Has a good point to move on.
You talk a little bit about sort of your review for you know that the retail formats that survive and it is interesting in particular I feel like an essential but it has a.
The tool sets feel like to have a.
A significant focus on marketplaces and you look globally and it's like it seems like the marketplaces are winning everywhere it's you know obviously Amazon 50% of e-commerce
in the US and and you know more than 50% of that is a Marketplace alibaba's 100% Marketplace Mercado Libre is the biggest
Ecommerce Adventure in Latin America also Marketplace Walmart and Target had both sort of shifted to a Marketplace model,
is Concerta curious.
Is some flavor of a Marketplace the the eventual in point for all these things is that is that basically what we're left with is everyone's a Marketplace,
or it or do you think some of that the other business models can survive.

[59:59] That's a great question and then again I think there's a lot there's a lot to come so I mean again knowing exactly where.
Everything will end up is it hard to get to Peg but I think the fact that marketplaces are as large as they are both in North America but also,
it is especially from a scale perspective in many other markets that may be developing but obviously are like Trump from fire.
AR North America Market multiple times over from an e-commerce standpoint and from a growth sampling I do take marketplaces ultimately kind of play to this.
Can I use this word a little bit Loosely because we know it's not fully democratize but it's kind of when we think of like information it was kind of.
Democratize to a point via a Google in the sense that the most relevant wind right that the most relevant and most trafficked in most.
Value added content would win and I know that's your that hasn't asked her cuz I'm so companies owned these but there are other agendas you'll good bad or indifferent better include a bit that Marketplace model does really ultimately allow.

[1:01:08] Product you know the consumer to vote up with the best product is and helps his aggregate all those choices into what we're really searching for,
so you take Marketplace is going to have a major dominant role in the future of of retail I don't necessarily believe that,
that all retailers as they are today are going to disappear that direct-to-consumer can't live on their own,
but but again kind of in the same way that we looked at no fairies even prior to being bought by edgewell personal care a lot of its sales in recent times has been driven by its in-store present Target,
write Antonio again that goes to the whole kind of discussion around what is DTC really mean when a lot of these are getting sales from their own stores are from Partnerships and I think at the end of the day it's.
Directions to Meijer brand they have a role for its direct-to-consumer citrate might be its most loyal Shoppers were part of a stand group you get to test the products to get to you.
A part of the market research process but they also sell to a digital omni-channel physical retailer.
For a different year for a different reason right there there's a reason at the end of the day.
Channel customer strategy you know what channel the customer strategy for where you're going to sell and why and and and how that's going to be different or better from.

[1:02:35] From the other places that you that you offer your proposition and so you bring up an interesting point in this is something I I I just I doubt it down it is interesting it is kind of like reminds me like the dash.
You bought a dash button cuz it seems convenient that when you ran out of Tide you might want some more detergent that pointed at some point.
Would you really have 30 - buttons around your house maybe not like you're like,
all the choices were great but would you really if you really wanted that convenient to me is when you just want one button oh wait I have one it's my phone or it's my voice right I can just say it out loud and it would do it for me.

[1:03:14] So it's funny cuz we kind of ebb and flow between like The Liberation and fragmentation and then consolidation right feel like.
How many subscriptions to be to see sites could I really have before I need an app that's like the instacart of subscriptions right I mean that's the business opportunity right there.
I am not saying you can win with everyone but what if I had an app to manage all my subscriptions.
So they don't have to only subscribe on one platform I can subscribe through an aggregator that and it just all of my subscriptions I think there's going to be.
There's going to be an ebb and flow but but Marketplace is ultimately allowed at aggregation opportunity again the democratized,
choice is lifted to the consumer based on what they really want I'm what they think they want so they're going to still be need for Discovery Discovery experience sweater.
Global national local lerna pop up and I think those are going to still do the experiences are becoming more important products nowadays with the millennial and future generations and so,
what you did is more important than what you have so it kind of became switch from the house Haves and Have Nots that I have done and haven't done which.

[1:04:28] What are we just have a photo of having done whether they did.

[1:04:30] Exactly exactly,
Edge forecast for the foreseeable future that marketplaces will be be primary driver is e-commerce globally and I think that they just ultimately provide a route to market for.
Quote-unquote proverbial d2c brand.

[1:04:51] That makes sense and that is it like it's funny because you eat
like that the category that's already like a lot more mature for subscriptions is digital content right like it's,
Your Entertainment and we've already seen the subscription aggregation services that apple and Amazon want have launched like a already trying to solve that problem of subscription
fragmentation so I could see that with a,
a lot more Goods in the future because that's going to be a great place to leave it because it happened again we have wasted a perfectly good hour of our,
is the Oaks had a burning question or have some feedback about any of the topics we covered tonight though they're welcome to hit us up on Twitter or leave us a note on our Facebook page and we'll be happy to get back to you.

[1:05:42] Chris we really appreciate you taking time to share your your wisdom with us one last question if folks want to find more about your your writings and thoughts online working together.

[1:05:54] I am most active on LinkedIn and I have all my contact information publicly available so spam me or write me I would love to hear from you and again down Jason I'm just so honored to be a part of,
I'm your efforts here I've been a longtime fan and so tickled to be on it so.

[1:06:12] What we are happy to have you and we'll make sure we get the LinkedIn URL in the show note so you don't have to write it down while while driving or exercising but until next time happy commercing.

Jun 20, 2019

EP178 - Chewy IPO and Listener Questions Part 2 

Recap of Chewy IPO (Chewy S1)

Listener Questions Part 2:

Q5: Nick Barrett Would be really interested to hear your guys thoughts on how an established e-commerce store should expand into new product categories. Is it a good idea to launch new niche websites through Shopify to do this, or is it better to keep focus within a single e-commerce site and expand within that?

Q6 Rebecca Saunders Have you seen any recent data on the costs of customer acquisition online via the various channels, and how these have changed over time? I hear a lot anecdotally but haven’t managed to access any reliable data. Thanks in advance! Love the show btw (all the way from rainy London).

Q7 Amit Agarwal Have you ever done some research on e-commerce subscriptions such as amazon subscribe and save or autoship? Also, what is the industry trends for bark box, hello fresh and other bundle subscriptions?

Q8: Parker Block 

Hey Scot, What do you see as likely business implications of rising appetite for anti-trust action (see FTC/DOJ announcement , Lina Khan joining Congress staff, etc ) on platforms which monetize  consumer data ?

Q9: Baxter Overman

How do you put consumers at ease with in-home delivery services? (i.e. Walmart grocery). Wouldn’t drop-off when the customer is home for certain items (or lockers) be easier to sell?

Q10 Aakash Gupta

What’s your favorite app that you’ve downloaded in the last few months?

Q11 Twitter: Natalie Dillon mentioned us as one of her top podcasts – thanks Natalie!

Q12 Ted: Mixed use retail entertainment?

Q 13 Michelle Grant

 Thoughts on pricing strategy in an omnichannel world where price transparency is high and filled with bots to find the lowest price

Q15 Melissa Burdick

The advertising race to the wallet – We’ve seen some big news lately: Target in talks to buy Triad, Walmart who is bringing advertising in house and just made a key hire Suresh as their CTO….where is this going for ads?  Is it going to be a war for brands wallet? Is everyone going to take a page from the Amazon playbook, bring ads in house, and move to a self-service performance advertising, PPC world?

Where is the $ coming/going to come from?  In the chart below, it looks like Amazon is taking from Google.  (I asked a big CPG this question and I asked where is this coming from – or are you just getting more $$?  Their answer – more $$).

How should brands prepare?

Q16 Melissa Burdick

Is Amazon going to do to walgreens/bartells/CVS what they did to the bookstore (kill the bookstore to build a bookstore) with the acquisition of pill pack + private label (aspirin, etc) and enable the ability to sell mass CPG profitably?

Q17 Melissa Burdick

Can Scot please update his Amazon Scape – how has it changed?

Q18 Melissa Burdick

When is Spiffy coming to Seattle?

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

Episode 178 of the Jason & Scot show was recorded on Tuesday, June 18th, 2019.

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


[0:24] Welcome to the Jason and Scott show this is episode 178 being recorded on Tuesday June 18th 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here to host Scott Wingo.

[0:38] He Jason and welcome back Jason Scott your listeners well we if you listen to good ol episode 177 we had so many listener questions we could not get to the mall.
So this is kind of a episode 2 or continuation of that episode before we jump into a star questions though
we a while ago on a new show about 30 days ago now we talked about the chewy S1
and since then she has gone Publix we wanted to give you a quick update on what’s going on with you once you take us to the Jason.

[1:14] So they did their IP aware According to some Tuesday it was Friday do I have that right.
And you’ll tell me if this is good or not I think it is
the day they had announced a rainy a price range for the offering at like 19 and 21 bucks and they actually came out at $22.
That’s a little higher than the range
they have a lot of good activity and they closed closed event on Friday it was at 35 bucks which is like 80%.
That seems like a pretty successful offering at least compared with like all the the Uber news or the with news.

[2:07] This is the only been one to one IPO process and you know what would they tell you you’re so far. Knock on wood so what they what they tell you is that the Brain Trust at Goldman Sachs these kind of place
is you want to go to one school of thought and this is not with the bankers agree with so you have to kind of
navigate your way through all this obviously you got a fox and how so she was here once thought is you price your I get the maximum because that’s what’s best for the company
the bankers would tell you to look your building long-term shareholder relationships so you want to give these shareholders that take a risk in your company a little bit of a benefit so you price a little bit lower than kind of where you can look at Newburgh lift they both would be kind of
what’s the bankers would say kind of broken IPOs where they traded below their IPO price
therefore now if you’re someone that participate in IPO you feel sheepish because you came in it
what was a $20 now it’s trading at 18 where is this true IPO performed a lot better in a bottle the bankers would recommend
I said if you want to come to clear range up there can a price above that range slightly and then have kind of a good pop and then stay there and then come out with your results and then kind of beet raisin your off the races did you could do.

[3:30] Secondary offerings happy happy shareholders by wear stockings
all kinds of good things happen at kind of tend to think this is the way to do it and they did really well.

[3:43] Yeah now a couple of things that make it particularly interesting in the the sort of Commerce retail world so folks may remember.
Chewy was acquired by PetSmart a couple years ago and it was a big deal at the time I was over three billion dollar.
And so a incident PetSmart is now spinning off chewy as a separate public company and so I Like You by.
And read my notes correctly that that close kind of values the company at that north of 4 billion dollars.
Weather so acquire company for 3 billion ticket public at 14 billion sounds like.
Pretty exciting acquisition for acquisition and transaction for PetSmart do I have that right.

[4:42] I guess yeah they’re kind of Phoenix it’s almost like a private Equity, think it’s unusual for a company to do what they did cuz usually you fold it in you.
You get rid of the brand overtime you make it your eCommerce brand so so young to the degree they have integrated it you could argue it
Kris Russell because you know now I’m Siri
chewy could be acquired maybe I do think that they sell and over half so I think they can control that but let’s say they do a secondary in overtime their ownership get step know maybe they need to sell some swimming in debts and then let’s say doomsday scenario
Amazon acquires chewy and your PetSmart that’s what’s running your e-commerce site then you can kind of have a you know
really bad day for someone at PetSmart to listen to see what happens with that integration now that you have these kind of.
The amoeba is being pulled apart here and and how does that work for PetSmart.

[5:42] Yeah so that’s kind of what I was going was like from a pure Financial standpoint if we look at it as a banker like it’s it’s hard not to see this as a win but but for your point.

[5:55] PetSmart was not a particularly digitally Savvy brick and mortar retailer prior to this acquisition so I can the time part of this acquisition was to bring more digital competency to PetSmart and once pain
the PetSmart team arrived PetSmart like really abdicated digital responsibility to that team so like as far as I understand it.
There are fewer.
Digital people at PetSmart today than there were before the acquisition so they’ve they’ve essentially made themselves extra dependent on chewy and it’s now not clear.

[6:36] Responsibility going forward she will have for PetSmart digital footprint like you can imagine they have a deal to run
I haven’t explicitly seen that but that that seems like a logical assumption but you know what happens with all the.
The start of omni-channel things and you know when PetSmart wants to launch new services or they want to like Market the Veterinary Service veterinarian services that she doesn’t sell but PetSmart does through their stores.
Like they’re certainly isn’t like a really strong digital team at PetSmart to be solving the.
The start of Digital customer experiences for PetSmart so it it it does it feels to me like it definitely create some risk.
For PetSmart and I’ll be interesting whether they they have like.
Chewy braintrust walked up some how or whether they’re going to try to rebuild their own their own capability there I guess I just it’s an interesting.

[7:36] I think to follow so I found that interesting and then my assumption is that the kind of felt like they had to do it because.
The the one interesting thing about the chewy idea that we haven’t mentioned is that that chewy is losing money,
and like despite some like phenomenal hockey stick.
Customer acquisition growth and sales growth and they have over three years they went from under a billion dollars to 3.5 billion dollars on sales they still haven’t found their way to profitability so your PetSmart you own this
fast-growing money-losing venture.
And you used a lot of debt to buy them so like.
That they’re not helping you pay down the debt you used to buy them because they’re losing money by doing that idea o u stand up a bunch of cash in my understanding is the whole IPO like.
Like tried to raise about a billion dollars and 900 million of that went straight to death from the PetSmart acquisition so for your point like it sounds like going public makes it easier to do subsequent raises. So maybe that.
The way to bring more operating cash.
Chewy but like there’s not a billion dollars in the bank as a result of this IPO that you can have spend on marketing that they didn’t have last year.

[8:58] It’s all very interesting is going to be interesting to watch watch how it all plays out and then I guess the other thing is fun for me and you cover this on a previous show a little bit but like.
In the process of going public May disclose a bunch of details that we don’t normally get to see and so I know there’s some interesting metrics that came out.
They they do a really good cohort analysis of a evaluate.
How sticky their customers are from each year that they acquire them and how valuable those customers are in so they have a like in their filings they have a nice what we call a wedding cake kind of showing.
Each of those previous years cohorts.
Growing in value over time and have some really favorable long-term metrics our customer retention is amazing a big chunk of their customers are on
subscriptions are longer-term customers are continuing to spend more and so like.
In general they’re having to spend a lot of money to acquire each new customer but the the lifetime value of those customers like is a significant multiple of that customer acquisition cost,
so it just spend together inside peek at a pretty big size e-commerce business.

[10:14] Yeah you know the history of e-commerce is littered with companies that they do all this math off of cackle TV and they’re using kind of known LTV,
acquire new customers off that no nail TV and then at some point you get through your lines cut across and that LTD of that new customer surprisingly goes down over time because the early days you’re you’re
bring in these these early adopters their Advocates they stick around and then the Slater customers you acquire
you know maybe they’re just sampling and that kind of thing so it’ll be interesting to see.
At the same time Irwin size applying data science and machine learning all his new technologies to try to fight all this in the sea.
How to do another big thing when you go public as you have to decide.
Which of these metrics are going to publish Schnitzer it’s pretty tricky thing cuz you kind of you know you kind of have to think well metric out there instructions
down that’s bad so you can you can actually have a much different and you should have different
kind of TV is you put out this one versus on your quarterly so will cover the first quarterly and no be interesting to see if they if they continue with a really transparent Buick faculty because that’s one they had some really good date on them.

[11:31] Yeah it’ll be fun to see.

[11:33] Cool swell I’m springing this on you but did you have a chance to look at the big Facebook crypto announcement today Libra new crypto-currency.

[11:45] Yeah you should have spring stuff on me cuz you know I did all day so I just rushed to the hotel room to get to chat with you so tell us about.

[11:57] Well I’ll just point point listeners to it the immediate reaction from Regulators was oh heck no so the other side quotes from the EU and
both parties in the US saying we’re not really sure we trust Facebook with this so that that’s kind of I’m still adjusting it and it looks like they had a big team here
the guy that got from PayPal but they put on chats Dave music.
He’s leading this so it’s a big pretty big initiative at Facebook it’s what’s called a constant.
Constant coin so it it’s kind of going to an individual value versus versus the US dollar does versus floating around the reason the white paper it looks like it’s going.
It’s going after being a payment mechanism, like miles and that kind of thing for people.
Within the Facebook Network they do have several people that have signed on to this kind of governing body eBay was announced today is also looking at it location being that the company Side dance this governing body
will ultimately takes this currency
along with the u.s. dollar other payments down the road so it just feels like it’s the payment thing to watch to see how it goes.

[13:23] So do you think the the Winklevoss twins will be all in in this will be the Zuckerberg Winklevoss reunions.

[13:29] That direction was an article where they have had something to do with it I know that’s compliment you can find them.

[13:45] I think that they were asked to apine on it because they they have put a lot of stuff into the crypto thing.

[13:53] I don’t know what we’ll see how it all plays out like superficially.
I I simultaneously and surprise and admire Facebook’s ability to sort of ignore their currents.
Situation and launching new products so I do I do feel like.
Visa V the other big technology giants like Facebook is it the biggest sort of trust deficit of all of them and yet they continue to launch products that like.
At the core require like this really strong level of consumer trust for adoption so
launching portal and putting like on microphone and camera and everyone’s living room and the launching of cryptocurrencies likes that there’s some hotspot
doing those kind of launches when it it it feels like you’re you’re not exactly killing it in terms of earning your user stress.

[14:44] Okay one of our one of our many interns just look this up and they actually it so Facebook had talked to the Zuckerberg they have an exchange called Gemini and they’re not sure they’re to work together but the Winklevoss folks said
you know it’s time to let bygones be bygones and waste will probably be Frenemies so if you’re very Millennial wait till dresses.

[15:07] Let’s jump into listener questions.

[15:19] Questionnaire questionnaire questionnaire questions.

[15:24] Yes sir we are so we covered for last time so I can start out here with number 5 this was from Nick Barrett and it came through Facebook
I believe Nick is from Australia or New Zealand so I don’t know if that puts it in context but there you go
I think he works for this company called Mighty ape which is kind of like
GameStop it’s like an FYE
but an American kind of context to hear your guys thoughts and I’ll and established e-commerce store could expand in a new product categories
is it a good idea to launch new Niche websites to Shopify to do this or is it better to keep Focus within a single e-commerce site and expand with a nut
I’ll take a stab at this kind of depends so I’ll use a
I use a metaphor here of orbits right so so at the at the at the center of this orbit is your existing customer in your existing e-commerce experience I think customers will.
Pretty easily let you go one or two orbits out you start to go three or four orbits out
then you really need to start thinking about that customers buying experience and the messaging it doesn’t make sense to have it
going to tie it to something on a closer orbit to what you’re doing today so use example it looks like a Mighty Eighth the selling games Collectibles those kinds of things so.

[16:50] You know another example of a store like yours is ThinkGeek here in the US and you’ll think he did a really good job of starting with your muesli.

[17:00] Kind of collectible stuff and then bringing in
toys stand life-size figures and then they going deep into categories so then in the store are they and the lion to have a pretty,
deep Star Wars category a Harry Potter category Etc and then online and license the brands and then there’s there’s actually
extra deep in this category So within the Star Wars world.
They did, cleverly came up with a sleeping bag that looks like a tan tan and so they they kind of got so deep into this vertical they’re actually kind of able to come up with their own products around that.
But you wouldn’t go in there expecting to find a non geechie pizza oven or something strange like that so so you know.

[17:49] Two to the same argument if if you guys wanted to add kind of your you know you’re on private label Collectibles I’ll keep that in the main side
what say you wanted to get into something totally
out of what you’re doing today like I don’t know Sporting Goods or hammocks or something like that then I do think you know having another e-commerce site is the way to do it
you know what.
Yeah what you didn’t necessarily but all all kind of kind of keep replying to thread is how do you find what to add in this is where it’s really interesting set a channel advisor we have 3000 customers
and the overwhelming majority of them are Supernatural and it’s always fascinating to me to find out how they.
Figure out what products to sell a lot of them spend a lot of time date of money so don’t go through comments feedback on products they look at no search results that’s a cool place on your own website to go find things you’re what are people searching for on your website and not fighting
that’s really interesting kind of area to learn a lot about consumer Behavior a lot of them use tools like camelcamelcamel this one called
jungle Scout and then there you can go look at Amazon’s data my favorite example it won’t surprise listeners is a Star Wars example so these guys are our customer and they like.

[19:10] Like kind of a GameStop in FYE Etc solo Star Wars stuff and they’re trying to look for new products they had a license with Lucas sounds do what do they had the image of Han Solo Carbonite that they put on almost everything they did a phone case
but it started poking around and using some his tools they win the Star Wars category of Amazon
Founders All these people looking for Star Wars beach towels
yo when you’re out in your bathing suits on the beach you’re always so obviously want to Star Wars down so they came out with Han Solo in carbonite on a beach towel you are really big one so it looks like it’s on the beach cuz she’s there.
And that became a top selling product on Amazon very quickly and they should develop that product by looking at null search results in finding those little
imbalances between supply and demand that people are looking for a date
use that create a product extension anchor so ankers electronics company in there is.
Picture in China or Taiwan they started mining the Amazon feedback and people would buy.

[20:23] Chargers and accessories and Illinois say one glad this has two USB ports but I have 6 devices looking at you Jason and you know I really wish you had a
a charge faster and be it had reports.
I think a lot of the anchor kind of lease early products were developed off skimming and parsing and really understanding the Amazon product feedback and then saying alright this product at 3 stars why can we develop a product.
Our own just got five stars in address to Consumers.

[20:58] Yeah and I mostly agree a side note on anchor like I literally have to have anchor products delivered to a email stop because my wife has banned me from buying Morty.
Totally has my number.
And one piece of bad news for you Scott I don’t know if you’re aware of this but I think was purchased by GameStop and effective July 2nd they’re shutting it down.

[21:23] Oh man I didn’t know that.

[21:25] Yeah so it’s not going to be a a section of a GameStop versus a separate site so.

[21:32] Mulligan artist closes stores.

[21:35] I don’t know maybe per your point and M4 Next original question again GameStops hoping to.
Aggregate that traffic from their side and Think Geek and do more effective cross-selling because they.
Basically I agree with your answer but I would almost come to it from the opposite and I would just say,
it’s extremely hard there very few businesses that can be very profitable by selling a single item in a car
and there are very few businesses that can be profitable by only selling an item once to a customer and so in general you’re looking for businesses where you have multiple products for the customer put in in your reason for the test
come back and shot from you multiple times and so to me that means.
Looking at your existing existing customer base as you suggested and finding adjacent products that might also appeal to those those customers.
In the early days of e-commerce there was this artificial thing.
SEO from Google search engine optimization bring much favored keyword stuffing in the URL and so you saw a lot of.

[22:48] Individual sites that were selling one item in the name that URL after the item they were selling and that him for a while that that could be very effective Google’s
dramatically depreciated the the effect of keywords in the URL so you know it now makes more sense to aggregate as much traffic you as you can on a single URL and sell a bunch of stuff
but what I would suggest is having a lot of different content for that different stuff in different landing pages for that different stuff so for your point you’re selling
Video Star Wars video games over here at Star Wars beach towels over there you might have separate landing pages for those two and you might have separate like digital marketing campaigns for those two
so it kind of feels like a separate site in that sense but once you get there and get that beach towel I can I can try to cross sell you the video games and try to make you up a bigger more valuable.
Does I guess that’s that’s the way I would think of.

[23:43] Yeah it’s kind of fun fact two big companies were created off that crazed were you just putting one product on a domain name hayneedle and Wayfair Wayfair had like
coffee tables kitchen tables
dining chairs that all these Furniture things and you go to dining chairs if you like just dining chairs slice of the things they ended up ruling all that stuff up both of them did and and getting rid of that strategy one.
Question number 6 is from Rebecca Saunders have you seen any recent data on the cost of customer acquisition so this is a question which we just kind of chewy online via the various channels and how these are changed over time
I hear a lot and it totally but haven’t managed to access any reliable data thanks in advance love the show by the way all the way from rainy London.

[24:34] Well thanks for the question Rebecca on answering from rainy Seattle today good night my SAT answer is.
Generally know why there are people that publish short of some industry data on customer acquisition that I would submit to you that it’s almost completely useless because.
The variance depending on the specific industry in the specific customer circumstances are so great that looking at these.
Averages are are somewhat meaningless and so you know you both have like.
Companies that are selling individual packs of Band-Aids you know for $3 online and guess what your customer acquisition cost has to be extremely low when you’re selling a $3 item with free shipping.
And you have customer selling $10,000 diamond rings and.
Not surprisingly that the customer acquisition cost can be much higher for that if you’re a company that’s already doing billions of dollars in sales right you.
To get meaningful growth you have to reach a really broad audience and that tends to be more expensive per user for customer acquisition if you’re a small startup.
You can very cost-effectively acquire some really valuable customer so your customer acquisition ends up being a lot lower so.

[26:03] As much as I’d love to point you in a particular resource and say hey just check out these numbers.
I guess I really don’t feel like other companies numbers are in less than a direct competitor of yours somehow are likely to be that useful to you
I will tell you you know what I was digging into that chewy S1 a little bit and for example in
2017 chewy added about 3.7 million new customers in the matted 3.8 million new customers in 2018
but that’s 2017 customers they spent about 60 bucks a customer to acquire around and for this 2018 customers they spent $101 a customer.
So there are not a lot of businesses that are much smaller in scale than chewy that could afford that kind of.
Customer acquisition cost but if you look at Chuy’s lifetime value and the dispenza previous cohorts if these new cohorts Behavior chewy the way the previous ones that has a Scott sort of alluded to earlier
then like even spending $100 a customer could be.
A tapered an investment like a it’s a risky one so so we’re going to have to wait and see but I would definitely not look at Chuy’s numbers and go oh gosh for my business I should spend a hundred bucks a customer because it works.

[27:22] Yeah and dumb ass gets in dead to your point the reason it’s hard to compare your business when Elsa’s you’re not only are you different categories
you know Supernatural businesses where they essentially say
look if I can spend a dollar and make 3 I will I will consider it almost cogs and I will have an unlimited budget.
Other people kind of say you’re the kind of come from an advertising View and they took people to come from marketplaces they tend to have that cogs kind of totality cuz they’re looking at it as a percentage of sales people that come at it from the ADI to SeaWorld
they’re looking at a return on ad spend
the inverse of a Crepes and they’ll say look I’m going to have a budget and demands that budget to a 4X or whatever it is returned my dad stood socially
really part of its Theology and and and some of it is other times I’ve seen really big companies for the CEO says I want to be number one to strollers
and then you say well that’s insanely.
Expensive in your money I want to be number one in strollers and.

[28:37] It doesn’t matter cuz when the boss looks at strollers and your shoulders not there you’re going to get fired so you don’t really care what he’s done or you know they are building a Brandt and they don’t really care about a transactional
kind of a Roi on on the stent there so it’s a hard hard to nail down.
And it does kind of depend in my experience where people come from if they come from that ad world of that Marketplace Road.

[29:06] What’s your view on return on that seventies.

[29:10] Yeah I mean I tend to be sort of green eyeshade out of about it I I like to have a pretty short return on ad spend to make the investment the.
Because frankly like
the more expensive the customer is to acquire the least likely the customer is to be very loyal so in general I like those customers I can earn organically and cultivate a lot more than the customers that I have to go out
and by so like you know for sure Mary meters
suggestion I’d way rather have some sort of freemium model what I have customers coming to me and find the use my product
for free on a limited basis and then turn them into paid customers and and sort of do growth hacking
then spend a fortune buying a customer and trying to monetize those that being said I work for a giant ad company and that’s mostly what we.
What we do.

[30:13] Spend a bunch of money to to acquire customers and it absolutely can work.
It’s not again it it’s somewhat related to your risk profile and.
And comfort level I will say the one thing one nice thing about being a small company a lot of my clients are very large and and they have to acquire huge audiences and.
The markets that have huge audiences that have inventory or
tend to be pretty efficient so it’s really hard to get a good deal but one of the nice things about being a small company is
you can play in a lot of small customer acquisition formats where the market isn’t very efficient yet and you can.
I often get outside return so no being a in early player on Instagram
when people weren’t advertising on Instagram was a great way to make money or being a you know a really excellent executor on Pinterest
or even like fractional television versus heading to buy Super Bowl spots or different things like that like there are definitely ways to sort of piecemeal together audiences to get an outside return as long as you can get by with a
a relatively modest audience size but you know as soon as you get into having a choir or million new customers a year to hit your numbers.
You’re you’re pretty much stuck thing the market rate for customer acquisition.

[31:42] Yeah where it where I’ve seen small businesses get upside down on this is day they take care of an Amazon eBay way of looking at things the applied to Google and they kind of think all right eye
I just spent 20% took Wireless customer and then what they don’t realize is the next time that customer comes to they’re going to probably come through Google so
now and then now you had another drink song that one in so I know what you’re saying is if you think you’re acquiring a customer for a hundred Google and you’re getting a $300 kind of LTD with them they’re heading Google twice more and you’re paying another couple hundred bucks.
Upside down you really look like to have to get especially with the CPC stuff and and you have to be real careful with with how your measure know that.

[32:28] Question number 7 this is from a bit Agarwal have you ever done some research on e-commerce subscription such as Amazon subscribe and save our auto-ship also what is industry trends for BarkBox hellofresh and other subscriptions.

[32:42] Great question I’ll be curious what Scott’s answer is because I’m always looking for better data in this category than I have in general I would say like there is not a lot of traffic data
it’s it’s the usual story like they’re these.
Third-party data aggregators that do things that customer surveys and things to try to give us some data or there’s the universe Creek receipt scrapers
like 1010data or slice a rocket and they can give us some insight into like.
Amazon subscribe and save is performing versus individual products but.
Those are like directional it best I haven’t seen awesome data there there’s one of the reasons that you yes one was kind of fun Chuy’s and I ever get with their trade name is for their subscription program.

[33:38] 67% of all Chuy’s Revenue comes from the subscription program in as we talked about in one of the previous answers you know the real key to to profitability in an e-commerce business is about.
Repeat purchases and customer retention and like there’s no better flavor of customer retention then auto-ship and so like.
I’m a big fan of the tactic I haven’t always had the best third-party data to validate that tactic.
The second half of your question I will I will say,
yeah you asked about some of the the well-known subscription offers out there like BarkBox and hellofresh.

[34:21] There’s a general sense.
It’s been hard to scale those subscription services and that customer retention hasn’t been awesome and so there’s this phenomenon called subscription fatigue and
in general the subscription Services tend to have a lot of churn so they don’t
maintain all of last year’s subscriptions and a bunch of new ones and so there’s kind of a dirty little secret amongst the.
The companies we tend to think of as subscription companies that are successful and that dirty little secret is most of them have an offering that’s not subscription-based that’s on the man ordering.
And the bulk of the revenue tends to come from that on demand order so you know Stitch fix the bulk of their revenue is from.
Young people that are ordering a fixes on demand rather than have a a a recurring a box coming all the time and in the.

[35:22] My understanding is the BarkBox and Dollar Shave Club and Harry’s have all had like three big turn on their subscription list I think when the hair is got a choir that came to light that 80% of Harry’s Revenue was from there.
Their retail deals are people walking in at Target and buying Harry’s Razors rather than being on the the the subscription program so
I would say like
subscriptions are really valuable thing to try to achieve and there definitely is evidence that Amazon’s program is really potent seems like chewy has a really potent program
but you know you probably need to be careful about assuming it’s easy or that you’ll have great great customer retention from doing.

[36:05] Yeah. I think that spot on a couple editions it it seems to work well in anything that’s replenishable I do think it’s kind of jumped the shark like I I see
tons of News subscription programs for coffee and beer and wine just feels like we’re probably
Pastor the subscription craze.
If you’re interested in the topic that you know again one of the nerdy things I recommend is when companies go public and they file that S1.

[36:36] That that is like a gold mine of data and it’s if you’re interested in these topics if you can find a company that has Nest one out there it’s really a good read because you’re
you’re dealing with these companies that have managed a business cycle were talking about up to the point where it’s at a pretty good scale so so so they’re kind of on Generation 8 thinking and
yeah that’s the guy you got started on Generation 1 thinking right live red and really enjoyed Stitch fix I would say you know there is a lot of negative cinnamon around Stitch fix
prove the critics pretty wrong with the success they’ve had
there is one is a really really good read and then when I when you read an s-1.

[37:22] It’s kind of like a poop sandwich so so you know the where the bread is the poop in the good stuff’s on inside you have kind of dig in and find it
the the part you want to read on this one and Skip all the way to Management’s discussion and and they’re in the Stitch fix one it’s a textbook on how
they think about their cohorts and and how they fight this Trends Jason’s talking about how do you know
how do you make the algorithm better and how do you also scale it with with computers instead of just people so I recommend that
a good Counterpoint is Blue Apron went public and has not been successful so in a reading their ass one it’s really interesting because you know.

[38:08] It’s not as strong and it’s not as clear that they’re actually
getting in front of the sky turn problems so that’s a good one and then if you’re interested in the food deliveries area GrubHub is public and I find their public stuff to be very interesting as well.
A good reading it going back to this one in either Coeur d’Alene updates her are
so it’s hopefully that gives you something to chew on a it is hard to find a lot of like the previous couple folks asked about CAC LTV out there I like reading a case of a prospective cuz it really.
Gives you an idea of how these teams are thinking about things and and I learned like a thousand things from repossessed one so I think that’s one of the best areas to go research the subscription program if you’re interested.

[38:59] Yep and it just occurred to me there’s one other point we kind of touched on
I’m the last person to call episode that I’ll just reiterate there’s certain segments that are much more mature and subscriptions and so that’s Professional Services
and digital subscriptions Regza think Netflix Amazon Prime
you know subscriptions to publishing companies Wall Street Journal newspaper all those sorts of things and if you look at how those industry of olives a couple of interesting things have happened.
aggregators have emerged because customers have subscription fatigue and their subscriptions are fragmented everywhere and it’s really annoying so you now have Amazon with a service where you do all your media subscriptions through them and they give you a single dashboard to turn on and off subscriptions and control them.

[39:54] Apple just wants to be similar offering
the financial institutions have noticed that people locking all the subscriptions they spend a fortune and they don’t tend to use a lot of the subscription so every budgeting tool out there like mint like a big feature that they offer is identifying all these recurring.
Cost and continue to turn off all the ones that you probably aren’t using and I think that’s now a national television campaign for.
Wells Fargo is they have a feature in their mobile app called control tower which is all about helping people like turn off the.

[40:29] The dearth of subscriptions they signed up for not getting value from so like give you.

[40:36] Use that as sort of a time machine and you let you know it’s it’s probably unlikely in the future you want a copy subscription with one vendor and
a water filter subscription with another vendor and you know and have all these things coming on different schedules and on different payment periods and you know it.
To me that’s one of my Amazon subscribe and save the big advantages is there started the de facto everything subscription aggregator for physical Goods.

[41:04] How many active subscriptions do you have Jason.

[41:08] So I’ll be honest I am not the biggest personal fan of that there is huge convenience but I do find that I waste a lot of money when I do their subscriptions and stuff tends to pile up so I’m not a huge fan
my my wife does a lot of our household management and she’s way more organized than me so she uses a bunch and I I couldn’t tell you how many she has.

[41:31] Is that work that has like around 20 and he has an Amazon credit card and it says so they’ve gotten every kind of replenishable thing in their house that like kids
can I come from Amazon if he’s done some calculus on it and it’s like the optimal savings for a little leverage on the on the Amazon Prime card.

[41:50] Side note taking a deeper dive in this answer than we intended to but the today most of these subscriptions and most Auto replenishment is what I call explicit like you go and sign up for something and you have to ask for it and pull it.
And it starts coming until you get around and turning it off but I do think the future for a lot of this
physical goods are implicit replenishment where.
If if you do most of your spending on Amazon or you do most of your purchases on Walmart like they they just get enough.
Data about your habits you proactively.
Send you the stuff when you need it without you even having to ask and both Walmart and Amazon have had various packet patents on this this idea of
predictive shipping in that it does seem to me that like combination of big data and artificial intelligence in this face that like their there’s going to be in near future when
a lot more of this purchasing is autonomous and the reason that’s interesting to me is.
You know when you never have to think about ordering toilet paper again or buying toilet paper because your your house just always has the right amount for the paper what do all the physical stores that today have an entire aisle of the grocery store dedicated to toilet paper do that space
so it’s like there’s an interesting challenge for brick-and-mortar retailers in the future as Auto replenishment gets more dominant.

[43:16] All right question to break comes from Parker block he always throws curve balls we appreciate that Parker this one came from LinkedIn hey Jason Scott what do you see as likely business implications of rising a Type 4 antitrust action
on platforms which monetize consumer data.
I think she’s just a little bit in the last episode but a lot of the platform’s especially ones with user-generated content like Facebook Twitter Google search YouTube they rely on the section of law code section 230
which essentially makes thumb the same as a utility like like a phone line if you if you say something on the phone line
that could be sheet Suites or something like that you know it’s not AT&T job to monitor that
so say since we say we are not a newspaper where I your you have liability around what is it libel in
was written once.

[44:20] Slander libel and slander you can be sued if you say the wrong thing she actually very careful with what you say that’s why they have fact-checkers they say look this is just a platform we’re just kind of here
I am so happens but as they increasingly are kind of changing and and.
People offer what they say it is interesting to see
should they still be within section 230 so that’s one interesting area another one is Noah senior up get really aggressive with these do not follow laws gdpr and
you know all these kinds of things I I do think there’s going to be increasing appetite I’m not hugely political and.
The times I had to kind of watch that stuff you always shake your head like when Zuckerberg was in front of Congress and they had like no idea you know the problem is our Representatives have no idea how this stuff works so slow.
Do anything that I just I’m not optimistic that it makes any sense what I shall do so I have to see.
The other thing I will say is there’s a lot of people Scott Galloway is really big on this on kind of breaking up Amazon and it a lot of people kind of gunning for Amazon it’s not really in the spirit of your question which surround customer day.

[45:38] I’m sure Jason has deeper thoughts on that everything about Amazon is a monopoly there has to be someone the consumer being hurt you know usually have Rising prices when you have a monopoly with like the power company or something
Amazon is lowered prices so and you know if you look at it.
Their ownership of retail it’s very small e-commerce store at 50% so yeah that’s pretty big but you know you have Walmart
got to swing an atom if if you if you took antitrust action at Amazon you know most certainly have to Walmart because Walmart has such a big share of
much bigger share of offline and I feel like Amazon’s probably be okay and I think
Facebook Google Twitter are prime or in the crosshairs because of the section 230 stuff and then the fact he’s ad models are built off of tracking across internet I think they going to have double risk there that will be nurse to watch.

[46:33] Yep this is the way I sort of think of it there’s a couple categories of Regulation like they’re there are business models that various government entities.

[46:46] Might want to influence by writing new laws and so that’s what all this privacy stuff is right like they’re you know you’re up isn’t trying to
in for some some fifty-year-old privacy law.
Against Google and Facebook they wrote a new I called gdpr specifically to change the behavior about how companies collect consumer data and use it the.
You know there’s lots of new laws that get proposed for you know regulating energy companies and and how they influence the Earth and all these various things so a lot of these companies have risk
that that dries, countries will pass new laws so you’re up obviously passed a Big Lot in the gdpr that as meaningful impact on how
I’m we all do data collection for people and personalization
there is a proposed law in California called the California consumer privacy act on which is very similar to gdpr and that goes into effect,
you know it it’s sort of difficult to
treat customers in California wildly different than the rest of the United States in California such a big Market that it could potentially have the effect of having companies serving us consumers behaving very similar to companies that are serving.

[48:07] European consumers because they they just won’t want to risk getting Sideways from the the CCPA so.
I do think that the biggest impact of those kinds of regulations is companies chains self moderating the their behaviors to not make it a necessity for a legislator to pass these laws and it’s.

[48:29] In a legislative bodies aren’t super efficient it’s really hard.
That’s why I was frankly and so you know you wouldn’t you wouldn’t have big expectation that like the US Congress is going to you know suddenly the House and Senate are going to agree on a bunch of stuff and pass a bunch of new new regulation and so it’s it’s more that they’re going to
threaten regulation in that causes companies to like somewhat moderate their behavior.
It is absolutely true that Europe is more aggressive than this right in regulation right now and so like it’s more likely that you that European regulation affects us companies then.
Then you know that we’re going to see a huge wave of new u.s. regulation so that’s my long-winded answer on writing new laws and then purr.
Scott’s point in the case of companies that whose primary business model is selling stuff that consumers there are t.
Is regulation in prokaryotes that’s called the antitrust laws at the Sherman Act and so it’s it’s a less about Congress writing a new law that would have some negative impact on Amazon and more about how
the US antitrust laws affect Amazon in first God’s point but the laws are.
Like arguably someone outdated you both have to be in Monopoly and despite how big amazon is there really not.

[49:53] The majority of very many markets right like they might be that the largest Bookseller in the u.s. I’m so so digital books could be a potential Market.
If you could get a court to agree that e-commerce is a market separate from
retail then you know you could argue that they’re up for ality even then there be arguments that they really aren’t cuz even though we say they’re 50% of e-commerce that doesn’t include some.
Some huge businesses like marketplaces and pouring and all these other things the
and in the second prompt per Scott’s point is once you’re a monopolist you you have to do behavior that
negatively affects consumers in an amp us antitrust law
that behavior is you have to raise prices and so you can’t just make the argument that oh my gosh Amazon’s reducing choice and that is fundamentally bad for consumers
in Europe they have antitrust laws like that and so it’s it’s frankly at the moment a lot more likely that.
European Regulators like impact how Amazon can grow as they get as big in Europe as they are here than it is that us antitrust law is going to be very effective against Amazon because they just don’t look like a
a monopolist and then they they don’t sort of trigger any of the hot atoms of of the Sherman Antitrust Act.

[51:19] Alrighty number 9 this comes from Baxter Overman how do you put super cities within Home Delivery Services IE Walmart grocery wouldn’t drop off when the consumer is home for certain items are lockers be easier to sell.

[51:36] Yeah it was so one service that just got an ounce in the last couple weeks.
Involved in last couple weeks is this Walmart delivered a fridge door and that’s kind of what I think of when you asked this question and so that the principle here is hey you order milk from Walmart you don’t want that like sitting on the curb for 8 hours while you’re at work.
It’s a Walmart has this offering where we’re like using an electronic lock they have permission to go in your house they go in your kitchen and they have employees that are trained.
Put away your groceries for you including putting the perishables in the fridge in the.
This was a big deal they made it their shareholders meeting a couple weeks ago and they had a video of Mark Lori doing the first delivery and
when they first proposed this service like a year ago
the idea was that they would install cameras in the customer’s home in the customer would be able to monitor the delivery guy on the camera
this year what the evolution is the delivery guys wear a body Cam and so you can watch everything the delivery guys doing while he’s in your house so they had Mark Lori wearing a body body cam.

[52:44] Delivering groceries to Consumers house and I do think some of those tactics like the body can can help.
Instill trust like I do think there’s a major trust issue here like I don’t think the Walmart service is going to be a.
A huge mainstream service I think there’s some niches where it might appeal to but I always chuckle because.
In this Walmart video I’d be intent is seeing marks wearing a body cam so you can trust him so you have nothing to worry about and in my head I’m thinking Mark what is worth like two billion dollars the one guy that’s not likely to steal any of my students.

[53:23] He probably didn’t need a camera at like there’s probably nothing in my house that he wants that he doesn’t already have so that that’s my my sarcastic answer.

[53:33] If you hard boil a nurse problem-solve.

[53:36] Yeah yeah so when it’s the.

[53:38] Not enough of them.

[53:39] Exactly I buy Cuban would do some deliveries.
Like trust is the big impediment here in in you so you see lots of interim step so I Amazon has this very robust program called Amazon key and it both.
As a version where guys can open the Smart Lock and put stuff just inside your door they put stuff inside your door as opposed to all the way in your kitchen
so there it’s slightly less invasive and so maybe you press them more but the I’ve been told that the big version of chi that’s really popular is customers aren’t willing to give
give Amazon delivery drivers access to their home
but they’re willing to give them access to the garage so in a lot more customers have an electronic garage door opener and then have an electronic lock on the front door so there’s a lots of places where the Amazon delivery guy can deliver the packages inside your garage
and that’s easier to have trust in there’s also a business-to-business component to key where Amazon installs the Lockers in.

[54:42] Commercial buildings and obviously you have a lot more trust giving giving a delivery guy access to your secure Lobby than you do your individual house so
I feel like they’re all these different tiers of trust but the one thing I would say is
overtime as the services get more popular and more people use them and have good experiences There’s an opportunity for trust to grow and so when.
Uber and Lyft first launch trust was a huge impediment I’m I going to get in some random strangers car today we all
no lots of other people that successfully use Uber and so it seems less scary and and you know even more so with Airbnb as we have more people in our networks that.
Regular use Airbnb and have good outcomes it feels safer to me and so in the same way if Walmart is able to find.
A decent-sized niche that’s willing to do this refrigerator delivery service and I have to get out.
He’ll probably share that experience with their neighbors and friends and you could see the service grow and get more trustworthy over.

[55:49] Yes I don’t have a beautiful answer.
Number 10 also from LinkedIn this Crumbs from Akash Gupta and what’s your favorite app that you downloaded in the last few months.

[56:10] So my can’t rain answers I don’t like apps that there’s all kinds of data that we
like apps have huge abandonment rate and so for most clients I’m actually advocating they build really good mobile websites that replace the functionality of a nap and that’s using a technology called Progressive web app so that’s my sort of boring work answer
in my personal life the app that I recently downloaded that I had no idea existed that’s been really useful for me is it’s actually a plug-in for the mobile browsers so it’s a plug-in called screenshots
and essentially What it lets me do is when I’m on a mobile web page
it lets me take a screenshot of the entire webpage not just the the part that’s visible above the full and so it for work a lot I need.
Screenshots of an entire entire page and sewed this was a new fine for me that I tend to be using a lot but.
I’m not that can be pretty itchy.

[57:12] It’s good I would say at at spiffy we use this thing called geckoboard and they just updated their app.
And up so gives me all my kpi is in one what kind of screen which is nice.

[57:29] What’s the app for the Star Wars experience in Disney if you like that should be our favorite app.

[57:36] Play Galaxy’s Edge I don’t I don’t know if it’s a blister not you so I didn’t download the Amazon go Store app.
Okay this is just a comment over on Twitter Natalie Dylan and she is at Maverick witch
you like this Jason that’s the VC firm started by Howard Schultz founder of Starbucks to invest in consumer-oriented companies
she mentioned just as one of her top podcast that was a typo at first but I’m pretty sure she actually meant us so wow I was speechless.

[58:11] That’s very cool Natalie if you’re listening I’d like to think that I have some partially funded your child’s college education so thank you very much for that.

[58:20] Did the Starbucks usage.

[58:22] Exactly.

[58:22] I think we’re now Pisco effectively at this question number 12 this comes from our friend Ted down in Austin he said make sure Jason talks about mixed-use retail entertainment I don’t know what that is but I’m glad you get to answer.

[58:38] Yeah I mean.
In general like in the 1960s when the mall was first invented the the appeal of the mall was there a bunch of sores aggregated that you all wanted to get
get tune so you know we built a big building and surrounded it with a giant parking lot and and put a bunch of stores together in overtime
we added things to that mall that made it even the game
customers another reason to go and spend more time there so for those indoor malls that was things like ice rinks and movie theaters in food courts and as.

[59:16] That the collection of the stores has become less and less appealing and it’s been less and less valuable that drive traffic just buy
this assortment of stores
a lot of these venues have had to get more persuasive with the non-retail things that they put them all so you know the food courts have have
often been replaced or augmented with more significant fine dining and today like a mixed-use small almost certainly means like in addition to shopping and entertainment
that there’s probably a residential component to and so you know you can live in an apartment building
that’s like upstairs from the stores or adjacent to the stores and like I would argue even
Hudson yard is a classic example of a mix you space there’s both a significant residential component of these various condo Towers
that are adjacent to it like and there’s these entertainment features in it like the Skydeck in the
that the stairway installation is named I’m forgetting at the moment and so in general.

[1:00:28] New successful shopping destinations 10 to have the this this multi-use component and
let’s focus on shopping meme only reason that you’d go visit at so I assume that’s what that’s talking about.
You won’t see many new balls built that aren’t like very focused on the the other traffic generation activities on the other revenue streams besides.

[1:00:53] That’s not sorry.

[1:00:55] Well but we haven’t what’s the name of the.

[1:00:57] The Vessel.

[1:00:58] That’s all thank you.

[1:00:59] Yes take a walk in the vessel okay alright Michelle Grant has a twofer one is should Amazon be worried about broken up I feel like we asked and answered that one did you want to comment on that.

[1:01:14] I think we covered it pretty well right based on current US antitrust I think Amazon has very little risk like they I think
potentially digital books could be in area where you can see some enforcement or like I might have said like Amazon web services is it greater risk
lucky I feel I can Google and Microsoft have made enough action lately that that you know that that probably isn’t immediate in Amazon where to get as big in Europe as they are in the US it would be more interesting question.
But I like I’m defending companies in the US I think Amazon has a lot less to worry about from regulation then does a Facebook or do.

[1:01:57] Cool and then this is clearly in your wheelhouse cuz it’s got the O word
you’re Jason what are your thoughts on pricing strategy in an omni-channel world where price transparency is high and filled with Bots to find the lowest price.

[1:02:15] Yeah so there is a bunch of controversy about pricing right now like lots of omni-channel retailers don’t have Universal pricing so they might have a different price in every store
the online price might be different than the store price you know a complicated retailer like Walmart there could be five prices for every item there to be a store price there to be a ship to home price
there could be a ship-to-store price there could be a pickup in-store price and online grocery pick-up price
and you know Walmart slogan is is everyday low prices
well if they’re 5 prices for everything spoiler alert for them are not alone.

[1:03:02] Inside you know most retailers today like have these fragmented pricing models and I believe that
trust is such a big deal moving forward and there’s so much information and transparency available as a result of digital in the web that I feel like it’s inevitable that all retailers are going to get forced.
To adopt a much more transparent pricing model which generally means so much more Universal pricing model so you’re not going to get away with.
Having a different price in the stores then you do online and hoping the customer just doesn’t catch you so in general will see more Universal pricing.
But you probably at the same time will see that price change a lot more based on
Real World Market circumstances and so you’ll see a lot more Dynamic pricing
but it won’t be secret prices that are changing without you knowing it like I think retarded you know tend to be transparent about that and into me the best example today is
is Amazon they have a super Dynamic pricing model that changes all the time but if you put something in your cart and the price goes down they don’t just take that extra margin they tell you.
And they lower the price of the item in your cart and when you you don’t go to their stores they now have digital prices and all the store so they can show you the same price online that they have in the store so I
you know it’s.

[1:04:27] It’s very difficult for retailers to make changes like this and break down silos so we’re not going to see it happen overnight but I think we’re we’re already starting to see retail shift in that direction so to me the future is.
Universal transparent Dynamic pricing.

[1:04:42] All right most sybaritic had a whole bunch of questions I’m going to lightning around a couple of them when is spiffy coming to Seattle.
Stay tuned Ken Scott please update is Amazon scape and how has it changed unfortunately there is an inverse correlation between my time to work on the Amazon scape and your first questions to come to Seattle so
position where I don’t have a ton of time to work on that it’s changed a lot so I think Amazon’s probably launched.
It’s been a year old I would say two programs a month 24 to 30 programs since I did that so like the Amazon Prime wardrobe isn’t on there
4-star store is not on there there’s a lot not on there one day delivery yes those are not on there.

[1:05:39] Scot I have no cars in Seattle so between those two I’m going to vote for the Amazon scape.

[1:05:44] Maybe maybe I’ll find an internship this one of our many interns can help with this this should be an interesting one is Amazon going to do to Walgreens drug stores what they did to the bookstore with the axis of pill pack and private label
enable the ability to sell Massey pg-propyl probably you think there’s one for the drug source.

[1:06:11] I think it is I mean they’re going for everything so it is a market like that they made some Investments and they’ve already like I think had some material effects on valuations for the national companies.

[1:06:25] I’m not sure like I mean there’s that Jeff has a equip that I kind of like and agree with Amazon denim put book stores out of business the internet put book stores out of business
and I think the same made partly be true for retail pharmacies
like I’m sure Amazon’s going to take a go after and take a chunk of the pharmacy business and that will be derogatory to traditional pharmacies but the bigger deal is
we’re shifting from picking up prescriptions in store to having prescriptions delivered to our home so increasingly the old wanting majority of all the prescriptions we take
R tronic,
Africana conditions and returning things and the insurance companies are basically mandating that we all get shipped these bigger quantities of those prescriptions at home so as a smaller percentage of prescriptions get picked up in-store there’s less traffic in those doors
the only reason people go to the stores his prescriptions they’re not good retailers if they don’t have prescriptions and so like I feel like that friends that macro-trends.
Is really going to dramatically affect the retail pharmacy space now most of the retail pharmacies have already pivoted they own insurance companies and mail-order prescription services so that seems like where they’re putting their big bats
well I’m sure Amazon will have some success in Pharmacy in and probably some Innovative products.

[1:07:55] I’m not sure that’s why I’m wearing they’re going to capture.
Huge market share super fast because there is a bunch of Regulation and Power in the hands of individual insurance companies that that
you know are some institutional impediments that make it a harder Market to dominate them say books was not saying they won’t get there but it would take long.

[1:08:19] Yep Mike my take on that is when I go to a drugstore I stand in line and there’s usually.
More helpers than customers but there’s only one person to check out the
person five people in front of me has a thousand questions and it takes me an hour to get something but she took me 5 minutes so I feel like there’s a huge customer service
kind of customer experience got there that the
Amazon could definitely fill in in his going to go at it because it’s very clearly something that they can make a huge Improvement.
This is a good one Jason how we doing on time.

[1:09:02] I think we are coming up to the end.

[1:09:06] Listen to all your questions about sitting on a big one can you talk about the advertising race to grab the wallet we seen some big news lately Target in talks to buy Triad Walmart Spring advertising and house and made a key hire there where is everything going for ads
is it going to be a war for brand the brands wallet is here we’re going to take a page from Amazon Playbook ring ads in house and move to self service
and a bottle and then kind of.
Correlated that she has a chart sheet fluted from Business Insider that that shows kind of percent of us had spent by platform and it looks just going to ask him where
Amazon’s growing their ad business you know he gets over 100% year-over-year still where’s it coming from is it an incremental or is it coming out of,
Google’s haydar Facebook excetra since you’re chief strategy digital retail add officer I will let you jump in on that with Jason.

[1:10:08] Quick disclaimer ads are nowhere in my title so I’m going to be expecting a raise when they had that one.

[1:10:19] So the starting point here is that it’s very difficult to run a profitable e-commerce business and so most most omni-channel retailers that sell stuff online
are we looking for every opportunity they can to improve their economics and as Amazon has demonstrated.
Ad Revenue to monetize the traffic and eyeballs on that website is a a significant opportunity
to to improve the monetization of the site so like obviously Amazon’s had a bunch of success you know
Walmart is at a program for a long time is it is Melissa alluded to the certifier their vendor and brought that function and house.
Sort of double down on it and we’re seeing them make a more concerted effort to to pull more.
More advertising on on and there’s now a rumor that the target will buy the vendor that that’s at Walmart fired.
And use them as an in-house entity for for Target advertising so none of those things are surprisingly I’ll make sense all these sites one of monetize their there traffic is as much as they can.
The one thing I will say here that is.
I sometimes think that retail ads are a little overblown and.

[1:11:48] Like I think there’s some self-limiting things so when.
Amazon has way more e-commerce traction than anyone else and there is a big site like.
They’re legitimately getting people to spend money on ads that they weren’t spending before.

[1:12:06] Because they all these Brands want visibility on this new Amazon plan form but as all retailers.
Get serious about this and they all start collecting ad Revenue what what temp to happen is this is mostly a zero sum game
brands have been spending money for 450 years on Shopper marketing inside of Walmart stores and Target stores in
the budgets For Those ads are a percentage of the sales of their product from the Target and Walmart sell so
you know you know you’re going to sell $119 of razor blades at Walmart and you reserve 3% of that or in-store Co-op.
That you can spend with Walmart on ads inside the Walmart store so when.

[1:12:51] All of the digital eyeballs are on one side and it’s not Walmart you might spend some extra dollars on Amazon site but when all the sites are getting traffic.
What you trying to do is you just say alright the
the 3% I was spending in stores I’m going to shift that to online and so while that might look good for the monitor the website monetization unit at Walmart.
Is actually a zero-sum game for Walmart they were getting 3% of razor blade sales as advertising Revenue before and they’re getting it again.
And is as more retailers have better advertising platforms like they’re all going to get their fair share of those dollars and even that the chart the Melissa shared like I look at most of these charts that sort of.
Are surveys of how people are spending their.
Their ad dollars in my experience is that there’s no one person at any brand that knows where they spend all their money so I have tons of clients wear
multiple entities at that client all bid on the same keywords on Google and drive each other up.
And so I can assure you of you surveyed any of those stakeholders and said what’s your total spend on Google.

[1:14:02] They actually don’t know they only know what their silos and is on Google.
Until you talk to a given person in one place then he either didn’t spend much on Amazon last year and he’s spending more this year and so it looks like a big ad.
But if you really look at it comprehensively across the whole organization.
It doesn’t feel like people are taking dollars they used to spend on a Super Bowl commercial and instead investing that on Walmart or Target so.
I think that the the ads on these sites are here to stay but to a certain extent it’s a zero-sum game and we’re just seeing Shopper marketing dollars shift from in-store to online.
And you know in the early days Amazon you know probably got a disproportionate amount of those dollars but on a go-forward basis.
They’re 50% of e-commerce they’ll probably get 50% of the the digital ad budgets from digital retail ad budgets from from these various abrantes up.
I like I think it might normalize at we’ll see.

[1:15:07] Well I think that’s going to wrap it for a list of questions we really appreciate everyone donating your questions it’s always a challenge to try to answer everything and hopefully we got to yours.

[1:15:21] Absolutely and certainly if you disagree with any of our answers or are you missing anything with Scott and I both want to learn so please leave us a note on Facebook or Twitter and will continue the dialogue there and then till next time. Happy commercing.

Jun 17, 2019

EP177 - Internet Trends 2019 and Listener Questions Part 1

A recap of Code Conference and Mary Meekers Internet Trends 2019 Presentation, as well as Part 1 of Listener Questions.

Recap of the Code Conference in AZ.

Recap of Mary Meeker "Internet Trends 2019" from Code Conference

Listener Questions Part 1:

Q1: Perry Solomon What do you project the effect of the FedEx contract termination to be, this especially applies to 3P merchants using FedEx for SFP?

Q2: Danny Sheridan If a brand is ready to partner with an Amazon channel-consultant, how do they tend to find each other? Is the industry growing or shrinking from your point of view?

Q3: Ben Kates How will the CDP change in the next 3 years? How does personalization continue to evolve? Thanks for all of your time and energy into the show. -Ben from CompassRed in Philadelphia

Q4: Jamie Dooley Hey Jason & Scot! Have you heard any news or updates around Amazon Singularity? (combination of Amazon Vendor Central & Seller Central). I’ve heard the project’s rumored codename is “Hybrexit”....?

Tune in next time for listener questions part 2!

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

Episode 177 of the Jason & Scot show was recorded on Friday, June 14th, 2019.

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


[0:24] Welcome to the Jason and Scott show this is episode 177 being recorded on Friday June 14th 2019 I'm your host Jason retailgeek Goldberg and I'm here with your co-host Scott Wingo.

[0:39] Hey Jason and welcome back Jason Scott show listeners.
Jason Simpson good ol episode 176 we have both been on the road so tonight we are going to mix it up a little bit and we're going to do
we talked about some road trips
at one of our favorite events every year is Mary Meeker Mega Jack of Internet Internet Trends drop so we have some thoughts on that.
And then we put out a call for listener questions and the response was overwhelming so we're going to try to chip away at those in this episode and then save some for a future episode,
I took it off you are fresh off the plane from code recode how was that show.

[1:21] Said I was fun so this is a show that's put on by coat recoat it's their big event called code it it's always been in California for the first year
they moved it to Arizona and they moved it a little later in the year so that's unfortunate cuz you end up with.
110 degree weather in Phoenix but I was excited to go because in the past they had some amazing guess they've had.
Live interviews with Jeff Bezos and Elon Musk and it's the event every year where Mary Meeker delivers her state of the internet presentation so I.
I eagerly consumed it every year but this was going to be my first chance to watch her actually deliver a lot.
And so it was it was a good show I would say slightly unlucky every year has sort of a theme to the contents.
I'm and several other things have been very call Mercy oriented in this team to me was slightly less Commerce oriented there's alot going on.
With a big media companies in the Basin arguments about a d regular regulation and content moderation and said the.
The conference been a bunch of time focused on that which is interesting to me but maybe slightly less relevant than some of the.
The previous year so with that one caveat I still found it to be an entertaining and informative show.

[2:46] And so it's it's like really put on by Kara swisher and one of the things that makes it work so well she's got this problem at work and she gets a lot of a list.
I speakers that come and get interviewed and most of them get interviewed by one of the the
Rico journalist in the United State in these famous iconic red chairs so things kicked off this year with the
Susan wojcicki who's the president of YouTube and YouTube had just just had a big internet kerfuffle over some
new rules they had around content moderation and so so she got kind of grilled on on their moderation policy and it made a ton of news because she
she was not a super eloquence defender of their policy and so you know you could you could
it was painful to watch you could feel that she was nervous and she was struggling to answer some of the journalist questions and some of the audience questions and I feel like there was some
criticism of her in the news Recaps of that interview so so very newsworthy not super focused on on Commerce.

[4:02] The next one to me was kind of interesting was Matt levatich who's the CEO at Harley Davidson and I was kind of excited for you,
this was apparently already well-known but I didn't know this that a major Initiative for Harley is Harley is making a huge investment in electric vehicles.

[4:23] Yeah Yeah Yeahs their problems Millennials hate motorcycles and no young people buy and ride motorcycles so I've been there their theory is electrics going to solve that I guess we'll see.

[4:36] Yeah so he brought out like a mini version of one of their sort of electric bikes and half of his conversation was you know tough questions about Chinese tariffs and obviously he's been up personal Target
President Trump and said it was all those dialogues but half of it was this whole like.

[4:56] Man it is an electric bicycle in brand for Harley and like you know when you think of the store brand elements of Harley like it's you know it is the the.
The specific noise of the Choppers and all these things and now you've got this the silent I can so is interesting to hear mad talk about how.
How does he felt this business would be additive and not disruptive to the brand and you know he tried to fix the fact that like.
Hey you don't get the signature sound of a Harley but for the first time you can actually hear.
Nature and have a conversation with someone while you're while you're out on the ride and and stuff like that so it was it was an interesting try somebody you I'd say that the jury seemed out.
The next interesting interview they had a couple of folks from Facebook they had Adam Missouri Oahu.

[5:53] Is that new CEO of Instagram he is a.
Run a bunch of big businesses at Facebook and took over Instagram when the founders left and then Andrew Boz Bosworth who's like owns the devices in the virtual reality.
Practicing Facebook you know again they they were getting Grill the lot on.
Regulation and potential antitrust actions but intermix in their Adam was talking a lot about.
The future Instagram being Commerce and he didn't get into a lot of specific examples but we have seen them
Instagram aggressively rollout New Commerce beecher's pretty regularly and he gave the strong impression that they're not done and there's more to come there.

[6:44] Pause did not reveal a lot on the device side obviously there their they're still very bullish on all the VR stuff they didn't launch this like in home.
Video chat system called the Facebook portal and I was quite serious did you know here they would claim some.
Market penetration success with that product and they they they refuse to talk about how well it had sold which made me skeptical that it is sold very well cuz obviously there's a lot of people.
The thing Facebook has a fundamental trust problem and people probably want to buy a camera on a recorder to put in the living room from Facebook.

[7:24] And I didn't necessarily do anything to dispel that that perception.
So then they had a couple folks on from Twitter Kayvon and massacring all these names I'm sure.

[7:39] Tackletour who is in charge of product at Twitter and then Vijaya cattle who's the chief legal counsel for Twitter and again,
you know Twitter has gotten slightly less heat than some of the others but they were really getting grilled on their moderation policy and so most of the dialogue was,
dominated by Vijaya and I I would say.
At the very least she seemed like a much more polished post spokeswoman for what their position is she held their own against the questions really well we didn't get a lot of.
Super interesting things about the direction Twitter is going in from a product standpoint the one thing that cave on you know Express that he was excited for the future of Twitter's functionality
is really exploring more.
Discovery by topics instead of by people so you know he obviously on Twitter the primary methodology as you follow people and have.
You know when your your feet is developed based on the people you follow you know there is a rudimentary hashtag system that is harder to follow specific topics and so it sounds like they have some some features in the word works too.
To sort of Bubble Up topics more on Twitter in and help you follow them.

[9:00] Andy jassy who runs the AWS business for Amazon he was certainly interesting again you know he was mostly answering questions about why they shouldn't nawas off.
And I'm not sure he had a super credible argument for why they should you can get all kinds of the base by about that why they should or shouldn't but.
Is it was interesting like talking like you know she got to ask a lot about the.
The evolution of competitors most notably Microsoft and and Google and it was interesting to hear this huge six-year head star.
He talked about when they were first launching the product how they were even they felt like there in Seattle.
At the very least Microsoft would quickly respond after they lost a service and so they were super eager to keep the service on a secret until this person wants so that they would have a little bit of a head start on Microsoft.
And he's like never in my wildest dreams did we think we get the market.
And have the markets are cells for 6 years before Microsoft came back with a product and it reminded me of this.
Famous Warren Buffett quote that Jeff Bezos probably isn't the guy you want to give a six-year Head Start 2.
But yeah so he was saying as a result of that like he he feels like AWS has two fundamental advantages over their competitors in the market you feels like they have.

[10:28] Many more services than any of the other platforms and so they're there are more comprehensive and he feels like.
Obviously they have a much bigger market share than any other competitors and he feels like that market share fans lights to scale which translates to lower-cost so he feels like they have a fundamental cost advantage over over Google and Microsoft
that was kind of interesting in some ways the headline interview of the whole thing was Stacey Abrams who ran for just.
Just last Governor tutorial race in Atlanta not super relevant to our.
Our listeners I don't think but they had a conversation with her and then Mary Meeker did come out she's changed companies I think she used to be with Kleiner Perkins if I'm remembering right
he's now with the new Venture Capital company called Bond but I was happy to say that the.
The state of the internet report you know it seems like.
It has strong continuity and didn't really lose anyting 333 slides we'll talk about it in a second so and she delivers it in 40 minutes so.
It's a.
Super fasting and she keeps highlighting the fact the reports meant to be read not presented it so it was fun to hear her deliver it for the first time I think there's some interesting things that you and I both pulled out of that.

[11:53] This is getting super long head that David Solomon in the CEO of Goldman Sachs of the thing I was interested in
with him is he has this credit card partnership with apple and we haven't done a ton of details about it yet but he said that a lot of Goldman Sachs and Apple employees are currently.
Getting the credit card in the beta and that they're they're super excited and they feel like like the.

[12:16] Credit card has a lot of Utilities in a minute he's that customers like that.
Previous credit cards haven't had so I'll be eager to learn more about that the next speaker was by my by far my favorite.
Of the show and probably the most people though the least impressive speaker it was this entrepreneur named Richard Browning who's with a company called gravity.
And Richard and his buddies decided that they wanted to build their own jet patch and so he should really cool sort of making a video of by Kim out on the farm.
With this first mini jet engine that he strapped to his arm and and.
Yeah trying to figure out if it could with him off the ground and you any shows this evolution of putting more Jets on his body and you know.
Falling in wiping out spectacularly in all these sorts of things but the culmination of all this is he has built a jetpack that essentially lets a.
A person fly for like 20 minutes and it's it's a very Iron Man ask and so he he's talking about it and showing the video and the monetization model for this is really it's kind of a novelty entertainment thing like.

[13:27] You might go to a race and watch people race the jetpacks around a course over a lake.
I think is a model but what was super cool is after his speech we had a coffee break we all step outside and 110 degree heat and Richard flies in in the Jets we all got the.
Got to see him flying around live like only a few feet from us and it was totally woods yet and I'm pretty cool, as I.

[13:54] Sort of a technology geek standpoint that was definitely the coolest thing at the shop until then just a couple more to wrap it up.

[14:04] Cindy Holland who's ahead of original content in Netflix.
I see we you know we both are fans of a bunch of the content not super content irrelevant but was super irrelevant is Cindy's previous experience in Netflix is she was with Cosmo.
That one of the original e-commerce grocery delivery company so I thought that was a funny background.
And then our friend Scott Galloway you know who does a podcast with Kara Swisher he came out and did his.

[14:37] Presentation images always well-received he's a really good presenter.
Yeah the inside baseball thing is he writes this great content every year for a show in Europe called dld which is in January and so he did this.
Content in January and was kind of recap of the 2018 predictions in is and what is 2019 predictions are and they're both some.
Some clever insightful stuff in there and some funny silly stuff in there but you know if I work if you're an Insider and you've seen it a bunch of times he did the exact same content and it seems kind of weird.

[15:11] Three making 2019 predictions and recapping your 2018 predictions in July so that was maybe a little goofy
and then the last two things Ed Williams who's the CEO of medium was on he's also one of the founder of Twitter
again not super relevant to us but he said interesting personality that had some thoughtful things to say and then one bit of news that I was sent that very relevant to our listeners
yes to the show and a journalist that covers our industry Jason Delray for who's the Commerce.
Reporter it at recode announced that he would be releasing a new podcast this year it's a series called The Land of the Giants
and idea is each season they're going to cover one of the things companies so Facebook Amazon Netflix Google in the first season is Amazon so he's the host
it's a narrative podcast with a bunch of live interviews with people talking about Amazon and going to be 8 episodes is going to release in
in July so obviously
the podcast that you need to be listening to first and foremost is the one you're listening to but that would be you know another good one to check out and I got the hearing Advance preview it sounded pretty cool.
So that's my super long-winded recap of the code Commerce this year.

[16:34] Free cool. Did you know Susan was this key couple fun facts her garage is where Google has started did you know that.

[16:43] I did not I knew she was one of the early Google Earth.

[16:47] Yeah and her sister married to Sergey Brin
and then they divorced after they're no longer together but but she the sister was married to Serge a for a while and then her sister is the CEO and founder of 23andMe.
Substitute Berry Google entangled entrepreneurial women.

[17:10] I feel like you are the perfect host for the People magazine segment on on the Jason Scott show now I love it.

[17:16] Yeah and they were last seen dating and I'm just going.
And then I seem like so it's kind of fun to watch these shows from Twitter and then hear you.
You don't seem I was kind of getting over Twitter was you know.
Monopolies break these guys up politicians are coming for them it was definitely kind of you know
so so I know Kara is talked a lot about that Galloway has been since he released the for whatever that's called he's been really big on it seemed like that was the ultimate theme and it's always funny to me like.
The tech people seem like so shocked by all that they don't really have it. Answers how could you not know that was coming.

[17:59] Prepare now that's why I like the YouTube one was a little better than a liner like giving her seniority and roll like.
You just would have expected her to be totally buttoned-up and nailed it in
and I I need to send a complimentary way she up she just felt more like a real person who is like struggling with it and just kind of admitting that like.
But we don't have it all figured out and we're we're pissing people off and we feel bad about it but you know.
They they definitely held her feet to the fire and that that was absolutely the big takeaway like not even so much should we split them all up and should we regulate them that the biggest takeaway is they all have a Content moderation problem,
and nobody's figured out how to do content moderation at scale.

[18:41] Yeah they're all worried they're so there's a section of the law that protects them from being Publishers they're all worried the more concentration to do the more they're really kind of doing it at Oriole and then will they still be able to live under that sexual
indemnifies I'm from all these issues.

[18:59] Scot out the former guest sucharita mulpuru who's beat that drum regularly on Twitter.

[19:04] Oh yeah absolutely.

[19:05] So when other note there should have been putting on forever if their Marquee event
they have now on some smaller, more specific events they they have like a dinner at a lot of the shop talk events and you and I have attended a bunch of those and then they have a stand-alone Commerce conference which is,
a two-day conference in New York and that's coming up again this September so it may be an event have on your radar.

[19:30] Brickell
cool while you were enjoying the quote dry heat a phoenix I was in your canoes beautiful whether there it was not a hundred Ten Degrees that was good and then I got to knock something off the bucket list I got to go to my first Amazon go store
I feel like the universe has been trying to keep me out of there because last time you and I were in Chicago we tried to run by and it just closed like 2 minutes before I got there.

[19:57] Yes I'm excited to hear I know you've obviously thought and talked a lot about it though but I'm excited to hear what what your impressions were from actually being in one.

[20:05] So it's kind of think it was in North Carolina it would be really exciting so we don't have a convenience store like that.
But when it's in New York and it's next to kind of the Pratt and the dean and DeLuca and those kind of places it's not as
kind of outstanding job Shadows selection and food called yet at 8 those doors are better not be able to do the,
just walk in and out just walk out technology thing
I was a little surprised I was expecting that I could watch the app and put stuff in a bag and watch it kind of go into my cart there's none of that real-time kind of stuff in fact I was surprised I don't know if it's normal or not but it took about.
8 hours for my check out to complete now it's starting to get concerned like I feel like maybe I ended up in humans.

[20:56] That's interesting.

[20:57] I did go with my daughter and she was like she shopped in there as she wasn't really expecting anything and she was like handing me a bunch of stuff.

[21:06] And then separately from you or did you scan both again on on your.

[21:17] Sure that that is a challenging use case for them as groups of Shoppers by the way.

[21:23] Yes I feel like we did something that cannot regret but oh and then she was like putting stuff up and back in a workout
Anixter was a purpose for in a really good.
It was funny it was very crowded and then there's a lot of confusion about how it kind of worked like especially if you needed like forks and knives and stuff like that is kind of hard to find but people figured it out.

[21:54] Yeah yeah I mean I would argue like this so I got a chance to go in the beta before it was open to the public and I would have said that
I swear in the beta it felt like everything got updated in the app in real-time but since the store is it open to the public you do get a receipt.
After you leave the store and in general I would say it's kind of in that 10 to 15 minutes at 4 so your experience to me is an outlier but the but you definitely don't have the real time thing and but there was you went to the newest.
Yo that just opened in New York but I got you were there that we could open I think which is the second one in New York and there's a super important new amenity in that store I want to hear about.

[22:34] Yes sadly I went to the old one,
it was an interesting part of town I hadn't Sandlot time it is kind of way downtown called Brookfield Place which was a lot like you know you have a lot of the
DMV East or is all that kind of iPad once I was interesting is all I Cuts in your nose and say.

[22:55] We actually mention that in the Hudson yard episode of you with Intuit.

[22:58] Oh yeah I remember it well.
But yes just right after I left the open the second Amazon go store again the universe kind of sticking out its tongue at me
and that one has espresso and coffee drinks so now I have a valid excuse to try to go to that I'm excited to see.
Is it's going to be a robot or a person or how that's going to work now compares to our favorite Starbucks.

[23:22] Yeah I have a New York trip I think the first week in July so I'll be I'll definitely make a chant a point of testing out there there espresso service.

[23:32] Cook's Chiloquin went back to gossier I've discovered when you have teenage girls they love to go to RCA so it's kind of funny the dads all still sitting there, looking each other like what's going on
we're all in there for like 2 hours as the ladies try out all the different colors and flavors and skates and stuff so.

[23:50] They do kind of comfortable man chairs did you find a man chair.

[23:53] I did yes yeah it was good it just got fun to watch just got to like a vibrant energy to it this really cool if I would definitely recommend it to listen to check that out.
And then as per my co-host recommendation went to this really need a place called showfields this is a lot like they done it to it when he's come Marketplace stores
down that phone that had a lot of fun interactive things so you can like jump on this pile of pillows to try them out and had a slide to go between floors that we enjoyed
I just want to find it it felt like.
Anika namakkal to me you know so so this is this is New York City real estate and there's, like four things on each floor of a very big building that
and the space wasn't like there wasn't a lot of
crowded space air felt like a lot of retail space for not a lot of stuff so I'm not sure how that model is going to work long-term so it'll be interesting to see how that plays out.

[24:47] Yeah I totally one side note on Amazon go there was that there's an interesting article that came out this weekend I'm embarrassed to say I can't remember who wrote it so I'll find a Lincoln put in the show notes but it was kind of talking about the early on Bezos City.
I bet he would only do physical retail if you could come up with an interesting concept and then this article goes on for critique a lot of the the Amazon retail Concepts as not being very interesting so you know talks about life.
The bookstore in the the four-star store.
Being early generic and then it called out Amazon go is the one novel concept and what.
There's things you could debate for and against that argument but the dialogue on Twitter about the article was a lot of people pointing out that if Amazon go maybe the.
The least interesting of all of them because it you know it is a basic convenience store or you know.
A grab-and-go sandwich store and it's it's Marquee feature is.
That you don't have to pay when you leave so there's less labor in the store but then everyone on Twitter points out that
like there's way more people working in that store then work at any 7-Eleven or or oboe Pawn in the country so like they had the technology they haven't actually got that jumps down in the store.

[26:05] Yeah I think it's a work-in-progress I think they'll get there.

[26:09] Yeah I in Arizona at the Fashion Show Place Mall I did stumble across a new Amazon retail concept there is the one and only ring store in in the mall.

[26:22] Did that predate that position has a ton of a vestigial tail.

[26:26] It does not it does pretty look like it was built like by that business unit and not by Amazon that's a perfectly nice store
but it doesn't leverage any of the same fixtures or or four common elements from the other stores it looks like it was built by the ring team and apparently they used to have a pop up.
And they migrated to the Sprint store but yeah I just find it interesting there's probably not that many doorbell stores in in the world and so this this may be the only one.

[26:53] Pickle and then I feel like you and I both had fomo because the show that ended up being better than where we were was remarks and this is Jeff Bezos is held this kind of
private robots kind of a thing talking about space and things like that now they've opened it up where did you get to see some of the activities.

[27:17] I did and so they do have that they still have this like super exclusive show that like it is invite only but then Remar what is an attempt to take the content from that super exclusive show and make it available to a broader audience
I'm in because it's called Mars I erroneously assumed it was predominantly focused on space but Mars is an acronym.
And I think it's like machine learning artificial intelligence and Robotics.
I probably at that wrong but that work into it seem like there's a lot of super interesting content and I've talked to a couple folks that attended
and I definitely regret not having worked it into my schedule did you see me key takeaways that excited you.

[28:02] There seems really cool demos and just forward-thinking things that's where that's where they announce Robert Downey jr. announce that he's going to save the planet so that's good.

[28:15] Finally thank goodness.

[28:16] Skip to leave it up to Tony Stark.

[28:22] And bassist was there and the end doors and content himself as well.

[28:30] Yeah the only all the unfortunate all the Press is about some someone kind of got close to him by a protester got like within two feet of him on stage and I think that free tarot now
that's all it seemed to just going to take over the whole conference app that one episode.

[28:49] Yeah yeah I feel like there had been a couple political things earlier where someone came on stage in the like none of the politicians have good security but a tree Mars they apparently had excellent security got wrapped up in exited very quickly.

[29:04] Yeah they're like white on rice of that dude.

[29:06] Exactly so way way easier to grab a bite from a presidential candidate than the world richest man.

[29:12] How to make sense.
Cool so we have both waited through the 333 page Mary Meeker internet Trends deck
I'll go to a couple highlights so I always enjoy the back and it it's kind of interesting just kind of get a feel for what beaker
is seemed pretty firm by the way is it's her starting the firm so she's like the principal now so she was kind of a general partner.
At the last tournament that this is her new firm that she started so.
It came on the scene I think she came out like a 3 billion dollar razor something pretty impressive so so she's got a lot of stuff behind her now
look up of my highlights so for listeners it's going to help you if you have the deck open right now so I'll wait for you hopefully you're not in your car cuz.
You didn't wreck so you can review this.

[30:09] Or on the treadmill.

[30:10] Yeah if you're on the treadmill with an iPad a spy doing sweetheart on your phone but you know it will put this in the show note so you can reference it later but you know the guy that
trying his first super in a company I kind of look at it is that lives mostly so you know all the stuff about you have people to plan on the Internet it's going down all that's not much there
I did like kind of presentation from slides 29 to 35 and it kind of starts out with the story of.
If your Castle TV if you're out there buying traffic is going to be challenging and this is we're seeing this with like the digital native brands for they can I get this hundred-dollar online.
Kind of sales rate in the de placa well it's because you just can't buy enough traffic that point to.
That's why many of them open stores and it talked about a much better than it kind of transitions into just some data and supporting evidence that
a better way to build a business nearby and traffic is Happy customers so I spend all day thinking about this so it was good to kind of see some of that data and I plan on using a lot of it and you know cuz I talk
internally about some of those things a long time listener Parker block pointed out on side 50 that
Jason Scott show is not on the top 10 podcasts at least I don't know I don't know where we dropped off their Jason that's kind of a bummer.

[31:40] I think it's just the summer of all I'm sure we'll be back up by then.

[31:43] Will be back next year.
And then I thought you would be excited on slide 51 they had some good data on the echo next at cirp cirp data seems to be
a little bit higher than we kind of think it's going to be but it showed that code doubling in the last 2 years I believe switches
Trinidad like around 50 million that goes out there
that was a larger number than I was expecting and then slide 53 again kind of in my wheelhouse with what I'm building right now there's 56 million consumers have in the on-demand economy so I thought that was good that's grown more than
2x in the last 2 years and then probably the newest new thing I saw him there a lot of this was just kind of
restating and representing a lot of data in a nursing new way because really good at telling stories
I've always learned a lot from her about the how to tie that together but there was this set of international companies and I have to admit all these for new to me so
it's in. So these where some of them are Chinese like the first couple like pee on duo duo.
Let's wind in pain and then that's kind of true the world there's one called rap beats Wikipedia Indonesia.

[33:02] This is interesting when called shop ESO hpe
all suspicious about that but I kind of made a mental note to go check that out that's out of Southeast Asia either one called Reliance jio so there's this really interesting new models out there in the globe you know kind
different ways to connect B2B buyers and sellers different ways for marketplaces to be born different ways for Content neumega apps that the kind of combine all kinds of stuff
and my last point is I always come a camel known as I go through exactly kind of companies tend to get like one mentioned in other ones will get 10.
And you called me curse favorites so her favorites as best I could tell from the stacker Spotify and zoom
so she spent a lot of time talking about those two companies and if she was going to talk about personalization she would talk about Spotify what you talked about happy customers best way to grow your business you know the zoom founder is kind of famous for saying all the other
conferencing software out there just pretty much stinks and we just focus relentlessly on making it fall us and getting rid of that having to download the little
you know I called will charge that you have to download if you're going to use GoToMeeting on those things those things never work.
Companies that she seemed to really enamored with right now is where the highlights at pick up.

[34:27] Nice yeah so I think you had a lot of things that jumped out of me.
You like a Nuance on a happy customers one of the things she talked about is.
Effective customer acquisition strategies and she was really highlighting the freemium or trial
as the best path to customer acquisition and most cost-effective sustainable path and do I do know there's even a knock that like these companies to try to grow by like buying eyeballs on social media.
You know is that is a self-limiting strategy but these companies that are growing by like offering a.
A freemium model and then updating people to a paid service are really strong and so and Spotify were both.
Like Marty examples of companies that leverage that that freemium model for customer acquisition so she was,
she was strongly endorsing that business model a fun fact for wisner's Scott and I
time ago now moved from from Skype to zoom for our virtual voice recording this show so so we have a slide.
Little connection there but she made a funny joke there's also a section about how big gaming is getting and how fortnite continues to dominate in terms of minutes and.

[35:49] Another area she talked about Zoom was the growth of remote workers and so she postulated you know some future where we're all remote workers bending RR.
Are daytime hours in zoom in our nighttime hours in fortnite my Visa.

[36:04] The evolution of humanity which seems a little sad but I do like some fortnite so I'm okay with my new version of that I guess.
I thought that bad stuff is all interesting and if I were to try to.
Wrap up the the international mobile app sheet she highlighted like there were two big themes
in every geography delivery and same-day delivery is getting digitized a lot of these Services were around.
Getting packages and purchases to you same day and then in a lot of the digitally less mature markets like India is the emergence of a local super app
along the lines of what I think of is a WeChat in China so you know in a bunch of these markets they're not buying the the.
Android operating system that comes with the play store or iOS devices to come with.
With the Apple App Store and so instead of downloading all your apps from some
some service these super apps have emerged that have sort of like mini apps that plug in and that's essentially WeChat is in a way like a.
An operating system for these apps in China and that and she highlighted some other ones and other parts of Asia and India that I had never heard of it but you don't seem to be emerging falling that model which as she said it made perfect sense.

[37:31] Yeah pretty cool so we definitely recommend you know I think if you're in this industry you need to have this guy on your laptop somewhere and I'm pretty good working knowledge of it because
you know. You never know what you're going to whip somebody stats out and say did you know that this many people are on the internet days of this much time and.
Are there some good Ecommerce stats on there nothing really are shaking so that's why we didn't really cover them but I think it's just really good to have a working knowledge of that deck because
it does it is foundational data that we need to find a job.
What was that it was kind of a slow news week so we're going to cover news next week and so we put out a call for listener questions and we got a resounding response so we've got,
20 questions to go through which we're not going to be able to do tonight but we're going to do for the next 20 minutes or so we're going to kind of see how many of these we can get through.
Light socket off the first question comes from Perry Solomon on Facebook
what do you predict the effect of the sex contract termination to be this especially applies it's repeat Merchants using FedEx for SFP?

[38:43] And I should care be all these answers to make the show feel more authentic I didn't for you read or prepare for these questions at all so I take my answer to the green assault I don't then
so just to recap for listeners.

[39:00] Amazon delivers a lot of their own packages they pay the US Post Office to deliver a ton of packages they pay UPS to deliver,
like the third most packages and they pay FedEx for the smallest amount of their packages so FedEx is there smallest the smallest piece of their delivery Network.
And FedEx chose not to renew their contract with Amazon and so you know next year you won't be getting any FedEx packages,
from from Amazon delivery vehicle so.
The reason I suspect they did that is is I've talked about a lot on the show demand for package delivery is far outpacing capacity so FedEx isn't growing,
as fast as demand is growing so they have a constrained resource how many packages they can deliver and when they sell that capacity
the biggest consumer out there in Amazon Amazon has all the leverage and gets to negotiate a great rate and I I think
FedEx felt like hey
we we can sell the same capacity to other people in the e-commerce echo system and you don't frankly charge more and get more
and so I think it's it's really a matter of Amazon monetizing.

[40:17] Facebook FedEx they can to monetize their capability as a FedEx always points out there is
Amazon the small percentage of their overall business so it's like 1.3% of FedEx deliveries so this is not a disaster for FedEx.
That's a long-winded recap very specific question is hey if you're a three piece seller on Amazon and you were filled for filling packages via FedEx how does that affect you and you answers.
If if you are owning the Fulfillment yourself you can still use FedEx and it probably doesn't affect you because you were negotiating those rates with FedEx yourself you weren't leveraging some
negotiated rate from from FedEx so I suspect that exit still happy to fulfill those packages for you and things won't really change
if you are using FBA to deliver your packages.
Packages are no longer going to get delivered by by FedEx but that will mostly be or or that'll be a hundred percent be transparent to you.
And you know it sounds like you already a seller so you may be more familiar with this but in general it's pretty tough to make a living as a 3-piece on Amazon.
Without using a PA you got to be enough.
In a pregnancy category does not super competitive a success and so for most 3p sellers they're using FPA and therefore Amazon's picking the carrier or not you.

[41:46] Banisters.

[41:48] Yes who won of the nuances and Perry's question is he talks about SFP so there's this this interesting middle program so so Jason you talk about your a third-party shipping yourself and then using prime
there's a middle program called SFP in this called seller fulfilled Prime and that's where you're essentially saying I will use my own fulfillment center
and I will live up to the prime promise as as part of that you do have to put all of your shipping's on out of your facility
on to Amazon's effectively within their Amazon relationships with the carrier's so that will affect the SFP people cuz you're not going to FedEx coming to pick those up anymore now,
inside of that same Persephone at Center you can you can also do Native shipments which you may be doing for other channels or your website or what not
and of course you're still free to use fax for those if you want to but if you do have certain thing doesn't it as a p that does you know will not be going through this mechanism the other nuances
you know there's two,
FedEx has a lot of international carrier carrying crossword trade stuff for Amazon that relationship is still in place and there's also a lot of ground stuff so ground is a program we all think of it is kind of like being 5 days
but you can actually go to day all out of ground within your kind of
missing Coast even into Midwest sometimes that so fed up that ground program where.

[43:17] It's almost within the prime promised for a lot of stuff so there is still a ground relationship
between facts and Amazon so I imagined Amazon will still use some of that for really short stuff where they don't have a you know this
their own delivery, Network going.

[43:35] So you know it is interesting that the bigger than you might think this really fast in here is you know this
as Amazon builds this out we I have long predicted Jason I think you're on board with this you have this Amazon Playbook is pretty well-known now you know so test it
it works test it figure out the model get the cost down scale it.
While you're dogfooding it and then the third page of play book which is what always blows people's mind is you develop the super-secret proprietary thing that's awesome now open it up and that's the part that
there's not really good physical analog four and usually blows like traditional retailers mines it it's equivalent of putting a Target in the corner of a Walmart right you would never do that in the real world
Amazon it just pastry The Playbook they just do it all the time.
There's so many quesadillas it's kind of obvious now so AWS is it was born this way FBA in the marketplace so those are three case studies so it's clear to me that if I filled out all this delivery
I open it up and I effectively compete directly with UPS and FedEx and by that what I mean is Jason could ship a package to me here in North Carolina.

[44:53] Amazon the Commerce company not involved at all and he could probably you know
I'm headed to an Amazon driver and say I would like to go to the store Carolina you'll go online printouts of postage and I'll be like $2 because
the package is going to ride along this huge infrastructure where all the fixed cost is already been implemented and if Jason was the FedEx that to me it would be
8 or $12 so I think the
carriers of finally woken up in like a boy this could be a pretty serious problem for us I need to focus on getting ready for that and shipping packages for Amazon,
does Harley how help me get there
what happens if you think UPS can get much worse position because well over the potatoes 10% I look in the back of a lot of UPS trucks.
And I have not looked at a UPS truck in the last year that doesn't have over half Amazon packages so let me just be me but you know a UPS is going to be in a really interesting
place when you're the death novel is hey UPS we don't need you anymore and we're competing with you that that's going to be a really tough day when that happens.

[46:01] No no no great point and you've been being a dumb for a while I think this is the year of it
like that.
Players have kind of become public like both Amazon listed shipping as a business they compete in in in their their financial reporting and and I think in there,
shareholder meetings I know FedEx and UPS had to acknowledge potential competition from
UPS sort of affirming what you said sign out and look in the back of the UPS trucks one thing that gets a lot of people is FedEx and UPS built their business to deliver packages to other businesses
so they're optimized for business-to-business and they they they're much will.

[46:45] Weaker at delivering to residential addresses a couple reasons that interesting is Amazon's built its infrastructure to deliver to residential addresses so it it
it can have some significant competitive advantages there and so if they offer their own service like you can imagine that the place will be strongest as in.
Residential address delivery there's also huge opportunities and challenges in e-commerce in Reverse Logistics and returning packages and doing real time trials and all these things and you could imagine
that Amazon owning their own delivery vehicles and infrastructure they could have some unique offering there that we've never seen
UPS or FedEx try try to offer is actually quite a pain to get a UPS or FedEx driver to your residence to
pick up a package that you decided you didn't want but I suspect that might have something to do with the the skewed packages in the back of the truck sure looking and if you're looking at a truck in a residential neighborhood it probably does have a lot more.
Amazon packages but if you were working and you know big big high-rise office building you probably see a lot of FedEx trucks that are delivering fewer Amazon.

[47:59] Question 2 also comes from Facebook in this is from longtime listener Danny Sheridan if a brand is ready to partner with an Amazon Channel consultant how do they tend to find each other is industry growing or shrinking from your point of view.

[48:15] Interesting so I feel like it's a it's a little bifurcated there's a lot of folks that.
Are relatively small businesses that are trying to sell in Amazon and you know at some stage in their gross they might need some help in severe looking for.
Pretty small providers are folks that can cost-effectively help you know like often a six-figure business potentially not even a 7-figure business so there's a lot of independent contractors that are focused on.
On helping me the long tail of 3p sellers increasingly Amazon an important distribution channel for the really big players and so you see.
A lot of the the agencies like my own frankly bulking up their Amazon capabilities to help their big clients like the Procter & Gamble's in unilever's and Smuckers of the world.

[49:08] Have a better presence on Amazon so I think you're seeing both I think you're saying.
Big consultancies in agencies adding dedicated Amazon practices that are targeted at those Enterprise clients and they're saying.
An increase in the Consultants that help the long tail and in terms of how they find them.
I think there's a couple ways there there are some good Consultants that are on the speaking circuit and that you know do a lot of offer a lot of free content on how to sell in Amazon and
they get their name out and get down that way
a number of them have written books so I got at if you do a search on Amazon on how to sell in Amazon you'll see there's a vibrant set of books and those authors all tend to be consultants in that space in there are.
A couple of.

[49:59] Trejo's that focus a lot on Amazon sellers and so one community that I I try to participate in is this Community College e-commerce fuel it's a bunch of
mostly seven-figure sale seller so you know if people are selling between 1 and 10 million dollars of stuff about half of them use Amazon as their primary vehicle the other half try to sell direct our we have some Amazon presents
and so you know there's a lot of sort of the Consultants that like Emerging Market themselves to those kind of communities any any other tips you have stopped.

[50:35] It's kind of starting to feel a little bit like Dacia world where you got some local people now you got some Regional players and you've got some national and agencies it
a lot of choosing the right consultant is are you a brand a retailer how big are you
how much Amazon experience do you have and then you're where I'm seeing the most activity is around Amazon ads and we have a bunch of questions coming up around the Amazon ad Network.
This is where there's just a frenzy of activity around Amazon's add soap to on the Amazon side they're releasing new units they're releasing new apis there's a lot going on there, show me how rapidly that's growing.
Artists similar large number of agency type people that are kind of like you're coming in from the SEO PPC World kind of in a Feeding Frenzy on that I do know on the soccer side of the company I started Channel visor
we're not really a consultant, we're really a software company and you know.
I do believe there's an area for a we're not included in this I don't believe cuz we're not we're not online sign up.

[51:46] But if you are a software company I do believe within Seller Central there's a little market place so this is kind of thing where I think at some point Amazon needs to step in and say
hey here's Google send a great job with this you find out all their programs better than I do Jason but they have the steering say say
you know this company is a Google Certified AdWords Platinum company what that means is.

[52:11] You got there been to the certified Google training they're using API stay support all the big initiatives and these kinds of things
I see Amazon kind of eventually doing that since your Marketplace and Amazon's got like
thousand low marketplaces all throughout their that got all the App Store and all that stuff so I think we'll see them normalize that
now that is interesting Aldi ad companies to Google Facebook Etc they've always got these oscillations for how they treat third parties trying to get between them and their customers,
Amazon's not known just generally for really caring for that and you know
it is kind goes to the cycle were in the early days so I can wheel of agencies yeah they help us and then over time as growth slows they start saying how could we get more margin let's cut all these agencies out of Facebook Google in those kind of more mature platforms
and that cycle I would say just you
we're about to say I do and then you know here we are in the early stage and it seems like Amazon's pretty open to encouraging this industry so it'll be interesting to watch to see if Amazon all of the same Transit ultimately starts to squeeze margin out by eliminating those this gentleman.

[53:25] And at the moment I was a Amazon has the least mature tools for advertising so it's even more important the agency's or to fill in a gap but as a tool sets get better.
Like it it becomes much more viable to eliminate those middle.

[53:43] Question number 3 at give me a time check Jason how are you doing.

[53:46] Yep we are 53 minutes in the show so we got about seven minutes left.

[53:50] I'll try to get these two Done Quick.
This is Adam from Facebook and it's been cakes how will the CDP change in the next 3 years
and how does personalization continue to evolve thanks for all your time and energy on the show Ben from Compass read in Philadelphia I don't know what a CDP is so I'm going to kick that one right over.

[54:19] So I'm assuming like there's lots of acronyms and some of them have multiple meanings I'm assuming he needs customer data platform which ties in with the personalization
so there's an alphabet soup of all these
systems that a business might use to track information that they use for advertising and marketing person
purposes and for personalization and customer experience.

[54:44] Purposes and said started that a popular when you hear about a few years ago was called the DMP what which is a data management platform a lot of advertisers that didn't necessarily know
the individual audience they were marching to might use a DMP to keep track of the segments they were,
are marketing to and then sort of evolution of the DMP is this CDP which is
a database of attributes on individual customers and customers a site misnomer
oven at the prospect not a customer so it could be both prospects and customers I'm so that it's a database you would use to keep
Keep information about people I mean is a you know it in all the time that contact management systems are in some ways cdp's there are
bunch of specialty CDP is that our Focus for particular use cases and.
In general how that's going to bother with it in the next 3 years like obviously data gets more important expectations for four more
personally relevant experiences get more important and so all businesses just have to collect and act on data better A lot of these systems are still design for
a single-use case now so they're sort of siloed on one particular thing and I think over the next three years they get more generalized and you know the date they become a system of record for Content that that.

[56:12] Get used in a bunch of different places so you might use it for your advertising and for your email and for your
on-site personalization platforms and all these sorts of things where is today.
Each EDP tends to be optimized for you no one or a few particular touchpoint so
in in super shorter I feel like that's the evolution and I guess the last thing I'd throw out is a lot of people that already invested in these platforms are now having to take kind of a step back because the
the Privacy regulation is getting stronger and a lot of the data that had been previously collected and put in these systems
hasn't been collected in a way in which the businesses are authorized to use at so 1 new
new Wrinkle In all these platforms is data governance and audit trails and making sure you have your permission to use all the individual elements you know about that customer in the way that you're using up so it.
Maybe industry industry a heck of a lot more complicated.

[57:12] And what he says how how does personalization continue about the sooner you can get some data to drive it are you a big believer in some of this machine learning AI is being a total game-changer here or or do you think that that's a little bit

[57:27] I think it's important but I do think it's overhyped the I don't think
just because inexpensive personalized it better and so I think it if your goal is to take an experience that was the same for all your customers and personalize it for each of your customers that's actually dumb golf
because that doesn't guarantee a better outcome like I think the reason you'd want to personalize those experiences is to make the experience more relevant for each customer interview,
you happen to have one experience that's irrelevant for a hundred million customers as for example Apple does like
knock yourself out that's awesome don't don't spend the money to the personalized that preaches hundred million customers.
It was one experience words but in many cases you have lots of different Shoppers with different missions that are different contacts and so you need to personalize to make it more relevant and so like if your goal is relevancy
yeah collect all the data and do what you have to do to get more relevant if your goal is just to be personalized for the sake of personalization I I would argue.

[58:28] That's that's kind of a silly goal
and you know I would argue some of the highest value personalization we've already been doing for 10 or 15 years I mean the recommendation files on Amazon are 35% of all Amazon's revenue
you know his is a i and better data making those recommendation tiles better today than they were 10 years ago absolutely but it's it's.
Evolutionary not revolutionary so I think there's places where it's a big deal but I think however big a deal it is is overhyped by the vendors right now.

[59:02] Cut it and then our fourth and final question for this installment Don't Panic if you submitted a question and we haven't gotten to it we have a good
15 more that will get to honor Nexus request and show this one comes from long time listener and guess Jamie Dooley Jason Scott have you heard any news or updates around,
Conoco Amazon Singularity which is the
so I think he's making out that name I've never heard it called that but there is this combination going on at Amazon between vendor Central and Seller Central and he makes a joke that he has heard the project school name is a brexit.

[59:39] Play Leon the brexit turn I'll kick off this one and then
and take it over to you so long time Amazon had two ways you interacted with them
that's if you're a brand retailers were always kind of in this third party bucket and then he sold other brands and then transfer into their Central the world's all smushed together because every retailer wants to be a retailer and so what's happened is just give you the slang so you should be that if you want to sell in the hole so relationship with Amazon
you would use this portal called vendor Central it is very simple it's essentially a kind of you know
chatting with your buyer and uploading you know kind of negotiating and saying hey I'm going to send you a hundred widgets and and this kind of thing and then
South Central is the third-party Marketplace World Hunan Seller Central very quickly you know it's kind of I would say.

[1:00:36] 10 to 20 x functionality of vendor Central soup. All def ba and there are you reporting
by box pricing Dynamic this that I'm so sorry Central really got more sophisticated as
as Brands kind of came on the scene song or direct they wanted the kind of had to use when they're Central.
And then they wanted a Seller Central experience and then they started just do both which created this hybrid model that that we talked about on the show Jamie's kind of
early Pioneer of his times at Doral Inn and Creek so.

[1:01:12] What's happening is Amazon's decided to squish the teams together and really have a central kind of a thing that makes sense but it's quite painful from what I'm hearing you know I I talk to Brands and
they literally will talk to three Amazon people and get different answers of
should baby one piece rebuke and a 3p can they do hybrid who are they dealing with I'm so there's no
to be a little. Of total chaos over the Amazon around this right now it's best I can tell so yeah I do think it's going to reconcile itself Amazon obviously is very.

[1:01:47] Focus on the consumer experience and Wildland on a great consumer experience but there is a lot of chaos there that have looked into wow you know they have this
they have these record reports to get around like.
Demographics your customers out there searching on reports
and then there's a couple ad sites that used to be only in there and then the the more enhanced pages on Amazon used to be only available there so as their special needs together
so that good stuff coming from 1 p.m. to 3 p 1 P people were always like
gosh I really wish I had more control over my listing and I I had a lot more dynamic system for the set the other so a lot of that,
I think the game is going to be good and it has a lot of pain to get there.

[1:02:44] Yep and I I guess I would just had a couple of things like early on Amazon head you know some interesting Protections in place if you wanted to be a three-piece seller and Amazon and therefore you're using Seller Central,
you you you had to agree to let Amazon buy your product one p if they chose to so,
they make it a century kick you off the platform review if they ask to buy your product first party and and you chose the only sell it third party
the Indian that they have the flip side if you're one piece out on Amazon you need permission to be a three piece or so
in some cases vendors that were hybrid sellers had permission but more often.
They were they were one piece hours in 3p sellers in Amazon just didn't notice and in a few cases Amazon noticed and post it but more often.

[1:03:38] Amazon would just to let it ride and so like you know some some mergers that have already happened
there's two businesses used to roll up two separate execs and we're separate p&l is an Amazon now they roll up the one exact
and it's way less likely that you was a seller are just getting away with it unbeknownst to Amazon so it.
It's much more likely that Amazon has visibility and and you know is used for the implied in the question
they're strong rumors out there that the tools will eventually merge the the
name for the tool I have heard the most and rumors is Amazon one vendor so I don't know if that that ends up being the.

[1:04:18] The universal replacement for Seller Central and vendor Central will have to see but obviously you know a couple months ago there was a brouhaha Amazon.

[1:04:31] Cold the one piece hours so they said hey if you're selling if you're selling us just one p and you're not doing 10 million dollars a year in Revenue it probably doesn't make sense
breast keep you the one piece hour or so we're going to ship you off that platform and the way you should have a relationship with Amazon at 3 p so they're there were a bunch of hybrid settlers and small one piece sellers
aren't you getting forced to go to 3 p.m. and you know all this stuff is playing out out simultaneously but I do like Jamie's names.
I do think it would be funny if it was high brexit.
And I think given time that is going to be a good place to end because we have done it again we have used up our a lot of time we do have a bunch more questions to go to the store going to record Another show here pretty soon and release it in the very near future
there's also some news happening while recording the show Chuy's just
did their IPO today so if you do have any comments or questions about the
the stuff that we did discuss on this show please jump on the Facebook or Twitter and and let us know as always if you enjoy the show
we love that five star review and we didn't get you a question keep your eye on the feed will have another show out super soon with the
the rest of the questions thanks very much.

[1:05:50] It without your five star reviews were never going to make it back onto the top 10 podcast cast list so we really need everyone to step up and leave some reviews so we can be on there for the Meeker report next year coming to listen to show everyone we really appreciate all the questions and engagement out there in the community that's what makes it really fun for us
and until next time.

[1:06:12] Happy commercing.

Jun 5, 2019

EP176 - Tuft & Needle Co-Founder JT Marino


Tuft & Needle (@tuftandneedle) is the original digitally native direct to consumer mattress brand (founded in 2012).  In 2018 they merged with Serta Simmons Bedding company.  JT Marino is a co-founder of Tuft & Needle, now Chief Strategy Officer for Serta.

Topics covered:

  • Tuft & Needle origin story
  • Merger with Serta
  • State of the online mattress industry
  • Tuft & Needles Amazon strategy
  • Future of Direct to consumer model
  • Omni-Channel opportunities

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

Episode 176 of the Jason & Scot show was recorded on Monday, June 3rd, 2019.

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


[0:24] Welcome to the Jason and Scott show this is episode 176 being recorded on Monday June 3rd 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:38] Hey Jason welcome back Jason Scott show listeners one of our favorite topics here on the Jason Scott show is direct to Consumer brands or digitally native vertical Brands to choose your poison
the day we are really excited to have one of the
Oggi’s JT Marino she strategy officer at Serta Simmons bedding welcome to the show.

[1:05] We are excited that you’re able to join us tonight JT one of these we always like to start off as give our listener and a little bit of a bio background on yourself can you talk to us about how you came to starts a tuft and needle.

[1:20] Sure so background let’s see so I study Computer Science and Mathematics at Penn State
and that’s also where I met my co-founder on it something you don’t Daisy Park we’re best friends
bear and help several startups build their engineering and design teams product teams and one of those startups that he actually ended up joining.

[1:46] And we decided that we wanted to Branch off and the time was right you wanted to start something of Our Own,
but we wanted to do something very different we wanted to start with
so trying to trying to come up with an idea this would that I would like this company for this week we really wanted to start with a problem that we knew.
I needed to be solved the big problem and what better way than the start with something that you experienced yourselves.
And so the idea we went to the prom We settled on was shopping for a mattress.
So I add you don’t have to call a judge had gone shopping for a mattress which was supposed to say worse than shopping for a used car.
A lot of money like it try to return it couldn’t return it and so literally every night was reminded of this big mistake had made and so that was one of the items that are one of the ideas for your problems to solve.
And in a way it was eccentric on the list because it wasn’t software-related which was primarily or background.

[2:54] So we decided to do you know instead of coming up with the idea of finding some co-founders building a pitched backcountry.
The BBC’s Kearns money building your team W product a year or year-and-a-half later launching it to find out if it works or not he wanted to rapidly test it and see if we can find product.
Ideally within a week.
So we knew if it would have legs or not or whether we should move on something else so we did was we built a single single page website.

[3:28] And I and I actually should say the way that we
approached the value proposition in formulating part of the business model was started with what we called hate must be took a legal pad we’re at the tables at the top
we wrote down everything we hated about shopping for a mattress and everything we hitting about mattresses example walking into a mattress store and having all of these different options to choose from.
Another commission sales people who are like really pushy and he’s all their sales tactics also not about a lot of fun,
I’m having a scheduled delivery take a day off work to receive it and so on return processing just there’s so many tears so many things in the flood literally for the page we do a line down the center and just what we would do instead
set up all these options one one mattress set up a commission sales person no commission sales person having go in the store will start online
instead of having scheduled delivery to ship it via FedEx it possible to things like that we reduce the the feature list to the minimum we fought with
it would take to convince me to buy from a company didn’t they never heard of and then just converted that to sales material on a website took a photo stock image of a mattress.
Put that up there in a credit card for the bottom.

[4:43] And the credit are formed it wasn’t fully wire. But it would send a signal somebody attempted to buy lunch the site took out a Google ad in 15 minutes later there was somebody just jamming on the on the process button.
We knew that we if we could get within 15 minutes of somebody already trying to buy.
Then there was something something here so that’s what we should decide down that was Junior 2012 over the summer no BB figured out
how do you make a mattress to make slime with a supply chain wires in a and then in October we launched tuft and needle the first product.
I’m online but it was October 2012 without Venture Capital it was fully bootstrap usage at 4 months
Runway with my savings just to survive before we had to either get a job or something ourselves between successful in doing what about 3 months post 1.

[5:35] That’s awesome did that first test customer ever get a mattress as far as you know.

[5:40] To be honest we we we we lost a customer we didn’t have their contact information.
I really appreciate them. Who knows maybe after that maybe somebody wouldn’t have no somebody didn’t attempt it within the first day we might have abandoned the whole thing but I’m glad I’m glad whoever it was.

[5:59] Yeah so that’s an awesome origin story I’m sure it’s a ton of the the diesel need to come in as we talked about on the show
come out of this Factory at Warden and you were across town like is there a Penn State Borden rival Reaper or digital native brands or not really.

[6:17] To be honest I’m not I’m not sure about.

[6:19] Yeah if you guys don’t have a softball league or anyting.

[6:22] There very well could be I will alternate there’s there is a pretty strong network of very successful entrepreneurs in Silicon Valley from Penn Station.
Yeah something like Stanford Harvard but we we we definitely have a good feel good group going Wheatley and.
A few others that works in the early entrance into y combinator in the first the first.

[6:47] Yeah it’s an interesting that that that part of the country has been such a fertile hotbed for for entrepreneurs especially back in 2012 you took a pretty untraditional path in.
Not raising outside money will talk about in a second that you were ultimately part of an acquisition but.
If you can say like where you able to then grow organically and did you ever have to raise any money before the acquisition.

[7:16] Yeah we we we grew so we started with $6,000 and we grew that.

[7:23] Sort of an anomaly so we grew like a fast-paced start up with a hockey stick all the way up and see the point of a merger.
And we merged with Serta Simmons the largest mattress company in the world last last October.
And it wasn’t something that we had to do we actually decided to do it because we strongly believe that would be the fastest path to completing the mission of company our mission was to not only disrupt the industry.
Are catalyzed A disruption what you did but it was also to shift the industry to being focused and prioritizing the customer.
And so we three felt that this was was a way to do that better between 2012 and.
In 2018 read re zero capital on the first three years we didn’t have enough.
Prophet to actually have much of a marketing budget and also be heavily relied on an iterative process of using customer feedback
and it’ll rating on the product or service that I pop all of those things to be Best in Class which then turned into I’m a very strong organic growth promoter score the highest in the industry.
North 75 on MPS and we really relied on our customers to spread the word until we we had enough profit actually start feeling I’m feeling the Dubrow.

[8:47] That is on bo4 are an awesome I’m curious I I presume you get asked for advice from other entrepreneurs is is that a path you would encourage other people to follow because I feel like there still is a lot of indoctrination and brainwashing.
In the BC community that they’re the the path to entrepreneurship.

[9:06] Well it really depends on what path you give me what do you want is your outcome we are going to disrupt something big but we also had a minimum
our goal as a minimum was to build a company if it if we couldn’t really grow it and beg him and caused a kind of change the ministry that we wanted to
we were okay to settle with a lifestyle business I could pass the soccer he’s we’re making at the previous company and then we would just build something else so
but one of the nice things about it so we we had a bad taste in your mouth with the proof of the previous company that we would work for 9
Venus not number of times how much Capital Money can be.

[9:45] Can be toxic to the decisions you make when you prioritize growth of everything a lot of times you forget about the cost of the very customer you’re serving or it sustain the shity product.
Never really should exist and you don’t really need to Sprint to solve it because you got this money floating you
so you know are orb just burning cash in buying your customer rather than turning them and having them or do $2 I’d rather than buying finest customers convincing them so we viewed it as a constraint
I having this constraint it forced us to make.
The brands of The Full Experience beginning to end for our customers so good that they would spread the word so additionally gives you a lot of options as to what you want to do you want to build a lifestyle business you want to sell it
want to do a merger you want to go public you know how the company grows you you have a lot of flexibility is to
how to do it you can operate your business build the culture the way you want to build it you don’t have anybody to condense I will say it’s playing the playing the
play the game on on hardcore mode so the risks the risk is much greater.
I’m the reward could very well be much much greater as well as high-risk high-reward.

[11:01] In it and I’ll also say I we learned a lot about building a real profitable business
building it up proper budgets and understanding the P hiding under Cena piano from from Day Zero before we had a CFO I just.
I say it was it is it is a huge learning experience for Daisy and I and it really set us up for whatever else you know we may want to do in the future but it’s really
it is really up to based on where you want to go that we ended up moving out of Silicon Valley because he knew he had to get out of that bubble of thinking.
If we were going to limit on some nothing kitchen hours.

[11:39] That’s awesome one of the things I like about that model as you pointed out it is it is potentially hardcore mode but I have a premise that there’s a lot of businesses out there that can be really vibrant.
100 million dollar-a-year businesses to $900 a year businesses that can,
you know it support People Help customers gameplay employ a bunch of people and that can be really successful business if you’re able to grow to be that kind of business organically but of course,
that’s not a win for a venture-backed company in so you’re sort of forced to get to that that next stage.
Weather whether there’s organic demand or not and then like it it feels like we’re starting to see some of these these companies have to occasionally do foolish things to try to.
Does BC multiples when the business maybe dance support.

[12:30] Yeah I’m in even even just press unimpressed is a good way to getting exposure
the Press we found it they don’t for the most part don’t like to write about startups that that had to raise Capital because it’s all about the valuation all about the amount of money raised and we always struggled to get to get noticed
where the architects of the destruction in the mattress industry and I’m in it it’s always been hard to cut through the noise.
I’m to really get that story out so but yeah I mean it’s it was definitely definitely an extreme position you know the Other Extreme raising a lot of capital but I’m in the end you know and it really depends on you know what
come product with the markets are in it possible there’s a few factors that made it possible for us to bootstrap it I’m in there in the early days
but in the end I mean my co-founder and I we eat we owns now 80% of the business I’m right up to the merger and be a given away 20% to the employees and then.
Set alarm to find me solve a long way to go through the merger to fully realize what it was originally but I’m going to Wild Ride but.

[13:41] That’s terrific and you mentioned just rubbed her I feel like there’s this or the traditional notion here is you know you had these disruptors that come in and come in industry and they either.
Disrupt the incumbent and become the new incumbent or
you know very often we see the incumbent acquire the disruptor another thing that’s interesting about you is is you alluded to earlier it wasn’t really an acquisition it was a merger of a disrupter and
in an incumbent in the mattress base and you know I might even characterize it as sort of a reverse acquisition in that it feels like.
You guys are not the leadership team for Purser. And you mention you’re you’re the chief strategy officer not for tuft and needle but for for all of Serta Simmons bedding.

[14:30] That’s right so yeah so the merger it was operationally legally and financially emerger
and we would not have done this unless it that was the case and that was only going over the strongest and sticky and I had.
I’m about to be honest that was also the way message because her descendant also wanted his if you if you think about it you know these these companies that.
Heavily rely on retail, as their primary distribution.
I’m when they when retail when this this whole landscape has and he cusses him completely changing the customer journey is completely changing what’s happening is direct-to-consumer is is the starting point of the customer Journey,
and so if you if you are you see that ends and they did see that.
That is what leads the business and you know a non long the customers Journey then some of them go to retail that’s the ship that’s happening so we are taking me to ship and are also currently I’m currently responsible for
I’m building out there direct-to-consumer business and getting a setup properly.

[15:38] Freckle is it on are you guys doing that on the platform you guys filters at, reimagining of of weather look like.

[15:46] Yes it’s it’s it’s almost completely on our platform you know that
in the first couple years I’m at built out all the software from the the e-commerce side with the front end all the way in the back ends and Order management customer service tools
I’m today to factory floors where we have scanners and all the logistics the nice thing about having her own stock is that we have all the data and we can automate everything so versus using like an sap origin of some kind of other or
you know like Shopify some
I got your very your business rules and your business process do not have to conform to the software that you’re using you can literally don’t let the way you want so imma get it is a competitive advantage
and for us I mean it’s it’s fairly simple to replicate for for the other brand so don’t go all operate with the same efficiency.

[16:42] Spoken like a true comp sci.
The so that’s good background let’s talk about the state of the mattress industry so you guys kind of I think you were really a side I don’t have a good yardstick on this then now you can’t throw a rock without hitting
10 mattress companies how did that kind of developed from your point of view.

[17:04] Yeah it started we were the first it’s so we started there were some company company selling mattresses online that it had converted their money,
and started before I mean mattresses were sold online back in the late 90s but that had converted to the model so we are the ones that said architect the model but really,
meet when we started in 2012 we got noticed in 2013 By the Capital Community.
I’m in another there’s a point where I heard the phrase meet decided to play in the space on actually to the Venture capitalists.

[17:39] Said that if we all had actually told us that if we didn’t take their money they would find somebody who would and they did about two and a half years later we had our first look alike company start.
The most heavily funded on competitor.
And then about six months after that it should more and then about a year after them probably 75 and now there’s two hundred plus,
enzyme you know as a first-time founder I will say that it was exactly.
Emotional emotionally it was emotional trial for me.
To get over the fact that somebody was building a company exactly like yours you’re not really much you can do a do about it.
And zabuton has I saw that this was actually a really great thing.
Because I’m all this Venture Capital flooded into the marketing is being spent a marketing raising the awareness of of consumers they knew they now know there’s a new way to buy a mattress
and as long as you do a good job of getting your name made it out there you know this is a.
A high-ticket item will do a lot of research on his long as you have a solid.
If not better value proposition in the competitors their dollars become your dollars so it’s been very good for accelerating our growth and and helping to stay safe out of the way it is this as it’s growing.

[19:07] Then what made you pull the trigger on combining with Serta.

[19:13] So in an initially started with so I want to say it wasn’t you have a 2000 mm 15 the beginning that we began to develop on the retail strategy.
And I’m in an ARP roach and where were also the first ones doing this and building the store was not to take the approach of a pop-up we we we,
I guess we’re sort of righteous and taking a right to standpoint or idealistic standpoint that the retail model is not dead.
It’s going to take a new form and that we just have to figure it out the unit economics must work out somehow.
And so we open up a store in San Francisco in followed by a couple more and it took us it took us a few years to figure out how do you build a store a retail store in today’s day and age that’s double lasting to the Future.
An Xin into a profitably and when we figured that out that was really in 2017
we are
well one of the things we learned was it something around the 6-month pay back before you know you making money back for a living and sorcery really wanted to rapidly expand it where you would being cash-poor because we’re following all are profitable growth.

[20:30] I’m being bootstrapped really wanted to go fast or we would have to raise Capital so we decide it okay we’ll take some capital on so we originally wanted to erase 25 million,
which isn’t much and I was actually it was very easy to get to a two-term sheets but it was very difficult to get the term sheet for that small amount
I’m so we as we were going through our options we had a lot of the word got out that we are raising
and then he got out to
I’m big giant retailers I got out to strategic factories and competitors and then we started to get calls and bounce from others and when Serta Simmons reached out
it was actually driven by the the private Equity Firm that owns majority
bed base I’m seen this and they saw the opportunity and they we
decided OK Google will meet with them and just see what they have to say this is one of the the big boys ever going up against fighting against and take him down by the time we met with them we saw that,
their point of view is completely different their executive team nobody laughs industry is on their executive team should weird their vision of the future is very similar to ours

[21:50] We just saw that there was actually almost for alignment so so we decided to pursue it and if it worked out of work. If it didn’t you just continue on with Rick will raise at Capital and will
we’ll expand our retail footprint, faster so yeah that’s that’s really the Genesis of how.
We are arrived at the concept of the merger.
And to be perfectly honest digitally native brands have a predicament when you when you capture the majority of the online Market you have to do something if you want to if your goal is to really be the number 1 2 or 3 you have to keep
and you have to expand and distribute and so one of the the key benefits of doing this merger was that sir Simmons has the largest distribution Network mattresses so essentially
unlocks all of those channels for us to expand so that was a way to greatly accelerate the growth of subliminal.

[22:49] That makes total sense. It’s interesting to see how much the evolution in the space has changed consumer behavior in some ways and expectations and then in other ways,
you know maybe it hasn’t we’re recording this the week after Memorial Day is that still the mattress Superbowl.

[23:08] It’s one of them yeah that’s it’s definitely one of them and it’s unfortunate that mattresses are sold this way from my point of view
it’s very promotional markets and its trains on customers to shop that way unfortunately.
I think if if it wasn’t so promotion promotional if people didn’t shop that way we’d actually be about all these companies I should be able to provide products at a lower price but yeah it’s customers point of customers expectations at least the ones that now no
are there any way to shop now expect at least so the way I the way I frame is usually is our biggest competitor is really Apple.
And Amazon because what they’re doing is on bear setting the bar,
so customers expect to get the kind of service that kind of product and kind of experience from the great companies that that are leading the way in other markets and sell them to go to buy a mattress they’re expecting something like that and then on top of it.
The people that are not learning about Stephanie Tolan and some of the others are now seeing that there’s also a better way to buy a mattress so that people want their mattress right now
they want it
easy it when a good price they want best-in-class customer service they want free returns easy return they come to expect all of this so that so any of these companies listed in comments that do not have died after I just going to the just going to die.

[24:32] For sure.
You mentioned where they got Scott whipped up into a tizzy of a word so we’ll want to get to that pretty quickly here but I did have one one other question like.
As so many digital competitors have emerged in the space one of the negative ramifications is
all the digital marketing tactics are super competitive and so that Brit drives up cost of customer acquisition and all those things and I and I want to say like back in 2017
there was this Fast Company article talking about like,
a lot of oily marketing practices in the mattress base that I you know I think one of your competitors,
was actually suing a review site and they were accusing him of being fake and then they they bought that review site and
and I drop a laxative I have the story right.

[25:25] Yeah that’s that’s about right eye so,
I’m not going to name any names but the mattress industry has been dirty since its founding I mean this is like it’s prolific
so I’m the reason why you know those law tags that are on a mattress exist was that mattress salesman would sell you a mattress topper
debits advertised that it was the used horse hair is very premium very high-quality material but instead it would be filled with straw.

[25:52] And so the government stepped in with a law that you have to disclose what’s inside the mattress so that they can track back if a customer to open it and discover or there’s an audit that you were you were lying then you do know
Yugi is a good thing because
customers buy a mattress so infrequent and if so uneducated really what to look for I’m like a computer like we no processing power
Aaron’s memory and screen resolution me know these things now it’s pretty easy to the brush up since the last time you bought one but a mattress it’s very difficult to too and to know what to look for the teaser fleece customer
and so it just the nature of the market is is set up for it set up for that and it also stems from marketing digital Lisa saying you’re something that you’re not.
We’re saying oh yeah we have that too but you really don’t you know that you can get away with it because you’re just a customer to mattress store and you know where you’re having it so but anyway yeah one of the
one of the tactics that used is these these review sites which I I refer to as the digital manifestation of mattress sales
so in and they’re not all like this but in general but how it works is these bloggers will write a write a review.
And I’m talking to a affiliate program or they get a kickback if the traffic flow through their website.

[27:18] And we have seen this. Where would be the more you give them in a kickback.
The better your ratings will be or if you choose not to participate the lower your ratings will be.
And we do have some on some evidence this this happening to us very frustrated because it’s it’s,
our customers to know what they’re reading in are they going to see the little disclaimers at these are these are paid on the simply advertisers but yeah there’s several competitors that we have that I’ve either built
I’m using these independent unbiased I’m doing are quads unbiased mattress reviews sites.

[27:58] I built them and long stem and tried to disassociate themselves and just review their product better and some of them have acquired a few and maybe just found another place another affiliate that we’ve been working working with.
I was actually invited or so and what do you suppose what do you do if they have a lot of customers are flowing through there if you’re if you’re rated poorly you.
It starts to influence your people perception of you it’s it’s almost like if you don’t if you don’t work with the mafia that you’re you’re going to lose.
We refuse to work with it so it’s for a long time until we finally decided that if we did in our company’s not going to survive its,
what about doing the deal with the devil it’s very frustrating but yeah it’s it’s a it’s a dirty market and that’s just one of the game that’s played another one is,
persistent promotions another competitor I don’t want to name it runs a promotion 24/7.

[28:51] And that’s not a promotion after they’re literally rules to marketing if you run a promotion for if you don’t stop your promotion for a. Of time before you.
You’re next one then that’s then it should that supposed to be your actual price
but again customers a fool because they come in to buy the mattress when I leave and you don’t see them for 4 8 10 years so I’m those are just two of the tactics that are used and for a company like tuft and needle
we’re we’re hiring people that are that are wanting to do right by the customer
go to company that’s focused on the customer change the industry that way when they see this and these tactics working against us but we we know we can’t play that game or it’ll it’ll it’ll taints
you know our ethos and I mean I’m certain that we would lose customers I wouldn’t be able to sleep at night it’s it’s definitely challenging so that is one of the key challenges took me to has is it is it
which fingers do you know hopefully continue.

[29:51] In this particular ironic when the the senior leadership of a mattress company can’t sleep at night but yeah.

[29:58] Exactly.

[30:01] Call so we can introduce to Amazon it would be a Jason Scott show if we didn’t kind of do a little bit of a dive into Amazon.
Maybe it’s interesting from historical standpoint I believe you guys sell on Amazon and it’s hard to tell if its first party or third-party or are a blend and then now so
it’d be nice to hear your historical aspect of how do you make that decision.
And then it looks like everyone selling their and now of course Amazon has an Amazon basic mattress in a box kind of thing how do you feel about all that.

[30:34] Well we sell first party onto to Amazon so in the in our second year we,
we were struggling.
To do it stops when you’re building a brand from scratch one of the things you have to do is build credibility until just everybody knows your name and one of the ways that you do that,
especially is a company that’s on unheard-of is you you collect testimonials you collect reviews so they never talking about this all we’re going to do reviews we can’t post them to our site or like,
have them write them on our side because what customers we wouldn’t trust that if we are buying it from somewhere else so we’re just like somebody’s going to read a review,
where would we read reviews on where to find one more shopping and Amazon for the places that both of us read reviews for you by whether it’s through Amazon or direct
and so we have this idea that we would list our product on Amazon didn’t even know if they would sell mattresses and just so that we had a place to send their customers right videos.

[31:33] And so we did and it took a couple months to get to get to buy button activated so that we can have reviews place there
and then we started sending our call our customers everyday to write reviews
and within about read a beautiful mess with the highest rated they were selling matches with the highest rated mattress in their store we are also the highest rated product in the entire Furniture category and we held that spot for almost two years so we were at an early mover.
Enzyme and we still have majority to Market of mattress sales above the $500 mark.
I’m on Amazon Nummies also developed a product with Amazon I’m called the knot.
And so they did really surprised to label but you know that one of the things they found is that brand new Mater and they wanted to do a collaboration so we did develop a unique product if only available exclusively on Amazon.
To serve their customers at that lower price point above or below $500 so I’m the way that we view it is.

[32:37] For us to only purely sell BTC,
the market is only so big so the online is only so big it’s something like 20% of mattresses the bottom line for once once your growth curve begins to slow.
That year your next question is where do else could we grow and there’s other markets and one of the big markets is Amazon so so far if there are customers there that want to buy up the needle why not be there,
as long as it makes sense for a business so one of the things that we’ve we’ve always done is we’ve separated so so those reviews ended up turning into a lot of sales and then end up being something like,
the years of art Marcell we would always measure penile separate or operating expenses so that if for any reason something happened to Amazon it wouldn’t include our business and I also gave us enough
leverage to negotiate I’m healthy healthy.
Chirps I’m at how it’s being sold there and but you know what the fees are in all that and to be perfectly honest I mean it’s always difficult working with the big partner but for the most part it’s been it’s been a good relationship, we’ve done very well.
I mean you know of course the money that we make their wewe just further in investing the brand so it sits and there’s definitely some cons but there’s also going to want to Pros for our business.

[33:58] Men are so not only did you going to partner with Amazon you partner deeply the soap so a lot of people a lot Skeptics say okay you gave Amazon all this.
Data and essentially LED them right into the mattress industry, how would you respond to that.

[34:14] I would say that’s probably true
we did we did share a lot of learnings with them they should a lot of lemons with us but if you think about it it was really do need to be honest with somebody else on it was bound to happen
but if you like here’s an example so we had a hundred Knight trial,
we found that hundred I tried worked really well and they had a 30 nitrile that was really upsetting all of our customer so we prove to them with data that this was something that they needed to do survey they didn’t they don’t do this they didn’t
my mom said he didn’t do this another word other categories so we convinced them to increase their their their trial on their return process to DeMatha are such an example is many others but but there are people who shop there
and they should get a good experience I didn’t like we had talked to me or has customers that buy on Amazon we want them to be taking good care of so even though it’s technically not our Direct customer.
We do want them to be taking care of him or Amazon to do a good job at themselves.
I’m we viewed it as a as a good thing to to collaborate with Amazon but you know their Amazon wants you know their customers by and about all categories and they want to do a good job I want to be competitive
they’ll figure it out you know just like our come out other competitors and figure it out so so that’s I mean it’s a difficult question to answer but that’s the sort of how I feel about it.

[35:38] Interesting in 1/4 vacation cuz I think you have one of the the most mature.
Amazon models out there so you see you have sort of your core product or original project product what you sell 1p through Amazon and you sell direct and obviously one additional challenge.
Protab selling 1p through Amazon as Amazon set the price at sets their price so they can potentially sell your product at a lower price point than you’re trying to sell your product.
You have this exclusive.
Product on Amazon Dena data value price point but then if I have this right you also have a premium product damn it that’s only available direct that you don’t make available through Amazon his back.

[36:24] So

[36:27] And I think that’s like a sew-in are there the way that we view it is.

[36:35] All the products are the products that we sell elsewhere we want those to be available direct with the exception we know we violated.
That idea with the nod and we don’t intend to do that with anybody else but but you know when you’re building your when you have your own stores and you have your own website.
There’s got to be some value,
Special Value that you would get coming direct and so we want to make sure that you have the full product menu available track I am so so so some Distributors may have some product that will not have them all,
no we don’t want to put on everything and every point of distribution is only makes sense like we’re we’re in Walmart we’re not going to.
The mint mattress would not sell in Walmart it just wouldn’t the demographic it wouldn’t even match unit just like the original wasn’t selling Crate & Barrel so we saw them in there.
Like we we just pick and choose where we believe the product would be best suited you perfectly honest some of these higher price points we don’t necessarily believe are the best spots for Amazon.
Until until proven wrong so we the majority of the match is being sold are actually below the $500 price point so by these these Chinese companies in factories or import export in for 10.
I’m just honored coming.
So you know we we don’t really see it necessarily has is it is a huge business. And sell them at the same time we also at the balance with a special value is like does example if you were to going to Best Buy and see the.

[38:00] The store in store for shopping shop for Apple doesn’t have all the products are just like at Walmart you might see an iPod you and the Apple Store there’s all their products you can play with all of them there’s all their merchandising you get all the.

[38:13] Experts about everything about the products there’s a reason why you still go into a Walmart to check out a product that you still want to go into an Apple Store.
And it’s the same thing with our own stores and Zen are digital store is that you have to think about the the the balance of value that you’re providing your customer specially if you want if you want at least some percentage.

[38:36] Yeah so speaking of that like one of the things that’s interesting to me so you were primarily as a direct model you do this merger with Serta and I think sort of had some direct sales but I
my son said they’re overwhelmingly a wholesale model.
And so now you have some sort of experience and Legacy on both sides of the fence we’re seeing one or more of the the the digital native brands that originally only sold direct through their own website.
You are starting to do Partnerships with traditional retailers but what’s been interesting is my senses a bunch of those because you.
Already built this desirable brand that has a special Affinity with customers before you go to the.
Crate & Barrel’s in the Walmart has your often able to cut a better economic deal than the traditional wholesale deal.

[39:33] Yeah it depends on you measure it so if you if you look at what the operating costs are for us to be in Lowe’s and we’re rapidly expanding Lowe’s and we’re the first mattress tattoo to go into a DIY store.
I mean the business is growing very very big and very fast.
But the operating costs is its primarily the the shipping by truckload which isn’t much different than that should be FedEx or customer so okay so that’s that’s you know that
that’s not neutral so but it but how many people does it take to run that to people.
If you look at my if you look at the clock, and we have we have a hundred and fifty employees so but but the thing is it’s it’s not that it’s not that easy you can’t,
that’s the old way of thinking about retail.

[40:21] All of these all these team members that are building this that you know the digital brands and then all the advertising all that in the products they’re building the value.
That the customer stop at it looked like on the customer Journey there’s a stopping point before they go into retail not to sight and then that gets them excited to want to go to Lowe’s to buy so it’s almost like you have to,
blend your expenses erase all your costs on an overhead across your digital but also.
I’m also your distributor so so it’s to answer your question yes it may and may be more profitable.
You know direct but you know by,
but honestly like it it’s still there still a lot of costs are involved with Lowe’s on everything that we do is driving driving those costs should be attributed to two loves them in Crate & Barrel in Walmart and all those.
But the thing is like customers.

[41:18] Customer if you want to build you the online Market you know just depends on which market like if it’s Electronics Electronics I’m going to 30 or 40%.
How it ain’t true that point for mattresses like 20% so if you want to keep growing you’re going to have to,
Spence you’re going to have to be to go into retail and the customer start online and then they they discover you whether to advertising and or Googling around finding you and then you build the excitement know either by the Y right there.
don’t want to go and see it for our specific Market on the mattress is Pete there is a large segment of our customers that want to try the product that’s just unique
that’s probably fairly unique to the mattress industry if you’re if you’re not in a retail store you’re just not going to get that sale so we’ll just lose those customers so it’s almost a requirement if you want to continue to grow to serve.

[42:13] Yeah and I feel like even categories that made me don’t have quite as strong a tri component are still landing at this model where you really need to be Omni Channel,
just survive and that you know that like it it seems like all the brands that started at exclusively selling directory website,
are finding for me either customer acquisition standpoint or customer satisfaction standpoint they need a brick-and-mortar footprints.
The compliment that that drug sales model.

[42:45] Yeah yeah it’s it’s just it’s just logical so it just depends where
like where are your customers go where the people going where are they buying from so I could say that yeah retail is shrinking just. It is drinking digital is eating eating the retail world the question is,
are we just going to stay digital until it fully transitioned over how long will that take.

[43:08] Even if we know that. But saying 10 or 20 years the 20% micro to 60% of something like that it may make sense to open retail stores and expand,
with the intention to contract the retail stores as a transition it just depends on how fast you want to grow and in and you know what what kind of business you want to build but it really just goes back to the customer customer service to go and see your product or they,
some people want to go to Costco or Sam’s Club and they want to buy their that’s just where they will buy their people that only buy from Amazon,
it will not buy direct so do you choose not to serve them you know that’s just a business a business decision so that’s in our point of view is that.
We want to we want to change the industry it’s over to do that when you insert a lot of customers and we need to go to where our customers are so I’m going to channel.
Is the way the thing about omni-channel was it makes everything complicated because the way that you attribute your marketing dollars like.
You know and I miss being able to measure what you know is this a creative or is this cannibalizing and that’s all very complicated so it’s a challenging problem but if you’re determined and smart.

[44:22] So the model that I can inform those decisions it can’t work we’ve proven at least Madison.

[44:31] Yeah I know and that that’s a great point about timing being so important in these disruptions as well I actually started my career million years ago in the like a late eighties early nineties a blockbuster entertainment.
And every year there be some super smart investor that would pontificate that that you know
physical media is going to get replaced by digital and they would short Blockbuster and,
well they were all certainly right in the long-term Horizon they all took a bath shortage.
And that that’s probably a great place to leave it because it’s happen again we have used up our in our listeners time if you do have any burning questions we didn’t get to or want to continue the conversation we encourage you to visit our Facebook page or hit us up

[45:22] Thanks sweetie we appreciate you taking time out of your busy schedule to join us if folks want to follow you online or you Twitter or a LinkedIn publisher or anything like that.

[45:34] I’m not much of a social media person but my my emails JT at 10. Com and our website is is you feel free to feel free to email me.

[45:46] That by the way is an awesome URL and will wish everyone happy commercing.

May 23, 2019

EP175 - Hudson Yards and retail earning news 

Review of Hudson Yards mixed used shopping development in NYC (thye don’t like to call it a mall).

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Episode 175 of the Jason & Scot show was recorded on Tuesday, May 21st, 2019.

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


[0:24] Welcome to the Jason and Scott show this is episode 175 being recorded on Tuesday May 21st 2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.

[0:39] Hey Jason welcome back Jason Scott show listeners.
Jason this is one of those rare occurrences which I think is actually not rare this year that we are in the same city so I am up in Chicago you and I just gave an amazing talk to Retail Group about innovation.
I’m Wichita that do a deep dive sometime I think I would drop some serious knowledge of their want to thank them for having us up and then we were able to lay down a podcast since I’m up here.

[1:06] Yeah I feel like it’s super distracting to actually get to look at you while I’m talking to you usually it’s just the the picture that I have hanging in front of my desk.

[1:14] Yeah your hair is amazing today I think we referenced in the taco or that you had a Brazilian blowout so it’s looking good.

[1:21] Yeah I’m not going there but I’m glad it worked for you.

[1:23] It’s also chilly here in Chicago I was in nice 90 degree weather down in North Carolina and flu up in my shorts I made that Strategic Air and it’s like 52 and rainy here in Chicago.

[1:35] Exactly but I I would like the record to show that I’m still not ashamed of you because I have brought you to my office in your goofy shorts and Jack.

[1:47] Yeah the other thing I’ve learned is when your Chief Commerce retail strategy digital officer you get Swanky Office Space.

[1:55] Yeah I don’t know I don’t know about that they just don’t know that I’m here so that’s like until they discover me I’m going to.

[2:01] It’s like we work but in Wedding Crashers all together.

[2:05] Exactly exactly show us to talk about this week Scott.

[2:10] Yeah we have some trip reports of you and I have both been to New York recently and went to the
Hudson yard new set up there which was pretty cool
how did you get to walk around the structure there called I caught the structure I think they’re going to rename it it’s the vessel did you get to walk around and.

[2:32] I did and this is going to be a big problem for me if the new attraction in all malls is hundred and fifty-four staircase structures I’m in a lot of trouble I might have to change my my field because my fitness level is not appropriate for climbing.

[2:47] Yep sadly when we went the line was like 45 minutes to get into the vessel so we pass on the vessel
but I did get to go into the I don’t know we’re supposed to call I know they are violently against calling it a mall so we went.

[3:02] Next you shopping space.

[3:04] Yeah I went into the mixed-use shopping space that was good so they have a beta store they’re obviously that you’re on the show,
first answer my family down there they really enjoyed the show and then I went with my younger daughter and they had this whole thing called a smart Park, news this whole combination.
Art installation space and kind of amusement area,
I’m in when we went there they had this really interesting kind of amazed so there’s imagine these sheets hanging from the wall in about a 3000 square foot area you navigate through these things and you kind of confined a lot of little interesting.
Art displays inside of there and then there’s a fun mirrored area we can watch everyone kind of getting lost inside of the maze that we enjoyed that.

[3:51] And is it purely to experience or is it also one of these places it set up to take like unique Instagram photos and.

[3:59] There was some of that yes so some of the art installation she likes it in so imagine a column that’s hollowed-out with a seed in it and then a mirror kind of a disco ball mirror on the inside so yes there’s a lot of lot of selfies taken lot of Instagram exciting.

[4:15] Yeah so it’s like taking me I have to be back as.
With most malls apologies these days that’s it’s sort of intended to be a mixed-use space so there’s,
luxury condos there’s a bunch of retail space,
there’s a bunch of Premium food and then there are these sort of
experiential spaces inside the vessel is this free one which is this really interesting structure with all these staircases outside there’s one you just mentioned and then it’s not open yet but they’re going to have,
it’s very tall tower and they’re going to have I think the highest outdoor deck in the in the in Manhattan.

[4:57] Yeah it’s called The Edge not to be confused with,
one of the members of U2 but it’s cool yes cantilever doubt and I believe it’s like 70 or 80 stories up.
So it looks like it’s going to be fun and it has an area there so he’s in Las Vegas on if you’ve been to them we’re going to glass bottom to it so not only are you you know I made some behind it in the air but it seems like.

[5:24] Charter member of the ghost bar in Las Vegas.

[5:26] I’ve also been there how about that.

[5:32] Boiler word that means that place is no longer cool when Jason and sky.

[5:36] We’re all in for table service and were the only people there so that’s going to be kind of fun to see what that’s like unless you’re scared of heights than that will not be fun.

[5:47] Into what was your overall impression this development a little controversial.

[5:53] Yes oh my I always go to my wife on this she felt like everything there was crazy expensive so so there’s as you know there’s an anchor stores a band
I like to find things that can go on sale and there was like nothing on sale at this entire
mixed-use environment so the betta shop was a power favorite another one there is a direct consumer sock company called stance and they were there so that was kind of interesting.

[6:25] I have an inkling why you like them.

[6:26] Yep they have Star Wars socks sadly they did not have them at the location,
you know as a operator I just kind of couldn’t get my head wrapped around how many socks should have to sell to pay for the rent so I felt like something like 10,000 pairs a day so I’m not sure you allow these things,
I lost four companies and they’re really more of the flagship branding kind of on the p&l versus like a real money maker.

[6:52] Yes what it is going to be interesting to watch the.
Anita manhattanites have been a little negative on this base you know they all tend to be tribal and stay in their own neighborhoods and there’s some well-established
shopping district either close to where they work or where they habitually shop instead of Hudson yards is in a new,
area that doesn’t have a lot of residential so it’s right next to Javits Center it’s coming on the water on the 33rd and 34th,
and when you talk to about a manhattanites there like who’s going to go down there.

[7:25] I’m so far away.

[7:26] To go shopping and I always remind them like.
Retail here isn’t probably first and foremost for them like it’s meant to be another tourist destination some of the traditional shopping centers for like luxury shopping like Fifth Avenue are actually starting to dying and brands are moving,
away from there because their rent has just gotten so crazy,
and so these kinds of places are are potentially alternative so I I don’t rule out Hudson you are being successful because of that like all mixed-use properties.
What’s really going to make it successful or not is how successful they are at the mixed-use part like if they sell out all the the residential there and they.

[8:06] Build a big community of potential customers and the the food is attractive enough to draw people there for date night and stuff.
It’ll probably go well if those things end up being a facade and the only reason you’d go there is to shop the beta store or the stand store.
There are other beta and stand stores in Manhattan so like I don’t feel like their store assortment is really differentiated like in fact.
It’s mostly the assortment you see it at any other sort of a or even being Mall,
in the US at this point and we’ll maybe talk about that in a minute the one really Unique Piece of retail there is the Neiman Marcus I’m in the reason I say That’s Unique is because Neiman Marcus is a texas-based,
luxury retailer would like 40 stores open the new store and sometime and they haven’t been in the new New York market and so it’s kind of interesting.
They’ve been relatively successful in the markets there in but.
Opening a new luxury department store in New York is very ambitious because there’s a lot of pretty well-established luxury department stores inside this.
You know it’s the newest in there for probably the nicest Neiman Marcus but it’s you know very high-risk high-reward whether they’ll be able to win over manhattanites with their ton of the Dallas Vibe if you will.

[9:29] Yes several New Yorkers I know pointed out the a bit of hypocrisy about it because I think
the the state and city gave a lot of development funds to this group
I’m actually more than were proposed for Amazon so it’s kind of funny that this was allowed to continue but then you’re bringing Amazon which would actually I have more jobs than a bunch of living and retail space would have to be very interesting to see the
the politics of Play-Doh.

[9:54] I mean these kind of Economic Development incentive programs are super dominant in retail and in development and obviously.
Why do you think there’s some hypocrisy there I also think it’s somewhat of a self-inflicted wound I mean Amazon dramatically raise the.
The the the public awareness and therefore like made themselves as a Target so I maybe don’t have total empathy for them.
But that this does dovetail to that the other thing I did in my New York trip is I went to another mall that’s south of Hudson yard called Brookfield Place and the reason I went to.
The place is that’s that’s a downtown that’s very near the new World Trade Center.
And it’s a similar mall with a very similar assortment of stores and actually I would argue while the food is is much more.
New indistinct at Hudson yard the retail mix between Brookfield Place and in Hudson yard is very similar and therefore not differentiated.

[10:58] What place has a lot of businesses already in it and they just open the first Amazon go store in Manhattan so for the,
all the retail price that’s based in New York and I want to say Bloomberg might even be based in Brookfield Place,
this became news because it was their first chance to experience Amazon go in their local market and so I want to see if they did anything different than they’ve done in the other nine Amazon go store.

[11:26] Today was a similar footprint cuz it got like a sassy that got alcohol in some now there’s some big ones and some small ones but they all tend to have prepared meals and kind of more of a convenience store type selection.

[11:39] Yeah I think if you drop those people in the store they wouldn’t be able to differentiate it from any of the other ones it’s definitely on the small end of the footprint.
And it does not have alcohol and the one differentiating characteristic you would you would really struggle to noticed so,
Manhattan is one of several municipalities that have this local ordinance that retail stores must accept cash.
And so big that’s a big controversy for Amazon go stores because they they were not designed to accept cash and so,
when Amazon open this store in Manhattan part of the pr round it was oh this is the first go store.
That would accept cash so I went there you know amongst other things to see how they they plan to handle that in the answer is badly.

[12:30] What kind of ruins the experience right the whole experience supposed to be totally digital.

[12:33] So again the whole point is like you use the app to show barcode to scan your way into the store you just grab whatever you want and walk out in the cameras automatically charge you for everything and it’s just walk out technology.
The pay with cash this time you can’t get through the turnstiles so you have to flag down an associate when you’re outside the store and get them to launch their app and cashew in meaning scan you in as a cash customer.
And then when you’re done shopping you have to flag down another employee who’s going to wheel out a portable.
Cash register with a cash box to accept your cash and then they’re going to have to walk you out of the car and it just.
It’s a very light.
Obviously they put a process in place to comply with the ordinance but if people really wanted to pay with cash this is an extraordinary High friction and experience and of course.
I like to joke it with Amazon go stores they invented just walk out but they broke just walk in.
Because there’s always a line in front of the store people trying to download the app to get in and now there’s people like,
turn the flag employees to get cashed in it’s it’s an awkward situation for them I don’t think any of their customers want to use cash I think it’s just an order in this thing.

[13:51] I bet they’re like a podcaster that wants to talk about our turbocash.

[13:57] Exactly I like to pretend that I’m such an irritant that there’s a picture of me in the in the employee room that there probably isn’t.

[14:06] Just a quick note we’re coming up on trade show season I am not going to a lot of trade shows but Jason is so code recode is coming up June 10th and that’s in York.

[14:18] That this year so historically has been in Southern California is the first year they’ve moved it to The Phoenician in Scottsdale Arizona.

[14:26] Should be nice and hot by them the show previously known as Internet retailer Conference & exhibition is now called retail X and that is June 25th I don’t think either of us are you going.

[14:38] If I’m in so that’s in here in Chicago if I if I’m in town I will at 10 but I haven’t.

[14:46] Poops then NRF has a new show called NXT or next and that’s going to be July 22nd etail East is in August 19th
Jason speaking at grocery shop which is from the shop talk folks and that is September 15th what he’s thinking about.

[15:04] Back in Vegas I’m moderating a couple of panels and you’ve totally busted me because as I sit here right now I can’t yeah it’s a.

[15:11] I said grocery stuff from side delivery.

[15:15] Transformation of a digital grocery is going to be super exciting don’t miss it.

[15:19] Well it wouldn’t be a Jason Scott show if we didn’t talk about some Amazon news.

[15:24] Amazon news new your margin is there opportunity.

[15:38] A quiet couple of weeks at Amazon couple things we wanted to hit on so one thing I thought was interesting is in India Amazon is testing a travel program this is kind of like
what I would look at liked Expedia business model were there,
instead of just being a a better site there actually looks like they’re taking inventory so imagine
imagine that goes well Amazon Alexa test these things a lot different markets imagine that goes well and in the next couple years imagine you could book your travel through Amazon and you know what can you tell me about that
cuz imagines part of prime,
I’m the beer that starts your travel habits Amazon so good at all this data processing they can do and they could give them an edge on going out and buying inventory
so that the secret of the travel industry is a lot of times it’ll use this data and I’ll go by rooms Expedia will go take inventory risk,
and then because they can go and say I was in Chicago’s when he busy and they go buy a bunch of rooms they can solve them and then they can
you make a bigger profit or give a bigger discount so you can see Amazon doing some really interesting thing for Prime users wear
you can effectively married with data you can effectively you know part of your Prime benefit would be really good hotel room kind of pricing
I thought that was interesting.

[17:01] That further expanding the definition of the everything store.
And went winning is mounting interesting to me about that is wow they’re pursuing that business model in India that model in the US has become somewhat controversial because you know who is really.
Threatening the traditional travel portals here is the Google so you know very hot you you do what you Google.
Hotel or flight information and now the incident answer box pops up and you can actually book your travel through that,
is answer box a lot of the traffic that would normally flow from Google the Expedia or Travelocity or those sites Google’s now.
Started stealing and monetizing and that’s like you know obviously that the traditional travel portals are not in love with it.
So that’s an interesting watch another part of the world Amazon acquired a delivery company in the UK called delivery.
The main reason I want to bring that up is because it’s really fun to say deliver roof.
But this is another one of those businesses that they’re not.
As big and in the u.s. delivery was sort of the doordash in the UK there are a meal delivery service in so that that was interesting acquisition as Amazon continues to bolster their.
Their breath of offering and their global.

[18:25] Speaking of delivery in Amazon so we talked about on the last show day Amazon in their q1 earnings,
announce that they are going to move Prime from two to one day now a lot of that is being driven by this program called the delivery service providers and that’s where they have these really fancy Mercedes sprinters out there
they’re kind of like this gray with the orange Amazon smile. I see you like 20 a day in my area I think they,
Danish about 20,000 of those
next day delivery they talk about an 800 billion dollar investment I think that’s going to be a lot into that program and I think they’re having enough challenge getting people there then now that any Amazon employee that want to set up their own DSP business Amazon will,
set them up the game guarantee volumes and then they’ll actually pay their there
previous job out three or four months so you know if they’re getting very creative on how they get more people to start these kind of 1099 delivery businesses for.

[19:28] And the way I think that’s got like it’s it’s not a 1099 individual employee delivering stuff from Amazon it it’s essentially.
Amazon hiring a franchise business to do deliveries and I think they’re their preferred version of that business has more than one van.

[19:46] Absolutely yeah they want they want employees to go and set up you know a business and hire 10 people and manage the whole thing and,
10 20 30 40 50 people,
the first company that did this is FedEx Ground so ground is effectively uses if you go to the dance closely every fax van has kind of been the corner operated by,
Jason Chicago delivery company FedEx air is completely owned and operated this broad category there’s a lot of legislation around this,
out there the labor market just the labor department actually just opined and said
individuals as 1099-r can still be 1099 now we’ll see how long that stays there because it’s in the political world and there’s been a lot of FedEx has done a lot of litigation around the way they do the businesses and that’s that’s pretty.
I’m pretty well litigated and if there is a business a true business then it can be kind of 1099 relationship.

[20:46] And this is not so uncommon like obviously a lot of other kinds of businesses are are actually a network or franchisees like a lot of fast food restaurant chains for example and often,
when you when you’re in growth mode one of the ways you if your Burger King or McDonald’s that you might grow your franchise footprint is you,
you looking at an employee base and go to all those good assistant managers and offer them financing to buy their own,
franchise in so I think of this Amazon program is someone on the same one.

[21:18] Yeah where it could bite you is I say you have you know this engineer working on AWS who gets a wild hair and wants to be on.
That made a harsh Street place I don’t know how many people I don’t know who they’re actually offering this to my my guess is probably kind of like supervisor enough time in the Fulfillment center so so they didn’t cover that in the
Presley’s but I bet there’s a certain type in that yeah if you are a senior developer this probably isn’t available to you.

[21:48] I would say if you were a conspiracy theorist.
Amazon is sort of rejiggering they’re the real estate and they’re moving a lot of employees around and one of the things that happens as you have.
And so potentially this is also a way to mitigate mitigate some of that turn that some of those employees that maybe wouldn’t have relocated to the new facility that you’re moving their team to stays in the family with one of these business.

[22:19] In tow,
you sort of wrapping up our Amazon delivery news Amazon of course I made a Big Splash in the US they announced that they were primarily going to,
one day delivery and we we’ve talked about this in a previous episode of the show Because of Winn Amazon on their earnings call announce,
did they were moving from 2-day delivery free with prime to one day delivery free with prime there was kind of a snarky tweet from Walmart.
Saying at that doesn’t sound like you do News free one-day delivery with no Prime Membership would be a much bigger deal.
And we all took that to imply that that was something Walmart was working on with but wasn’t prepared to announce.
And so now of course they have announced it and,
I would say it’s kind of mixed it was not exactly what I expected so they’ve they’ve announced that they’re Walmart has announced that they’re going to provide free one day delivery on orders over $35 which is their usual shipping threshold.
In initially in three marker.

[23:27] What’s it isn’t that big a deal but they sound like they’re they’re intending it to scale at rapidly so they they intend to reach 75% of the US population by the end of the year.
And so you know they I’m calling this the one day Shipping Wars as as both these companies are sort of escalating the.
The shipping promise.
As we talked about in the previous episode Amazon has a lot of infrastructure to leverage to do this and it’s probably kind of a incremental thing for Amazon,
it’s probably going to take a much bigger investment from Walmart and arguably Walmart eCommerce already isn’t profitable so this is probably like,
a pretty painful move for Walmart to further a road margins to keep up the service level that that Amazon has offered,
are you a Walmart can afford to do that what’s going to be interesting as the rest of the the market right at Walmart and Amazon are both offering one day delivery that’s going to set a new expectation level that all the rest of retailers are going to really struggle to me.

[24:32] Yeah I saw an interview with Mark Lori and another reporter said you must be doing this from the stores and they said no
it’s going to be from the warehouses and so it’s interesting so there’s like a whole different set of inventory that will be available for that
I’m going to be kind of play this out you know the next
kind of domino fall is Target and noble fir Target talk about more than 50% of their stuff is so from the store so what are Target can almost get there faster
on the smaller selection of store items by cranking up the ship from store kind of capability.

[25:05] Yeah I think that’s exactly the the trade-off that they each have to make Amazon’s got.
North of 400 million skus that they sell now.
Several million of those are available for this too and that one day shipping likes them millions of skus in there one day shipping program Target.

[25:29] Primarily sells the assortment that they have in the stores now they do have a broader assortment online and and they recently made no news because they’re adding their own Marketplace but all that ship from store,
is the store inventory so the overwhelming majority of Target sales are the 60,000 skus that are in a Target store side note.
Those those popular shoes are generally the hardest ones to be profitable.
And then Walmart has been kind of in-between they have a hundred thousand skews in a typical Walmart store and I assumed that’s what they were going to offer one day on because that would be a pretty painless thing to do is ship from store.
And they actually didn’t do that they’re they’re saying that they’re assortment for one day shipping is going to be about 200,000 skews so that’s twice the assortment of a store.
They’re shipping from the Fulfillment center it sounds like least initially they’re shipping from existing fulfillment centers but they’re going to have to dramatically expand those performance centers cuz traditionally.
Walmart is spread their inventory around there 8 for filament centers in when you order 10 things you may well get three boxes and so what they’re now saying is you’re going to get everything from one for the moment Center and it’s going to be up to.
200000 items that we can promise one day and so essentially what Walmart is really doing is.
Adding a bunch of capacity to their existing Adidas e fulfillment centers to offer this new service.

[26:51] There’s a beauty that means just bigger or more robots or more people.

[26:55] So don’t know they haven’t said but I suspect the answer is going to be Automation and the not so much because the automation is more efficient that’s a benefit but.
One of the cool things about these automated systems is they stack up higher in so you can get inventory all the way to the ceiling as opposed to just inventory that a person.

Marker 02

[27:14] Speaking of Walmart we are entering a peak earnings reporting season for retailers and so Walmart did report their earnings and,
is generally pretty good.
Their earnings were slightly above expectations of Revenue was slightly below expectations same-store sales were up 3.4% which is right about,
we’re the analyst expected them to be and then the big number I always like to watch at Walmart was there eCommerce sales were again up 37% for the quarter so they’ve been in that,
40% range last year they promised 40% for the year and they basically hit it I think they said that that for the year that the growth will still be big this year but slightly lower and so starting off with 37% is probably pretty good.

[28:02] Yeah an Amazon this slow down so Amazon’s kind of in the low 20s now and you
Walmart Ecommerce going twice the size of Amazon which will help him catch up now you pointed out on the show a lot that’s coming from grocery so what can I have to see you at some point
every store has curbside grocery then it becomes a game to see if you know can you drive more general merchandise and grocery sales do that that e-commerce pipe.

[28:27] Yeah I think Walmart has basically laughed all of their big Acquisitions and so the company against those now but they still only halfway to plug with groceries so they’re still comping against stores that have you just called her the didn’t that goes to ask.

[28:42] Yep and they always do more Acquisitions that always helps with the inorganic
I’m so set up going into the earnings was interesting cuz Macy’s surprised books in a positive way same-store sales grew .6%
which you know you may say wow that doesn’t sound great but you know I think while she was looking for a flat down
and then they you know the the stock reacted positively
I visited I actually here in Chicago I visited Macy’s and we went to the one in York is really interesting to see story so in Chicago is pretty start there’s other renovating it so there’s like all these gray sheets hanging around and then,
talk to you in theirs is colorful section of the store so it almost felt like story was taking over Macy’s in the signage everywhere and even the one in New York the story really like you.
So interesting to see a lot of innovative things are doing at Macy’s.

[29:37] For sure the next one really surprised me is Kohl’s and Kohl’s has been sort of an outlier in the his department store stories they’ve been the one,
department store that isn’t completely value-oriented that like has been generally conferring comping pretty favorably,
and in particular their same-store sales have comp favorably every quarter for I think the last two years they made a lot of news around their partnership with Amazon and letting you return Amazon packages in the store which they,
have said drives a lot of incremental traffic to the stores so they’re a little bit of a earnings darling and they just had their earnings call this morning and.
Surprisingly pretty severely down so same-store sales were down 3.4% I think the the initial reaction on the market is the stock really took a hit the management team,
talked about my favorite excuse they bring the weather,
which to me is always a warning sign and they you know they talked about the risk from tariffs.
Potential warning sign at Kohl’s at first first sort of chink we’ve seen in their armor in a while.

[30:49] Yeah I also heard and we’ll talk about JCPenney I heard Kohl’s and JCPenney are trying to dial down promotions in the consumer is not reacting well to that they’re kind of like I’m not coming to your store unless you’re going to give me some kind of a promotion of some kind.

[31:02] Yeah and so I think Kohl’s answer in his earning call is so we’re going to go back to the promotions and if that’s of course a one-way door that you you basically can’t reverse once you educate customers to only shop for the deal your car stuck with that for the rest of your life.

[31:17] Yeah it does so JCPenney also announced today and it was kind of a worse-than-expected situation so they’re the same store sales were down 5.5% revenues down 4.1%
I’m so you may ask yourself why is that different will there be the closing stores quickly which
which kind of helps and then the bad news is why all this is happening there they’re spending more than expected so they missed on DPS as well Macy’s telephone
Tale of Two Cities with Macy’s and Wal-Mart so far really kind of coming out ahead and then Kohl’s and JCPenney I’m coming down behind,
I also was announced today in a we try Molly getting here on the show Dress Barn announcer closing 650 stores we’ve had I think we have had more store closures and now started this year than all of last year,
so so this kind of in a mulligan is worsening it kind of went was flat from 17 and 18 you’re 19 feels like it’s definitely kind of the snowball is gaining momentum so I think there’s white like 5,000 stores that have been announced and that’s what we did last year.

[32:25] Potentially even a little more now.

[32:27] Yeah so that’s that’s.
I kind of used his good news I think we need to kind of clear out this dead underbrush and then build a new retail experiences so we’ll see how that goes.
Another we want to spend time on today we kind of touched on it while the whole episode with web
episode 174 was about direct-to-consumer digital native vertical Brands but really there’s been a lot of news they’re so we so
Perry’s was acquired for 1.6 billion what is interesting things about that acquisition is that we’ve seen this too so I kind of called this
analog company buys digital DNA and then what it what do they do with that digital DNA so some of the early ones were PetSmart bought chewy
Walmart by jet and they took the leadership of Jet and put him in charge of a lot of things mostly e-commerce and then we saw it with Dollar Shave Club,
I think they founder of Dollar Shave Club is now running a pretty big
piece of the car and Company there so it was interesting about this announcement is the Harry’s team is going to be running the whole us operations of the clearing company which is shiksa substantially.

[33:45] That’s kind of a pun for the shipping industry.

[33:48] Edgewell Cooks so you know this this is and of course 1.6 billion is nothing to sneeze at so it’s really heating up in this space also a way to raise capital.

[34:03] Yeah where is the another hundred million dollars,
I think we talked the last year mid-year they raise about 50 million dollars but what got people’s attention was they raised it a 1.4 billion dollar valuation
so I think it was Wellington Capital Management LED this particular round but one of the things they said they’re going to do with this cash is open 50 new stores in a bunch of new markets and potentially introducing new product.

[34:30] Yeah in love and one of the things in the world of venture capital that we look at is this whole unicorn Club so once a company gets up to a billion dollar valuation it’s called The Unicorn there’s not that many of them that’s why I’m so now we’ve got.
Between 6 and 8 depending on how you’re counting companies in that club so I’ll just go quickly through it
Warby has a 1.75 billion valuation is raised about 300 million allbirds is at 1.4 has raised 77 million
weigh at 1.4 billion and has raised a total of 156 Harry’s which was acquired their previous valuation was 1.4 and they raced 250 million
eyeglasses at 1.2 billion valuation 187 million raise Casper
1 billion valuation at 340 million raised Dollar Shave Club 1 billion at 163.3 million and finally hymns in kind of the
direct-to-consumer pharmaceutical space a billion dollar valuation on about 200 million dollar wrist so.

[35:34] You know those are interesting numbers you can kind of look at the multiples there you made a point that was interesting
can I sell you on the show you guys should get such a big valuation why would a way not raise more capital and I think you know.
Couple things are sometimes these sometimes I sugars are choosing to get in this billion club and then the capital E raised have a lot of negative
aspects to it it’s effectively almost like alone so so the people in the investors at that scale will say all right I’ll give you this evaluation
but I got all these protections there’s several.

[36:10] Ratchets in the.

[36:11] Yeah there’s there’s they can double dip on participation so there’s like there’s all these things that you can bake in there took the really kind of take their us-20 could be part of it is there is no you don’t want to.
Pull down a lot of that kind of capital another thing that could be in there is.
Also you could have things that commit to going public so some of this is called mezzanine Capital has kind of a trigger in there that says in 3 years if you don’t come go public or have an exit this thing kind of like explodes on you or it turns into start paying it back.
So the other one that I’m seeing is if we pick on a way the big fan of the brand they’re I think they’re actually profitable so when they’re going in and raised in this Capital it’s usually for a very specific purpose that says,
Iowa krapfl right now but we want to own we want to open 40 stores that’s going to take 30 million to open those doors so then we’re going to go ahead and kind of
little cushion on that and draw down a hundred so you know so is that that could be another reason why there’s not a lot of capital being pulled down.

[37:17] That meant that makes total sense.

[37:20] Another thing I wanted to talk about that that I’m watching really closely is the IPO windows open so we had you know you could argue if it’s successful or not but we had IPOs from lifting,
if someone else in our space that is filed to go public is chewy so when you file go public the document you file with the SEC is called the s-1,
is pie crust dry reading everywhere it’s kind of a poop sandwich I like to talk about it so so what you know the because of the way the laws are set up,
you almost have to discourage people from investing in your company I haven’t gone through this process before so what you do is the bread you have to have kind of like the SEC is in 3 sections the first part is you know All These Warnings you know.
And it’s kind of funny that the the
buses to financial press boost the Press I’ve noticed retail they kind of focus on those things and they’re like oh my God they could be exposed to all this competition and
but you purposely have to make that negative so you avoid lawsuits from someone saying chewy didn’t tell me PetSmart was a
competitor blah blah then the delicious middle part is called the management discussion and then you have a bunch of the end so I encourage listeners to kind of open up the two S1 go right to the management discussion
and then this really interesting things there I wanted to share.

[38:38] Answer a question for me about the wrist part.
You read those sections and it’s super Armageddon the and I sort of imagine that there’s somewhere there’s this really funny we go boilerplate of all the bad things that could happen to a business and so you I suspect you’re not inventing this way from scratch every.

[38:57] Yeah what you do is you look here, so you go out there and you look at all the other risk factors every public company update some annually typically
when they do so you have to accuse and then your cat when they do their K they will update the risk factors so I’m sure I’m sure you know what the lawyers did is they went out they looked at
all the public retailers and they kind of whittled it down to the most Salient ones her for 2.

[39:19] I’m talking like the population could catch SARS and not go outside and stuff.

[39:25] Yeah yeah you know how lawyers are they want you to just kind of put everything in there.

[39:31] Dep so nothing ever comes out of the risk section I can definitely play that easy to add stuff nothing ever comes out.
So just some highlights there in just a refresher so so chewy sells obviously pet in the pet category
they were acquired by PetSmart in Q2 of 2017 so it was actually kind of a spin out that way and they were founded back in 2011 in the second quarter.

[39:58] It was impressive to me was the scale so so chewy is now a 3.5 billion annual revenue company,
that was a 2018 Revenue compared to 2.1 billion in 2017 so that’s a 67% year-over-year growth rate,
which is pretty impressive now the losses were pretty sizable so I filled it this thing called adjusted ebitda they lost 268
million on that three and a half billion,
I’m set that equates to kind of a minus 6.5% margin so snarky folks would say sure anyone could build a business with this going that fast if it’s losing money but the way you think about this,
you know this business is trying to get into a very high orbit and when you try to get more of it you have to burn some some people to get there since essentially what they’re doing and if I think if you looked at other companies you don’t like as a post or
you know any of these other kind of companies that I’ve got to the scale I think they’ve actually done it in a pretty efficient way.
What do you peel the onion on a wire that is another aspect I will also point out is.

[41:05] Justin Bieber dies in Oxford or tend not to look at that because you don’t have a lot of control over it there’s all these County roles you can’t control,
right so a lot of the stuff that comes out you run your business you think you’re doing a great job is in your adjusted ebitda got worse on there so why would sound of your control so what most companies do as they look at free cash flow which is as an operator while you have more control over and I can’t
I can’t control what you’re going to do to my Revenue when it runs in the counting rule that I can control
you’re selling more and spending less so there are actually free cash flow was -57 Million so I would argue with a 3.5 billion top-line you’re effectively,
cash or break even.
Is that that’s a good indicator that that you know this is a really well-run business and those lines that I would imagine unless they accelerate further at that same growth rate they would be free cash flow positive
so why is that what was kinda secret while they were the things I love about this management discussion is you get kind of inside the head of the operators and they spend a lot of time in there.

[42:07] Talking about subscription spend their version of that is auto-ship so 65.7% of their revenue is on auto-ship which is amazing you may know better than I do
what the typical industry averages but I think most retailers that have a subscribe function and it’s probably like in the 10 to 20% range but of course obviously not stitch fix or something like that the whole model
I think it’s really impressive for a general merchandise kind of retailer in the category to have so much on auto-ship,
they have 10585 active customers another thing will try to put the show notices.
A lot of these as ones do really interesting job looking at Kotor analysis so get as an operator I like to look at this because I like to kind of think about how I think about my business and compared to how they think about their business Uber and Lyft had really interesting examples of this.

[42:58] What things they show is in their cohort analysis is they’ve been able to take the average sales per customer from 2016 at about $297
today at $334 so it’s nice about that is in addition to acquiring new customers in there,
kind of increase the sales from existing customers more than 20% Which is pretty impressive a lot of times that goes down over time so they’ve done a really good job of.
Building loyalty from a wallet standpoint and part of it probably is related to this auto-ship program.

[43:35] To me it’s it’s the interesting thing here is they they were acquired a couple years ago by brick-and-mortar retailers and now that retailers spinning them off again as a separate public company in it it seems obvious.
There really an outlier in terms of how well they’re performing as a pure play e-commerce site in many ways by,
the profitable are not very few. Play companies have gone to that two to three billion dollars in Revenue in almost all Pure Play retailers struggle with the repeat purchases and so,
repeat purchases and such a valuable spent per customer and have so much of that locked in Via Auto replenishment.
Is terrific,
oh, because they’re still not making a lot of money I feel like they’re they’re not getting a lot of credit for all those good things so I’m assuming they’re going public because they feel like.
The the stock market will better reward them for their scale even if they haven’t achieved profitability.

[44:35] Yeah could be of value unlock play it could also be you know I don’t think integrated the websites did they so
so he’ll be really weird if I’m running I’m probably I’m going to go out on a limb and guess I’m getting my butt kicked by chewy
I I can’t imagine that is growing 67% and that 3.5 billion dollars may have seemed like a good idea and then they may actually be good kind of moved to an arm’s length relationship.
Spend it out I’m kind of thing that could be part of it as well.

[45:08] So that’s going to be interesting to watch we’re coming up on time but there were a couple of interesting grocery tidbits I wanted to at least.
Briefly acknowledged there was an interesting partnership that was announced this week between Lidl and boxed and is a reminder for our listeners Lidl is a highly successful German grocer that’s really focused on
low high quality with low cost of goods and they they famously tried to enter the US market a couple years ago and,
your your hometown is one of their initial markets,
and they weren’t super successful so they kind of slowed down retooled and now they’re getting ready for a second big push in the US,
wheedle in a very similar company them all the historically they really focused on No Frills,
barebones price in so they therefore completely ignore digital so one of the interesting things to me is as we don’t rely on Chaz in the US they’ve done this interesting partnership with,
text in there they’re essentially renting,
the Fulfillment of hardware and software the Box built for their own business to do.
What to use for grocery fulfillment as part of a digital offering so I’m excited to see,
what sort of digital experience Weedle is going to offer when they they relaunch here in the US and it’s going to be fueled by box.

[46:35] Shelby Nursing I get smart on the box side to have differentiated Revenue so they can sell direct to Consumers and also be a technology provider into the grocery.

[46:45] Yeah I was disappointed digital didn’t play any part in their initial launch so I’m pleased to see that they’ve seen the air in their ways there,
Kroger announced a new investment arm to invest in these,
direct-to-consumer cpg brands that they’re launching into it we talked before.
Maybe the most successful venue for launching new branches is inside of a retail store instead of seems like Kroger’s way of getting unlocking some extra value for helping some of these Brands become successful,
and then a funny when I saw is Bed Bath & Beyond just launched a new commercial.
Which is intended to be humorous.
Sort of that commercial where they’re explaining brick-and-mortar shopping to a millennial.

[47:40] Yes it is only a couple is kind of like sitting in bed online shopping and then they’re like trying to encourage them to come to a store so so I thought it was quite interesting to me is somebody like some kind of sign of the apocalypse and realizing that it is nigh in a pond.

[47:54] Yeah I feel I feel like there’s some infection point we used to have the funny commercials where these well-established brick-and-mortar Brands were trying to convince people to buy online so you know,
it was the ice shipped my pants campaigns and things like that in the
in the early days of e-commerce and now the fact that we’re having to do funny commercials to remind people you can still go to a store and buy something,
definitely definitely said something about where we are.
And that’s probably why you’re all listening to the show and therefore it’s not going to surprise you that it’s happened again we’ve run out of our,
a lot of time so if there’s something you had a question about a want to continue the dialogue we’d encourage you to hit us up on Twitter or jump on her Facebook page and as always if you got bad you out of this episode we sure would appreciate it if you had.
30 seconds jump over to iTunes and give us that five star review we desperately crave.

[48:44] Thanks everyone we appreciate your five star reviews and we will be back next week.

[48:49] And until then happy commercing.

May 16, 2019

EP174 - Web Smith of 2PM 

Web Smith (@web) is the Founder and Editor-in-chief of 2pm, a curated, subscription-based media company.  We cover a wide variety of topics around digitally native vertical brands, including the recent Harry's acquisition, and Away investment.

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

Episode 174 of the Jason & Scot show was recorded on Wednesday, May 16th, 2019.

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


[0:24] Welcome to the Jason and Scott show this is episode 174 being recorded on Wednesday May 15th 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scott window.

[0:38] Hey Jason and welcome back Jason Scott show listeners
Jason one of our favorite topics on the podcast is the Mega Trend that has several names that that we talked about our favorite is DMV because it just rolls off the tongue but there's Brands going direct to Consumer and I'm sure there's others in there
and tonight we're excited to have on the show one of the top experts on this Trends both
from being in the trenches but also the Strategic level we have with us tonight web Smith
web is founder of 2PM DTC e-commerce newsletter that is published at wait for it to p.m. everyday
full disclosure for listeners both Jason and I are fans of the letter end of the executive membership enjoy reading.
And prior to starting to peel web was a senior executive investor founder and many well-known DTC Brands and he also as part of his whole portfolio what he does he advises and invest in lots of these Brands as well
welcome to the show web.

[1:44] It's my honor guys for having me.

[1:48] Call someone one kind of fun topical thing I just saw that the luggage company had no idea they call themselves a travel lifestyle company but I think of them as luggage company away,
just raised over $109 and I think they're in the the definitely the Unicorn club which is valuation over a billion dollars but I think they're closing in on a
billion dollars and I hear you have a fun away store.

[2:13] Oh yes well you know I know that,
one of you guys is a fan of Jen Rubio and she certainly on my good side a long story short I think it was maybe for 4 weeks ago for 5 weeks ago and I was joking about wanting to go to the Masters and everyone wants to go to the Masters but,
but I don't have a joke that I would want to go one day but I also want to be able to afford my kids college education.

[2:36] DaVinci respond she says you know do you want my tickets and I'm like well.
Yes yes of course I want your tickets she's like to meet up in you get to Georgia I confirm that I can get to Georgia and in the next,
3 hours is a really interesting sequence of events happens she responded she has one ticket it's a very special ticket,
but in that time I told my dad who's always wanted to go that I was going to take him,
buying two regular price ticket regular price tickets for the Masters for Sunday with Tiger In Contention cost $2,400 per,
okay so I buy these tickets which is a huge sacrifice and long story short.
My dad fly so maybe go to Augusta,
and I end up selling those tickets aside all together because Jen got me two of those special tickets,
so I can honestly say that that time gesture is responsible for probably a top 15 or 20 day of my life with my dad it was a bucket list item for him,
and we got to see you know the Masters and style.

[3:50] Yep and tiger sounds like you're a tiger fan is really awesome to watch him kind of make a comeback I thought it was a pretty interesting moment.

[3:57] On that day every everybody was a tiger fan that was really spectacular to watch.

[4:02] Awesome,
Aiken South Carolina and the guy that runs all the concessions at the Masters lives in my neighborhood I don't live there anymore but my old neighborhood and we all would get jobs at the concession so I worked at the Masters for 6 years.

[4:17] How many elements are cheese sandwiches have you sold.

[4:20] A lot. The
with Aaron Works their way up to the Beer tent because a back 10 beers were like a dollar 75 or something like that and then all these quarters would fight with her so I get tips which is exciting
and second of all are there so many quarters swing around it that you could help make an extra like 5 or 10 bucks from falling quarters.

[4:43] I just wanted to an awesome fact about stuff that I didn't know that.
Spence I don't where you able to liquidate the the general admission tickets to you invest in in.

[4:54] So I did not and that was very painful that was a lot of money for me but again it was my dad and he's no 63 and he's always wanted to go so I did it,
at the end of the day I still ended up net positive I got two of the most special,
tickets in all sports and I got to watch Tiger In Contention on Sunday and obviously ended up winning for the first time in 14 years so.
I got over that expense for the sake of how wonderful of the time it was my dad.

[5:25] If it happens again don't forget your favorite podcasters.

[5:29] I will never forget you guys.

[5:33] Yeah that is awesome and I'm pretty confident on your hundredth birthday one of the things you're not going to regret is is your investment in going to that Masters.

[5:42] I agree with you I'm a piece of it.

[5:46] So speaking of things you might regret one of the things we offer to do on the show is is get kind of the,
brief background bio of Our Guest so that was nurse can kind of understand for the how you came into your your current role and knowledge base can you can you come,
walk us through your high level of career progression.

[6:08] Sure long story short I would say that I got my my first big boy job my real beginning e-commerce back at Rogue,
Rogue is a sporting goods and Equipment Company manufacturer and a consumer brand here in Columbus Ohio I was responsible for auditing and,
running paid search and so on and so forth or time there I learned a lot about you know frankly high tension,
advertising company was still growing at that time it was it was maybe a hundred people if it's now it's six hundred people,
it's one of the most underrated e-commerce companies in America my opinion.

[6:52] I think it's actually run so I learned a lot from a group shortly after that,
I cook pounded missing the name of Kevin Lavelle that company's doing really really well now it's Consolidated in Dallas and the team is strong,
having to step down as CEO himself and a gentleman from Stitch fix is now running the show,
from there I sort of switch gears and went on the publishing side so,
I was at unpaid for a little bit I was there director of gear Patrol director of e-commerce or e-commerce platform on top of the existing publishing structure first,
real ghost experiences are my first real contact Commerce or what I like to call them to your Commerce operations understanding how,
audience & N Supply meet in the middle.

[7:48] I consulted for a little bit and finally I decided to go all-in on 2 p.m. and it's been almost almost three and a half more years now,
and I'm loving every minute of it.

[8:01] That's awesome and for listeners who might not be familiar with,
the 2 p.m. news that are let's let's break that down a little bit so this is a email newsletter is a freemium model right like you have a free subscription and you have some premium content,
that you can pay for do I have that right.

[8:19] Yes yes so you know I started the letter,
because I wanted a place to go where we could just focus on her industry without any distractions keep in mind this letter came about when every publication Under the Sun found a way to talk about politics,
whether it's National or recode or whatever they found a way to talk about champagne I just wanted a place to go or like you only focused on.
On the issue at hand how to understand the industry that we are in and how to be able to better operate on that on that intelligence it's always started for group of a couple dozen Allegiant obviously it expanded and,
but the letter itself fully monetizing the beginning of 2018 and it's it's been no looking back ever since it's,
the structure that business is 3 folds we have,
pay subscription we have a Consulting arm and then we invest in direct to Consumer brands with some of our cash flows.

[9:27] Yada interesting and the primary Topic in the newsletter is all things direct-to-consumer native brand is that.

[9:36] Well I would say it's a little broader than that it's it's e-commerce in general but it's a combination of,
digital publishing data branding and and traditional Commerce my belief is that you won't understand one vertical,
unless you understand how they all interact together.
And the executives to understand how all of these articles are interacting with one another are the best computer to operate in this ever-evolving space.

[10:05] Awesome in in so like what's the profile of the ideal subscriber.

[10:10] Shirk so here's a great test that I I do maybe once every 6-8 weeks I opened the list to come to my event we I host a dinner it's fully paid for by my myself and Dory,
sponsor partner.
And I first come first serve we usually hosts 24 people at a round table an amazing dinner always amazing always an amazing time everyone that shows up is always director VP level and above.
So I don't dig through to figure out how many Executives I have in the executive membership what I'm finding is that it's heavily skews in that direction,
these are people that are actually making the decisions actually implementing the products and the positioning.
And I like that that's where the focus is and I'm hoping to never have to expand beyond that.

[11:09] Got it got it and Scott mentioned that both he and I are executive members in so short of mine ocean for the kind of content you publish in this will be a good test you can tell me about,
I'm wildly off-base are by have it is is you really have sort of three kinds of content that I've found useful,
you do these memories which I kind of news curation and I think you know they say that in the coming couple times a week,
you write a bunch of original content in your own sort of povs which are these sort of weekly reports and then you also have this executive Library which are these really useful,
list like the the jewel need a vertical Brand Power with sore with small that investors in the space or agencies in the space stuff like that Dua,
do I have the sort of content types roughly right.

[12:02] You do and one of the last,
inside added in the last several weeks is a member research Series where I will pick two companies against one of them
and expect and explain its excuse me explain how these companies are which company is better positioned to take the market,
so the first one was stockx vs goat.
That that research document actually influence a and upcoming investment round that's all I'll say about that.
And the most recent one was Peloton versus tunnel.
Pelton's obviously be on demand cycling Hardware / platform,
and tunnel is the functional fitness,
mirror / digital weight apparatus that you that you attach to your wall so I explained,
based on both empirical data and some anecdotal evidence which which company I feel like to take the majority of the marker moving forward nothing that's been really interesting for my executive member.

[13:12] Awesome and then if I have it right here last.
Weekly report the topic was direct-to-consumer Playbook is a trap maybe you could tell us a little bit about what with your POV was there.

[13:31] Yes so one of the one of the most frequent questions that I did is from investors at asked me to help build a Playbook.
Or direct to Consumer Brands what to do in the situation which agencies to go with.
Choose a copywriter you know key terms that you want for SEO depending on the industry what song is this,
the notion of that of that particular report is that any company that's been successful in the DTC space space whether that achieving unicorn status or below or right below it or are you asking me got there.
By being antitetico to what was written before then.
So instead of following what someone else is what another business is doing right write your own path if that's really what you want if the debt exit is really what you want to achieve That's the basis of the record.

[14:34] Yeah that's so like I sent you a you like there is no point buck or at least there there's not one Playbook that works for multiple play brands.

[14:45] Correct everything that Harry's did.
Was Waze was antithetical to what was going on in the Market at that time if you remember them going to Target with soft,
you know I thought we saw that you were supposed to be a direct consumer brand why are you giving up why are you giving up Margin for wholesale.
Or were they open their pop-up shop in New York there their Barbershop why would you go into retail that's a that's a poor investing why not just invested ads.
So on and so forth are five examples that I mentioned in that document and one thing is clear they they achieve a unique outcome because they were a unique company that was well run by there to Founders.

[15:32] So so it sounds like the Playbook is rip up the Playbook.

[15:37] That's that's that's exactly right.

[15:38] If you can be a disruptor Fila disruptor you can't follow Playbook.

[15:43] Correct correct I'm going to ask you to put someone on the spot there's a quote.
There's a quote in the actual lab report and it says embarrassed it's hard only the disruptors will survive I will survive,
and it says Anonymous founder that was actually a quote by Kevin LaBelle who co-founded business name with me,
and he made a good point the whole Spirit of the document itself was to remind Founders that they have to continue disrupting if they want to succeed they can't follow what everyone else is doing and expect that unique outcome.

[16:17] Brickell let some so it's that's good let's take out of it this thirty thousand foot level you're the timing of the show here is really good because you mention Harry's and they just required for 4 is a record for one of these to join in Africa brands at 1.4 billion by
folks that operate shit and then we just talked to her about even since I've
I kind of put our little strip together we had the away investment do you feel like,
taking the Playbook piece of side you feel like we're kind of super early in this space
or is like this 1.4 billion dollar sale almost like a sign that work on towards the end game.

[16:56] Oh I definitely think they were early you know I was talking to Alex at Lightspeed earlier today and one thing that he added was that that you know there will be more there will be more stories like what we've seen from Harry's in a way,
it's just a matter of time and companies are finding out what it takes and they're they're finding their stride and they're moving towards profitability a lot earlier and omni-channel operation.
Omni-channel operational success earlier and it sits and dividends.

[17:29] It seems like invest yet these exits typically actually get more and more investors calling in this is that kind of what you're saying is the investor interest is still on the rise.

[17:40] Stoner eyes.
However I tend to be biased I believe that companies should take as little money as possible.
So hopefully these companies are being Savvy about who you know they invite to their capital.

[18:01] Yeah but if some is the ones that are scaling up or having to do omni-channel and break the Playbook and you mentioned like opening a barber shop that's all that just kind of feels like.
The need to raise more Capital daddy how you reconcile those two things.

[18:19] That's your question I mean listen going back to our days at missing mizzen is in over 700 stores right now I'm not even including the Nordstrom deal so that's 700 + independent retailers around the country.
We did that because we were hoping for more cash flow and it worked out well.
The team bear did a successful job well beyond my time they're digging into that model and really developing strong relationships with these retailers,
sometimes these operations are less capital-intensive than you would think it will all depend on the demand for the product.
In the hope that the products the sell of the product will pay off.
That's that's what I'm saying from a lot of the companies I mean from all reports Harry's was profitable.
And I'm hearing that that away was profitable or very very close.

[19:20] Yep this is kind of an aside but it kind of came to me that you probably got a really nice portfolio of these things have you ever thought of starting an angel list for people could invest alongside of you.

[19:34] No I haven't listened I'm still figuring out.
How to build a strong Media company in 2 p.m.
And until I understand the ins-and-outs of of consistency over time II can't go all in on the investment side like I would want to.
What is an interesting idea the problem is the more the more opinions that you have at that stage of growth.
From investors the more viewpoints on it so forth I think the more convoluted you're going to be as a founder.
Nice guys rescue much but one of them one of the more bullheaded Founders that I know is it's been what he have a recessed you can't tell that kid anything,
it really believes what he believes and it's paying dividends for him so my fear was getting a lot of investors involved early on is that the goal often for early-stage investors is to,
I guess in for some influence on the strategy or the model and you know I tend to believe that you're supposed to listen to your gut and do your own thing and then and operate with a few strings as possible,
so I would actually say that we strapping to a certain point and then seeking investment what you have some social life.
Traction would be your social proof rather would be would be the play.

[21:03] Cope with assignment Jason with sign up for mini mini Millions if you heated Angeles thinks I'll just put him on Spotify.

[21:12] You talk about Annoying opinions that investors don't want mine would go right at the top of that list.

[21:19] I was searching on Google for shoe and you did not come up.

[21:24] Yes please.

[21:26] Why are you here yet exactly yeah I'm actually at the other end of of,
that that chain like I'm always getting the call because my client you know just got some goofy request from their investor so.
Yeah I feel like I have great great empathy for the,
the management team in that regards but the interesting thing is,
you mentioned what kind of in the first Inning on the DMV bees it does feel like they've done a lot of Buzz and they get a lot of mind sharing our space and a lot of people are talking about,
it seems like the number of entrances really balloon it wasn't that long ago that you know there was a you know you could name all of the these digitally native brands in or you know,
probably less than 10 minutes I mentioned you you have a,
Visa executive databases on your site your your power ranking for digital native brand has a 316 companies on it,
is like what's your what's your POV like in the market support 360 companies and can they all have a great exit and is it going to jump to thousands or you know is there going to be a reckoning.

[22:51] There will certainly be a reckoning it clear I'm not a fanboy I'm actually quite bears.
I'm very bullish on the companies that have it figured out.
So I agree with you that the volume will go up I personally think that the volume is ridiculous but it's really easy to raise 3.5 million dollars out of the gate right now no to specially if you went to Wharton,
or one of those schools and you just have like that that direct-to-consumer sort of prestige that those schools offer at this point.
It's too easy and I don't think that the companies that have raised money easily are the ones that are most likely to succeed.
So yes there will be a reckoning and it will be sad but I do think that building a direct-to-consumer brand a digitally native brand is the best way to launch a company that is it in this day.

[23:51] Interesting yeah I want to drill down a little bit more but I do think it's funny like you mentioned earlier that like,
companies that are looking for a Playbook to Simply follow or probably wrong and I can agree with you I get the moment there's like this,
this specific Buzz that does have a.
Seemingly A playbook attached to it and in it you know we haven't seen a lot of phenomenal exits from that play book yet but that's the whole like,
Warden student hires red antler raises 3.5 million dollars spends it on a branding kit,
invest in some huge huge cock and like it does seem like there's this sort of.
Traditional play that that you know you're you're starting to see a bunch of of Brands follow and it is interesting cuz there's not necessarily a lot of evidence that.
That there's a strong exit at the end of that tunnel.

[24:52] I can't agree with you more if so it's frustrating for me partly because we have such a hard time raising money ourselves,
I don't think that you did Russell retire match of the time or that type of growth Capital but that's not bad for the side.
You know whenever there is ease and a low barrier-to-entry you're going to have hundreds if not thousands of competitors I think those competitors or false the Wayside especially as,
Facebook continues the whole tight they're their inventory of as the bill self.
That means that cost is going to continue rising and it's going to wash my to be friends out it's unfortunate but it's true.

[25:36] Yeah so you bring up the Facebook CAC tactics and it's funny you know you significant number of the well-known DMV bees have now shown up on Shark Tank,
and I I miss having a fascination with a show we've had a bunch of gas on the on the show that that are are DMV bees,
that had a shark tank experience,
and they're all there's a number of wisdom's that the Shark Tank investor share some of which I like wildly disagree with but one when it comes up a bunch on that show is there really negative on companies who like,
have primarily grown through Facebook marketing and you know there's a there's like a strong perception that there's,
there's not like that that customer acquisition through Facebook isn't Portugal a scalable for these brands that there's a small amount of,
audience that you can buy really cost-effective way that it starts getting really expensive really fast and I do tend to agree with that so it is,
it is funny to see some of these brands with a over-dependence on on a couple of these digital marketing Tech.

[26:44] Absolutely into that point you know I hear the other way I believe that the brands have the best organic audiences are the ones that have the best,
long-term opportunity to succeed.
It's at that point ironic and I said this had a recent speech in San Francisco the companies that are the most likely to have successful direct-to-consumer operations are existing Media Company.

[27:14] Interesting for example.

[27:17] The best example right now with some is an example that that will probably be scoffed at but Arsenal sports or so we'll probably do 40 million in e-commerce in 2019.
That would put them in the top 2004 online retailers.

[27:35] Glenda what is Barstool song I'm not from Earth that is it just it kind of pulled in some affiliate sporting good stuff or is it private label stuff.

[27:44] No this is I mean they they have in their store they have something along the lines of 1700 1800 skus.
Apparel knick knacks so on and so forth,
in addition they have Behr Premium media subscription that I want to say this something like.
15 million since March and November 2018 so baby are moving in a recent article with biggie day.
Your CEO Erika nardini.
Mentioned by two digit is editor-in-chief she believes that there is there going to be a 150 million dollar beer company.
A lot of that is Commerce and and commerce except for Commerce feeds into successful advertising but that point to side,
I've noticed that it's easier for companies like that to ramp up without that's where I can just jump off exorbitant customer acquisition cost any news to companies that are purely there to sell a product to a consumer.

[28:51] Yep cuz I already have the audience it's just kind of kind of matching the products already to the pre-established cap that they stay.

[28:58] Correct they already have the audience so when you so in that context,
the reason why I carries a successful or an away is successful or a glossy a successful is because they already have the audience in their own way away is done a great job of tree sticks with them,
company to launch a new product they have tens of thousands of people in the CRM to sell to.
Agua CA she's a referral traffic is from into the Boston is dead they just recently went on to buy Facebook ads in the last 2 or 3 months.
There are nine figure annual revenue company this morning so that's the common thread and I I'm surprised that more.
Drive to Consumer brands on understand that.

[29:44] Yeah yeah there's some of the media companies have tried this stuff and kind of failed miserably to kind of the big guys don't seem to get right.

[29:52] What's what's up with the top one in your mind because I I feel like Community first and then I'll give Mike solution.

[30:00] So they're worse the guys that rebranded to the terrible brand Tribune company and then like in there they tried to do some e-commerce stuff and it got lost,
steel I get AMC anyone that kind of has newspapers inside of there has just been kind of challenging.

[30:20] I think it's always thrown out is probably in your throat list and jackthreads.
I actually think that Jack threads was succeeding.
It was exceeding Jason Ross is a Columbus guy used to advise me early on with Ms in,
when do we need salt to throw away I actually think that it was it did it that the company can be complementary I think that that that that girl Weston that ordered that media organization want to.
Raise capital on a media valuation on the timer salutation obviously there's a premium on being in the evaluation and that affected that relationship.
But, she's doing really well under that system it's a shame that they shut it down and made it seem that that Thomas was not exceeding.

[31:13] Cool we'll be watching that closely let's give it a little bit it wouldn't be a Jason Scott show if we didn't talk a little bit about Amazon
and what what do you make of Amazon just generally and are they this Unstoppable Force I would love to hear yours
a rock with you that I'd love to kind of feather and how you think some of these brands should think about Amazon are they they friend or frenemy.

[31:39] That's a lot of questions yes they are an Unstoppable Force they cannot be broken up.
I'm going to Weis you want but that's my that's my summary,
they are both friend and foe to Brandon's I think that brands have to be extraordinary really Savvy when they decide to partner with Amazon.
Otherwise they won't end up getting burnt but as you saw this week with the recent development Amazon is partnering with Adobe.
It's one of those Magento Strikes Back situation where that partnership will allow consumer Brands early-stage direct consumer Brands to build stores.
On top of Amazon's logistic structure instead of having to you build a store.
Pasta market and recruited 3pl issued to move the product.
Yes I feed the Amazons continuing to find ways to show me entire ecosystem and as long as they make consumers happy and they are.

[32:49] Gold and then you kind of hinted that you know you have to be kind of prudent this are you talking about Amazon you are kind of taking a bunch of data and coming out with a competing products I've noticed they're they're being very aggressive and the mattress base review.

[33:04] Yes that's exactly what I mean there's always a chance that if you have a product that can that can be easily knocked off your you're going to pay for your participation.

[33:15] Yes it's a how do you know when someone comes to you for advice on that is the answer if it's easily knocked off don't sell on Amazon or is it you know a more nuanced kind of thing or how do you advise books on it.

[33:29] It's the 41 stye eye tend to say that you should you should have a category of product that you're comfortable selling on Amazon whether it's your your your shell products or or maybe like you're cheaper.
Your cheaper skews beings that do not cannibalize your existing audience and your own platform.

[33:53] Yeah that makes sense and I think we've heard from some of the some of the brands that are both direct-to-consumer and having a successful presents on Amazon like a tuft and needle that there's,
sort of a product delineation strategy what are there you know there's a arrangers use that they'll only sell direct to Consumers and then there's the rain just use,
the doll maker available on Amazon and now there's even Amazon exclusive.

[34:22] Correct I think that's the way to do it.

[34:25] Yeah I know that's seems like that makes a lot of sense of night they at least make that strategy what pretty,
pretty robust I want to touch on one thing you mentioned cuz we haven't covered in on the show yet and will probably do a little deeper dive in a in an upcoming new show but you you reference,
announcement that I think was yesterday that,
Magento which is not owned by Adobe is launching a new partnership with Amazon where I sent you a you can run a,
your own URL Magento sites,
that it's pre-integrated to all the Amazon infrastructure so you can leverage fulfillment by Amazon and Amazon payment and it is essentially a way to have your own destination on the web,
I'm for sellers that are primarily been using using Amazon and it's for real Old-Timers like Scott and I don't want to our age,
Amazon actually offered a product like that themselves called Amazon webstore that they discontinued in 2015 so this is a interesting play to see.

[35:29] Adobe facilitating that now,
you know cuz one thing is if they also announced that sitting on Amazon web services and you know that if that ends up being the the hosting strategy for Magento in the cloud,
that that's going to be an interesting conundrum you know there are a lot of retailers that are going to want to operate their their e-commerce site on Adobe web services the more I agree with you I found that to be an interesting,
news this week.

[36:01] What will the floods concerned about you know these Brands seeing just your Amazon sales presumably now Amazon can see everything your shipping and I don't think they would look inside of your AWS
pull and see what's going on inside their but they'll definitely you know they can see wow you sold you know,
80 widgets a day on Amazon and worshipping 300 seems like there's a pretty big Direct business here so you don't have to run your whole infrastructure,
how many people adopt.

[36:38] I'm anxious to see myself it's going to be a test for a lot of companies especially if they hope to streamline speed and availability from the logistics tampon.

[36:48] Yep and it feels like they're shooting it's a fire shot over shopify's bad because shopify's been
mopping up Webbie be done any research of like the platforms are these companies choose it just anecdotally it feels like Shopify is got like 80% or something.

[37:04] Without a doubt I just it's one pole vault I've worked with several of these companies,
I I've consulted Bigcommerce I'm very close to photoshop 5 have a lot of fix my inner circle. Love what a Dobies hoping to do with Magento whole body issue. I want to say was 6 weeks ago.
I said.
If you are directing superbrand today which platform do you use to launch on Shopify webflow eCommerce a big Commerce or Magento it was 96% shop.
With over 400 boat.

[37:49] Yeah that I hadn't seen that,
that skewed by that that's early Echoes my own antidotal impression is it just it feels like Shopify is totally one that face so it makes sense that,
Magento Adobe had to do something big to try to disrupt that that pattern,
on a side note you know Walmart has now lot like they've acquired some did you need a Brands but they'd actually launched a couple of their own he wants to
abetting brand Caldwell House when I'm home but this week they wants to another one that's a premium bicycle brand called by Athens,
and what would I find fascinating about those two Brands you can't buy either of them on you can only buy them on their own websites and these two,
Brands websites that are owned by Walmart and invented by Walmart are hosted on Shopify Plus so you.

[38:42] Despite the fact that Walmart owns you know their own proprietary you know multibillion-dollar e-commerce platform they that they also are turning the Shopify for these,
these sort of a Nation brand self to watch on a,
slightly Gigi note the Adobe announcement seemed to imply that these stores could do everedge fulfillment by Amazon and map was particular interesting to me I'm eager to learn more because,
it wasn't Euro in Amazon was encouraging you to use them for all your fulfillment whether it was sold on Amazon or not but in the in recent times it feels like,
they're Amazon's capacity has been so constrained that they really like curtailed your ability to to ship goods from fulfillment by Amazon for orders that weren't collected on the platform so so it's going to be interesting to see whether,
whether this is a pivot back or not but.

[39:41] Putting them on the shelf or second and turning back to the the broad direct-to-consumer topic one of the things that's frustrating to me as a consultant is,
that the DTC companies have so much Buzz that I I frequently like go to these digital days and you know all these sort of,
multi consultant events and I share a lot of my counterparts,
sort of talking about deceiving the future and then one has to move Daddy to see you and that's going to be the model that winds,
and you mentioned that you're sure a little barishan on a lot of these companies I'm equally bearish and the thing that I keep noticing is,
me and you talked about the incumbent then in particular you'd like the cpg space like the Procter & Gamble in the universe and there's a scary stabbed that none of them have invented,
no billion dollar brands in the last 10 years I know three, companies and you know she hear all these people talking about how it's all these Challenger Brands brands that are eating the,
the incumbents lunch.

[40:51] But none of these DLC brands have hit 3, as yet either you know for your point they've all raised a ton of money from investors that that need them to hit three commas,
in order to have a successful exit so they're in this weird space where where do they have to get to a billion dollars and sales at least,
and embrace you of any have ever achieve that,
and I've noticed there's a third category that seems wildly more successful than either of the other two and this is what I'm curious about your thoughts.

[41:24] It's these new brands that are being launched by the retailer Target in the last 5 years has watch five brands that have sold over a billion dollars.
And you know Kroger has some of the most successful brands in the world that they've created themselves that's it's some of the interesting like the DTC brands are,
are having a lean into whole wholesale distribution for Tech but the guys are really winning are these retailers that are kind of falling,
some of the the components of the DDC Playbook but they're but they're leveraging the the huge audience that they already have in terms of Shoppers that are coming in their store if you.
You think I'm wrong there if you seen that as what.

[42:03] I don't think that you're wrong at all I think it just goes back to the conversation you're having earlier but you're having great success with these private label Brands because they have an audience.
Allow these directions to Consumer brands have underestimated how difficult it is to develop an audience that you're not paying.
And that's where the advantage shifts The Leverage ships back to the incumbent.

[42:33] Yeah no for sure and then I eat I do think when your return you have a portfolio of ways to monetize that same audience it's a huge advantage and in that way I think some of these DDC native companies that are
a category like glossy a that you know is doing really well in the entire category seems like they have an intrinsic advantage over,
a lot of these d2c companies that still feel like single Product Company.

[43:00] I would agree wholeheartedly one of my most one of my recent post was about the importance of these direct to Consumer brands that are essentially products companies.
Converting or or I guess graduating to becoming category Brands the only way that you'll succeed is if you are a category brands.
Can you name can you name one of these to record one of these directions to my brands that stayed in one lane sold one product all the way through you can't.
Bonobo started his pants I mean that's not the best example because they simply sold for life.
Every word they raised through in a million + 8/330.
So I never use bonobos as an example but but there are others even even the Dollar Shave Club became of a category brand before they before they,
before the accident carries category they owned half of half of the target.
Away becoming a category brand obviously glossy the category brand allbirds is Shifting in that direction Evelyn is Shifting in that direction it's only a matter of time in the company that aren't prepared to do that are going to be left behind.

[44:12] Let some,
it's coming up soon to kind of play the chessboard out and when you do you what do you think happens to to kind of retailers and then we're super barishon malls here on the Jason and Scott show
so where do you see balls also in the hole by Future.

[44:32] Yeah I haven't I got a nuanced answer you want the answer to that I'm not barisan almost embarrassed on the middle class.
Embarrassing the middle class in general.
I believe that that subset of America consumer is struggling the most to maintain their to their place in society.
And you're seeing it reflected in every every retail marker malls the malls in a middle-class are struggling.
I've been to some wonderful cheer animals in Columbus you have Easton.
You know obviously Hudson yards will have to be exactly does New York needed to be a success in Miami you have Bal Harbour.
Not like there are numerous examples of of malls that cater to the upper middle class and higher that better almost invulnerable.
Obviously there are the numerous Bargain Bin sellers that are appealing to you know economy buyers,
what is the middle class in all of those retailers are getting eaten up at warp speed,
that's where you're bullish this comes from or saw your tears just comes from with respect balls that's,
yes there are stores closing because they're closing after after months and years of dwindling demand from The Middle.

[46:01] Yeah know and we've actually kind of hit that topic several times on the show,
Casey will MBA from Deloitte talks a lot about this and a great consumer bifurcation in that you don't essentially is is the same thing that you know there's,
increasingly affluent consumers on there's a you know a lot of successful businesses that cater to them and there's importunately.
Increasingly financially distressed consumers and there's there's businesses unit value based businesses that are doing really well catering to them but it's the.

[46:33] People stuck in the uncomfortable middle that you know don't seem to have a great future.

[46:39] I did have one other like start a question about how some of these days you'll need to Brands Play In traditional retail mall or otherwise we started off the show talking about Harry's and some of the,
other clever things that they've done and I don't know we mention on the podcast but I know you mentioned that in your report there's a lot of speculation that carries with predominantly,
sold the retail so I think between J.Crew and Target like you know the the number is I've heard or like 80% of their revenue came from those,
does retail stores versus their their direct consumer e-commerce presents and there's a,
like from customer acquisition standpoint you you could totally understand that like you know obviously that if they're selling those razors at wholesale to Target and J.Crew that would be you Julie margin iroso,
but the the interesting thing I have heard and I'm curious if you've heard the same thing is that because Harry's built a really desirable premium.

[47:40] Brand before they went to these retailers and they didn't use these retailers to build a brand that use these retailers to amplify the brand that they already built.
The dude actually able to negotiate terms with the retailers that were not traditional wholesale economic terms.
And so I've been led to believe that that Harry's was much more profitable for Harry's in Target than a nutritional consumer goods at Target with cell.

[48:09] Target benefited greatly from cherries from Harry's involvement,
what are the what are the prime directors of Target management over the last 10 years just to get more Millennia since the store,
need more younger Millennials to buy more products in Target and it's certain jump-started.
Stop Target 2.0 with respect to their their continued Revenue growth.
So yes Harry's probably had some leverage that other companies didn't but when it comes down to it Harry's get exactly what they're supposed to do baby,
that they can compete in traditional retail boundaries are within traditional retail boundaries against the incumbent,
the brand was strong enough to do that in over that time they they threw the guy was that that was the case there were there have been a few companies I won't name them unless you want me to that I have gone into Target and not succeeded,
so so Harry's.
Yo it should have been an early marker for a lot of analysts see that because they were succeeding there eventually they were going to exit in some way shape or form.

[49:23] Has been a great discussion
and kind of your very topical with current time and I know we're up against time so it would love for you to whip out your crystal ball and look 10 years into the future it's 2030 time frame what's what do you think
retail and e-commerce look like it at that.

[49:46] Remind me of the Year again 20:30.

[49:48] Its 2029 but I added one cuz it sounds more futuristic.

[49:54] Are you not have a pretty positive person but may I may I just get dark for a second.

[50:04] Let's go dark.

[50:06] Okay I think that as the years progressed the middle class will continue to pleading.
So a lot of the products and services that we see for through Amazon to Target and Walmart are all appealing to higher consumer I hire a consumer.
Those products and services and retailers both digital and physical will continue to thrive over the next 10 years.
But I don't think that retail in general will Thrive with it and I do think that that that we're going to see a retail induced recession in the next five seven years it will probably stagger into that from your mother.
But that's that's turning the future that I'm prepared.

[50:58] Go to the counter argument was we need to kind of solve the middle class problem to have a prosperous view of the world in 10 years is kind of your underlying thesis.

[51:05] 100% And is it very clear that no one cares about that right now.

[51:10] I think we do.

[51:14] I I care about it.

[51:14] 3 out of 300 million Americans.

[51:17] Sure I guess what I'm saying is that the people that have the ability to make changes now don't seem to care enough about making changes now.

[51:27] Those guys yep you're right.

[51:29] It is as if you look at the big history if you can and get out of our kind of Iran and look at the
all spectrum of human existence so I get every time this happens it eventually gets off like you just have a revolution you Lop off the heads of all the rich guys and and you know you start to develop a middle-class again for a little while so.

[51:47] Problem with this is a problem with this iteration of that story is by the time that can happen either we're going to be on another planet or the rich guys are going to be another planet,
material are harder to Lop off an Intergalactic head.

[52:05] Yeah you are going dark you are a happier follow-up question in 20-30 has Tiger surpass Jack Nicholson Nicholas remastered.

[52:14] Gosh me and you're putting me on the spot listen I've never read against tiger I will root against them now the kids,
he said his mind when he was 7 years old that he was going to be Batman you have to believe that he's going to fall.

[52:32] Yeah I I for one I hope he does it I didn't even watch the web we are really pressing up on time so if folks want to contact you what's what's the best way to find you online.

[52:46] Just WEP web on Twitter or you can email me at web web at the number to p.m.

[52:56] Awesome I appreciate it and it is obviously happen again we've used up all our allotted time so if folks have further questions or comments about today show we encourage you to jump on our Facebook page or hit us up on Twitter.

[53:10] And what we really appreciate you taking time out of your super busy schedule doing a 8000 things you make us look like Slackers is actually pretty easy to do so we really appreciate you have being on the show.

[53:23] It's my other guys thank you for having me.

[53:26] Until next time happy commercing.

May 10, 2019

EP173 - Live show from ChannelAdvisor Connect

This is a live presentation from the ChannelAdvisor Connect show in Austin, Texas.  If you'd like to follow along, you can download the deck here:

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

Episode 173 of the Jason & Scot show was recorded on Monday, April 8th, 2019.

Apr 30, 2019

EP172 - Amazon Shareholder Letter and Q1 Results

Amazon Annual Shareholder Letter

Jeff Bezos released the Amazon 2018 Annual Shareholder Letter, which this year was focused the the phenomenal success and growth of the Amazon Marketplace.  In the process, Amazon disclosed the breakdown of it's 1P and 3P revenue from 1999 - 2018, as well as giving us the "physical gross merchandise volume (physical GMV)" for the first time.  In 2018 1p = $117B, and 3P = $160B.  For a total GMV of $277B (which means US GMV is approx $161B).   Prior to this disclosure we've all had to guess as the the actual size of Amazon's retail business.  This makes Amazon the second largest retailer in the US, behind Walmarts $318B (excluding Sam's Club), and ahead of Krogers $116B.

The letter also talks about the importance of companies being allowed to experiment (wondering as Jeff calls it), even if many of those experiments ultimately fail.  No customer ever asked for AWS, but a few success like AWS can fun many failures.  Even failures can be valuable, such as the Fire phone, which ultimately led to the Amazon Alexa.  Jeff argues, that as the scale of a company grows, so much the scope of these failures.

The letter takes a victory lap for some of the improvements in employee pay and benefits that Amazon has put in place and a challenge to other retailers.  A challenge that other retailers like Walmart did not particular appreciate.

As always, the letter closes with a reminder that the 1997 shareholder letter still accurately reflects the guiding principals of the company.

It's very likely that this years letter, is in response to an increasing call from thought leaders and politicians to regulate and even break up large tech companies like Amazon.

Q1 Results

Revenue came in at $59.7B, 19% y/y growth ex-F) which was in-line with Wall Street consensus.  Overall operating margin was 7.4% compared to a 5.2% consensus, so that was a clear beat.  There is some concern about unit sales decelerating (a risk as Amazon saturates the market, and Prime membership plateau).

Surprisingly, ad sales growth also plateaued but that was explained as mostly an accounting change.

The big news from the Q1 earnings was that Amazon would be investing over $800M to move from free 2-day shipping for Prime members, to free 1-day shipping for Prime members.  With most retailers already struggling to match Amazon's 2-day delivery promise, this is a meaningful moving of the goalposts by Amazon. 

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

Episode 172 of the Jason & Scot show was recorded on Monday, April 29th, 2019.

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


[0:24] Welcome to the Jason and Scott show this is episode 172 being recorded on Monday April 29th 2019 I'm your host Jason retailgeek Goldberg and as usual I'm here with your co-host Scot Wingo.

[0:38] Jason and welcome back Jason Scott show listeners so Jason did you survive the Epic geek week that we just went through with the featuring.
Avengers and Game of Thrones really big episode / movies come out.

[0:56] I did it was soup this is the first time in a I did not get to see Avengers yet so I have tickets for next week so so spoiler-free please and we won't do any Game of Thrones spoilers either
but I will say is the first time in a long time I was like desperately waiting for the weekend to be over.

[1:15] So that we can watch Game of Thrones so I got her the whole weekend I was just waiting for Sunday night and in that seems like counterintuitive.

[1:21] Yeah yeah me too it's pretty epic the amount of geekdom was was
was off the charts I ended up seeing an in-game twice with a complicated kid Arrangement so it was so I had like seven hours of of intense content.

[1:38] You're the only dude I know that gets to see the movie twice and win father of the year for doing it.

[1:44] Yeah we'll see if my wife agrees but yes I am not coming husband.

[1:50] I decided when everything come out.

[1:53] Mutually exclusive.

[1:54] Apparently so I will say on the a joke about desperately waiting for the weekend to be over with a young kid at home my brother who's in the same situation and I am taking the saying that like.
Sunday night is the new Friday night because I like entertaining your kid for to haul at the holidays is so much more exhausting than going to work.

[2:16] Yes it absolutely is.

[2:19] You could have warned me about that earlier.

[2:21] Sorry you didn't ask him.

[2:23] So in between all that supersetting get dumb and parental responsibilities I feel like it's pretty dense Amazon week as well.
Amazon news new your margin is there opportunity.

[2:47] It is so Amazon had there since we we we we were at Austin and lay down some shows that we've been putting out there so the lot of Amazon music come out so first mr. Bezos Jeff who's one of our top listeners
he releases annual shareholder letter which is one of my favorite days of the year and then they also had their first quarter results that came out last Thursday
so with all the Amazon news that is going to be our Focus For Today Show
so let's jump into the shareholder letter this being an Amazon geek I read these like.
Many many times I keep them all and I refer back to the 97 letter L
this is a really interesting shareholder letter first of all because a lot of time so like last year he talked about it always being day one.
I'm and you'll come
cultural stuff I would say about Amazon and this one was really so very internal thinking, sharing a little bit of how they think about things of Amazon with which I find intriguing the 2018 letter the one that was.

[4:00] Just came out recently it was really different because it was really external so the first thing was there is a really big surprise you and I have talked a ton about mini people
underestimate the size of Amazon because their revenue is a derivative of the GMB that goes the platform
so first-party sales 100% Revenue equals gmv
third party sales they only recognize their take rate of that GMP to Amazon's a lot bigger than you would think they are on the retail side
and this is been a puzzle that everyone's been trying to figure out literally for 20 years and just right there in his letter Jeff Bezos revealed
the the DMV for 2018 from third parties so let me pull that up here just kind of go through here
so we'll talk about why he did this but here's what he said third-party sales are grown from 3%.
The total of 58% to put it bluntly third-party sellers are kicking our first party but badly
and then he said just got a little long so I was up to it and it's High party because her first party. From 1.6 billion
1999 2A 117 billion this past year the compound annual growth rate for a first-party business in the same time. Is 25%
but at the same time they're pretty cells are grown from .1 billion to 160 billion.

[5:25] Compound annual growth rate of 52% so twice the rate so he's essentially saying 3ps going twice the rate at 1 P we talked about that on the show that's definitely a thing.
Write an external Benchmark eBay's GM be in St. Drew a compound rate of 20% from 2.8 billion to 95 billion
I want some pack there but he was he's essentially saying in 2018 first party was 117 third-party 160 you had those up you get 277 billion new surrounding you got about three hundred billion in GMP
so and then you'll see
yes I didn't do the revenues during that period were 232 billion so much have to take out AWS and advertising and then you're left with retail gross it back up to 277 Amazon's a lot bigger than people think so that was really interesting
and you're the real question is why why would Amazon do this do you have any speculation on them.

[6:29] And why they would they shared the the the gym being focused on the third-party sellers for the first time.

[6:36] Yes I do right now I think there's been a lot of news recently talking about folks that are interested in regulating Amazon and that you know you have all these.
Candidates for political office I frankly on both sides of the political Spectrum in Amazon has been a easy Target and you have people like a professor Galloway that talks a lot about splitting up all the big
Fan Company in Amazon gets included in that and it's a complicated issue.
And I feel like there there's a number of vectors where they like the the sort of simple.
Criticism of Amazon probably isn't accurate or fair but one of the the best offenses Amazon has that I think they're really trying to lean into is.

[7:29] We we are not some big company that has these huge revenues where a facilitator of all these small businesses that have these these revenues and you know if you were.
To try to split Amazon up based on antitrust allows you to have to establish that there are monopolies in one of their big defenses against being a monopoly is hey we don't have 277
billion dollars in sales our partners have.
This hundred and sixty billion dollars in sales those are even our sales so I think
emphasizing the their Marketplace roll.

[8:08] Is is one of their better defenses and I think you know there's a full-throated version of that in this the shareholder letter but I think there's some earlier efforts as well where they,
like they really started doing some advertising campaigns promoting the small businesses that sell on Amazon and in hitting those numbers and so to me.
That there was a huge nugget in that letter that it was the first time that he really shared enough data let us back into an accurate gmv and.
Amazon famous for not sharing information like that I think Jeff has a good quote we're in the information
Gathering business not the information sharing business so she had to have a good reason to share it and and in my mind the obvious good reason is it's it's one of the the pillars of of his defense against the
The Break-Up break us up argument.

[9:00] Yeah I'm playing up here he even specifically says you know where we're a very small percentage of overall retail even when you can add one Pea in 3p so so definitely you know kind of.
Trying to get in front of the spani trust talk that that's out there.

[9:17] Yeah they're making the anti-monopoly argument and I'm frankly based on the way the laws are written right now like I did think it actually is a good argument
the the the argument that comes up a lot.
Protecting Amazon the there's this related argument and and I think some of the the presidential candidates have gotten really vocal and this one is the whole like hay
they're using the marketplace data
as an unfair advantage to design their own products so they they look at what what those 3-piece sellers are selling and then they knock it off and sell it themselves and it's not fair for you to be
one of the teams in the baseball game and the Umpire to use a bad metaphor that Elizabeth Warren tried death
I tried to use at one point and so that's an argument that I also frankly think is wrong but that argument ironically
like probably get strengthened by buy this argument that the marketplace is the biggest part of our business.

[10:23] Yeah he doesn't really defend against that other one he kind of takes a little bit of a swing out is just reminding how many employees they have and which is
portents and then they have raised The Gauntlet and I think this is actually just came out around the time.
I think it was Bernie Sanders was talking about how they don't pay a living wage that they upped it to $15 an hour for all their full-time books.

[10:47] Yeah. So that way there's a few funny references right any any so that you mention that he he compare their there
third party DMV that eBay which eBay did not appreciate and and had some pretty prompt responses to online and then Walmart decided
the comments about hourly wage were targeted directly at Walmart despite the fact that Walmart was not named.
In the in the shareholder letter and I think maybe you guys should pay your taxes.
Which also is kind of a.
Amazon doesn't pay a lot of taxes and I think there's a legitimate criticism to make their from a from a social justice perspective but.
They do pay all the taxes they required to pay under the US tax code so it's it's maybe a little unfair to criticize them for.
Following the rules but it does are interested or interesting sort of public fuse I'm not sure.
That in past decades you saw this kind of like real-time tit-for-tat between
in a bitter Rivals I got I don't think the car manufacturers took those kinds of over shots at each other that we're now seeing eBay Walmart and.
And I Amazon shoot in that I think we're going to have more examples before the show's over.

[12:14] Yeah yeah the the Twitter battles between these guys is pretty fascinating
and then some other interesting thing was kind of everyone was able to now say okay here's a real datapoint let's go sharpen our pencils
now one of the things in the letter is it.
Because it's a letter and not really Financial document this is not what's called Gap measure meaning that it's subject to General accounting principles you know everyone Defiance GM be a little different so for example.

[12:47] EBay.

[12:49] They've gone back and forth I can't remember where they are right now of you have this concept of unpaid items so they're there are some items on eBay that go unpaid and then know should they count in GMT or not they went through a phase where it was in wasn't sometimes shipping is in
what are the sayings did Amazon did say was this was paid physical items so this would not be things like apps
any of the Kindle e content in the ebooks any of that kind of stuff music digital music digital movies any of those kinds of things were not included in here
so that being said one of the analysts that we put a lot on the show John Blackledge she's over at Kalen he had 2018 at 314 billion so
off by about 20% Which I feel like could be I'm pretty sure this number I called includes media and digital stuff so and I know he hasn't text me yet it have a chance to put for the show so pretty close
my model was a good bit higher
so the percentage wise you know was really capturing the 25 in the 50% growth rates as well so I'm going to go find my model never actually have a real datapoint
and then the real variable you say two points is.
What the average selling prices for 1 p.m. three piece suits this really gives us a pretty good way of backing into that now it should be helpful going for.

[14:18] Yeah I know I was like a day and a half of my life when that letter came out cuz I quickly started opening spreadsheets and building forecasting models and and trying to like.
Back into the physical DMV in North America and compare that with like Walmart's physical DMV in North America for example and there's all kinds of interesting ways to slice it and dice it now that we have.
Slightly less speculative data.

[14:47] Yo what you think about the rest of the letter.

[14:51] So I liked it you know he hit some
important points that he is he's talked about in the past as well the the main theme for the the back half of the letter after the gym V stuff.
The the notion of the importance of curiosity and what he called the power of wandering and this is a section of the letter where he talked about the.

[15:21] The company needing permission to.
Sort of stumble into new products and solutions and not necessarily take a straight line from each each product Innovation to the next and so.
You know he kind of talked a lot about how when you know you have a successful product in your iterating it that you know you want.
Can you achieve a certain scale and you can you can really focus on efficiencies and and try to take the shortest path from each version to the next version as you can.
But when you want to invent something new most often you can't do that by.
Knowing in advance what you're going to invent and that you can't necessarily ask your customers what they want and and you don't assume that you're going to get some.
Some you know game-changing new innovation out of a sort of feedback from your customers and so that the huge example for him of that was AWS and that like.

[16:23] You don't know customer ever came to Amazon and said hey we really need to rent server capacity from you you guys seem pretty good at doing it for your retail store you should sell it to the rest of us.
That that was a a a sort of risky bet that Amazon had to take that like if we offered this to people that they would accept it and.
And I could be a big business and it's become a huge business obviously and then you know in the letter and Jeff gives examples of.
Of dozens of soda products on top of AWS that got invented in much that same way that like.
No one was necessarily asking for machine learning models from Amazon but they built them and put them on top of AWS.
No one was asking for all these like specific database solutions that Amazon invented but you know many of them have been super successful.
And you know you kind of made the point that.

[17:19] You have to give people permission to sort of explore and fail and then he's easier to transition into talking about how important it is.
To have failures and he talked about the Fire Phone for example and that that was a you know a billion dollar fail for Amazon.
But you know his argument was that that failure enable the success.
With the the Amazon is I quickly hit mute with the Amazon Alexa and that those products only existed because.
A bunch of Engineers had permission to fail on the on the phone that was sort of the precursor to this product and he pointed out.
As a company gets bigger that their failures have to be bigger as well and so you know he's going to.
He talks about you know you should expect companies of Amazon size to have some pretty pretty big honkin of failures and that that's a sign of of Health then so.
I think that that's an interesting message you know like I'll be blunt like I walk into a lot of distressed.
Clients and they they talk about like only being able to make a limited number of a bats and I can't afford for any of those vents not to work.

[18:38] And I Michael those aren't Betts if you know if you have to know in advance that eat each one's going to pay off like there's they're like by definition you can't take any risk and they're not bets and and you know Jeff is talked before about.
Like if you have to know the outcome in advance is not an experiment in until I like this weather seems like a kind of articulation of that Philosophy from Jeff which which.
I do think makes a lot of sense.

[19:04] Yeah I was good to you it's just easy to make billion dollar bets when you know why she doesn't care about you make me up your GPS and you have a cute voice.

[19:16] Yeah I mean I do think that there's an argument the date they have more leeway and until I do think a lot of companies to wear that are a little sort of jealous of that but.
You know the kind of argument would be the day earn some of that we way with their investors.

[19:34] Yeah they're they're pretty upfront about it with Wall Street will talk about it and q1 but you know if the know they basically say to Wall Street we're really focusing on growth and we think this is a big opportunity for that ride.

[19:48] And if you
it's for those that aren't super friendly are at the end of every single annual shareholder meeting Jeff references the original shareholder meeting letter he wrote in 1997 and includes a copy of it which is what you were talking about at the beginning of this segment
and it's in that shed all their letter that he sort of like.
Makes the the argument and announces to shareholder that hey what were long-term thinkers and where we're not going to necessarily focus on on short-term profits and if you invest in that you should be up for that.

[20:25] Yep yep and he's been amazingly consistent.

[20:29] Yeah yeah and so again like the when you write that in 1997 you might not have a lot of credibility but but today and in 2018 that the fact that he still gets to point to that letter and say hey we've been through that for
now more than 20 years like there's there's some good credibility there.
And as you mentioned he kind of closed out with this conversation talking about wages and I do think you know Amazon has made significant progress in.
In raising their wages I'm as have a lot of other retailer so I would say like sort of.

[21:02] Target Walmart Amazon have all announced major initiatives about raising wages and into Arch Dent have.
Follow through on those initiatives they all want to get as much Public Credit as they can for it and they all want to use as a foil for the attacks they get from the the Bernie Sanders of the world,
like there's also a very good practical capitalist reason that they're doing that that like their.
They're all desperately trying to grow and they need quality employees to grow and is a competing more customer experience then they're relying on these employees to deliver the customer experience.
And I think they're all just finding they have to pay more to.
When the recruiting battles and get the kind of employees that they need to keep feeding their businesses and so I.
I'm not so sure that these guys are all doing it out of the goodness of their heart I think this is a place where.
Where capitalism is kind of working and driving driving wages up a little bit which is certainly a good thing.

[22:01] So that was my take on the shareholder letter I did reference earlier like that you know.
The other attack is this whole notion of the the market put is unfair to be an Umpire and a player,
and that that was the baseball metaphor that Elizabeth Warren me like she's she's pretty smart woman I'm not sure she's an expert in baseball cuz I didn't love that metaphor because the umpires actually work for the owners.
And I think I can change the rules whenever they want like I'm not sure that wasn't exactly the the metaphor she was going for.

[22:37] I have heard this a lot like there lots of people that hark on the fact that like oh my gosh Amazon's totally leaning in a private label and they're launching all these products and their they're using the data from the marketplace.
To build these these products and we can't allow that if you're going to be the marketplace you can't also be a seller.
And we're hearing that argument more and more and.

[23:01] Yeah you can make that argument like that I mean there's an intellectual argument there that that a smart person could could certainly by into but what what miss me a little bit is people talk like Amazon's the first one to do it and it's a new idea.
And I would argue like that's a play that retailers have been running for 200 years and at the moment all of Walmart's competitors are much better that play than they are so I don't frankly with only a few exceptions.
Virtue of the Amazon.
Private label products are very successful and is as business does hit I think I think I may have hit this in the in the shareholder letter also or maybe it was in the.
Another document this week but like less than 1% of their sales are private label and you go look at a.
Walmart or Target or a Best Buy in your in the like 20 and 30% of sales are our products that.
That are owned by that retailer and so I like I do think we want to be careful about just saying hey retailer shouldn't be allowed to sell their own products in addition to other people's products because.
That that would like fundamentally break most retailers.

[24:11] Yeah yes communication to see how these things play out and you know what we'll see.

[24:18] So I know there's a super big transition that I was supposed to remember and I think it's to the the q1 sales results which came out last Thursday so Scott what what were your sort of take away highlights from from the q1 result.

[24:36] Yes it does the really big news that kind of swamped some of the Nuggets that we will cover here is it Amazon announce they're moving Prime to one day shipping
and they're going to become gradually doing this so
they're going to start with certain areas in the US and and then continue to ramp it up that's really kind of what they announced it didn't announce it in.
They also did announce that they're going to do to they're going to be interesting over $809 in this initiative so certainly not chump change by by any,
means on Wall Street is girding so Amazon is gone through this. Through to one of 19.
And harvesting a bunch of Investments and now they're really signaling both with this race Pacific number and then there for guidance
I'm a really good margins in q1 talk about their sibling you know don't get used to that investment cycle as we really invest in one day Prime,
so does speculation when you kind of read you know you and I get along this Wall Street reports Wall Street, read the tea leaves there is
no Prime now is in 50 to 75 US market so maybe in those metros by Prime day
at which will be dry just as shortly Benadryl I don't know what it'll be this year but I'm at
but then by holiday 19 will see a much bigger kind of coverage pays for the delivery.

[26:03] Reaction was really interesting on social media you and I had a lot of folks chatting to us about it while streets are really excited so I said said they were very
spaghetti with excitement and most of Wall Street I'm on the back so this announcement plus the results will go over a socially raised Amazon, 2002
2250 price Target
the wall Street's kind of analysis has this is going to weigh more than pay for itself because know what we seen is as Amazon turns the crank on getting stuff to you faster and faster your demand goes up so you just got someplace just it's not clear how much that's incremental but more of your everyday shopping kind of then
the time is over into the prime bucket as I can just get it next day then that's
in fact the shares of Wal-Mart and Target were worked something after they announced that
but then at the same time so that was the bush reaction to Bears reaction is there's a sea of people on on
Twitter that were saying that's kind of ridiculous because they're not living up to the two-day promise for me so it was interesting to see that there was more negativity that I've seen in a long time from anecdotal Ian I'm sure Amazon has all the student is exactly what's going on but.

[27:22] Army isn't rushing there was a pretty big outpouring a folk saying
what day what what happens if I don't get my stuff in two days so that was that was fun to watch most perplexing reaction was Walmart's Twitter where they said one day shipping without a subscription
interesting so that was funny
what time is the Wall Street guys that the headlines in the reports are kind of fun this was the winner from you is Scott Devitt of
I said Amazon is releasing the next day Prime that starts we work the Star Wars reference in there which is
always awesome Jason what did you think about Saint ounce what is this kind of the nail in the coffin for the Ollie's omni-channel guys that are kind of catching up the amazon or or do you think they're going to kind of be able to hang in there.

[28:11] Yeah you're always going to win the quitting contest with Scott if you include a Star Wars reference
I don't think this is the nail in the coffin I do think it's a big smart move from Amazon though and I do think it's a gut-punch to most other retailers so the.
You know no retailer has close to the investment in fulfillment that Amazon has and you know Amazon has all this.
These other aspects of their fulfillment network but if you just look at these big fulfillment centers they have like more than seventy-five of them in the US now and and dozens of other things that support them like sortation centers in and transportation hubs and all these other
but they have 75 of these big warehouses Walmart has been next most which is they have like 20 many of which are much smaller
and then you know after that most retailers are lucky they have like two or three and so no retailers made close to the the.

[29:17] Investment in fulfillment infrastructure that Amazon has made into most retailers are you know.

[29:25] Taking some sort of strategic approach to how they answer what Amazon was already doing like.
Oh man we don't have custody ability to deliver in 2 days at Amazon has what should we do should we invest billions of dollars to try to get closer to them by opening more fulfillment centers
should we use our stores more in leveraged or fulfillment like you know because Amazon doesn't have stores and we do and you know they're all these sort of.
Typical omni-channel plays that you would make
and those are all things to sort of close the gap than Amazon has between everyone else and so when Amazon it if you just came up with some strategy to.
Partly closed the Gap and you're making a a big painful Investments to partly close that Gap and then Amazon goes oh by the way we've got another gear and we're going to open up this Gap more
that's that's really demoralizing to to a lot of these other retailers and so I do think this is a big smart move I think it's it was a clever way to leverage that advantage in in fulfillment centers that they have over everyone else
and you know I think there's going to have to be a lot of soul-searching amongst all these other retailers about the how how to respond a little more detail in the Walmart response which I agree was totally wacky.
Like basically Walmart public relations made a tweet that said.

[30:51] Not sure that's revolutionary what would be revolutionary is one day shipping without a membership fee.
Stay tuned in the the implication was that Walmart's going to announce something in the future that they're not prepared to announce today
along the lines of free free one-day shipping in the
the reality is they just don't have enough of filament centers to do one day shipping to to the whole Us in so you don't frankly like either they're going to make an announcement to dig another hundred holes and build
you know you know 10 billion more square feet of a filament space or
it's going to be something like we're going to do one day shipping from our stores,
which is interesting and that could be a good customer experience in a bunch of retards are using that approach Walmart's one of the last ones.

[31:39] That really isn't shipping from their stores but I would remind people that those stores have like a hundred thousand skews in them and Amazon selling 800 million products so
you know really not Apples to Apples if that's the approach that any retailer takes two matching Amazon so you know
roll all that up and I think the Fulfillment centers are a huge competitive Advantage for Amazon and they keep investing more in it which is a total gut punch for retailers and in frankly they talked about you know this being an 800 billion dollar investment for Amazon
that's actually not that big of an investment right
it's all right you like you know I think going back to the the wandering and the size of your failures has to scale part of the letter like I actually don't think a hundred million dollars in fulfillment for Amazon at this point is even a huge bat and so you know that's
that's going to be problematic for retailers to match I think they're they're doubling down on their damages which is smarter.

[32:37] Yeah my um so I have two thoughts on this just got out of pylons what you're saying and you give a really good talk you have this kind of rare but occasionally to give a good talk in the winter.

[32:51] You know that I'm recording this right.

[32:54] What are the topics you talk about is that their work done out of Potomac capability among the big tree so UPS FedEx USPS right
I maxed out to as a reminder to listeners in October of last year Amazon
started this program that they've tried to go out this couple is first day they started this flexnetwork
I like uber for products that it works okay but it's not really at the NC that.
Volume that they're looking for and it's it's hard to control the quality of uv2 of that program of doing more salt delivery is they
they split up this program called delivery service partner program DSP
this is very much like FedEx Ground where they actually went to logistics companies and said look if you'll deliver packages for us we will give you some pants and in front of the state with her 20,000 Mercedes Sprinter is really nice delivery Vans let you know.
Orders more capacity than likely yes. If you think about it
I think we could take a six months of data under the hood and my bed is they now know exactly.

[34:13] What the cost is and how to take over enough of The Last Mile in certain markets to do the one day and don't think they could do it when they had they had FedEx.
I'm really ups and USPS a little bit of FedEx as The Last Mile I just want to date the cost was cost-prohibitive but now I think they have the economics for they say you know if we just spent $800 more we got you know
maybe that equates to you another 20,000 Spinners and then whatever it is to deliver their I think they now see that there had this last little push and they can get to that.
Buy one reading of the tea leaves is
you're right the filament centers are key to it but I don't think it was until they did The Last Mile that they realized this was Insight they could do it and then I think once you do next day then same day everywhere
Art's to become a pretty good reality so then you're kind of there's not that much more capacity I think you have
add for same-day so so I would say to retailers you're going to probably have a competitor that's able to do its own last mile delivery at about half price you pay a third party
and they're going to be moving to same day delivery so it could be interesting to watch this and see what happened.

[35:32] Yeah for sure in like I don't even think you have to guess that like. I live in Chicago which I sometimes described as living in Amazon's future because there's a lot of this this one film incapability they're talking about rolling out Nationwide is already here so
the majority of packages I ordered get delivered in one day
and they're very often is a same-day offer in this is totally distinct from Amazon Prime now so Amazon Prime now is this thing with smaller warehouses that have 60,000 accused and and can deliver in a couple hours
what I'm talking about is delivering from the the full Amazon assortment and when it says like order right now when when you get this product
if it's before noon very often it says I'll get the product by 9 p.m. today and almost always the like the
the promise is
that I can get it tomorrow and so you know frankly I think what they're with their talking about here is is building out the Chicago style fulfillment Network.
For the rest of the country in it like you know I think it does fundamentally change your shopping behavior when you win the
the lag between desire and fulfillment is is that much closer.

[36:47] Yes and one day Prime was the big kind of Earth shattering news out of the first quarter results what other financial highlights did you see Jason.

[36:55] Well they made some money so so revenue for the quarter was just a hair under 60 billion like 59.7 billion
which is 19% growth from from this quarter last year
which is basically in line with the the Wall Street estimates but what got people excited was the Mead more profit on that Revenue than then folks expected so I think.
The consensus goal for operating margin was like 5.2%.
And they actually announced that they made 7.4% so that's a very meaningful beat.
And you know it's super encouraging that that Amazon is continuing the ratchet up these sort of.
Record profits on their their sales and you know side note that makes it easier to make these billion dollar investments in new fulfillment capabilities.

[37:51] And yeah a little more detail on that North America is is about 60% of Amazon's revenue and that's the profitable market for Amazon so that.
Operating margins in North America were 6.4% and international was a loss International so far in their in their history is always been a loss.
But the the loss is getting smaller and smaller so the International Ice was like 6%.
Which which sort of demonstrates that they're getting close to break-even and eventually getting profitability on that that International Revenue in addition to this North American Revenue.
So that seem like a big deal in an encouraging sign and I think Amazon attributed a lot of that that incremental profit to.
Fulfillment efficiencies so essentially.
Getting a return on all this fulfillment investment that you were just talking about and all those fulfillment programs in the airplanes that are Leasing and things that they're essentially.
As they scaled they're able to to squeeze some some incremental profit out of the model which is unisuper encouraging to.
To Wall Street at the very least and then of course you know.

[39:07] Amazon web services is another big big chunk in revenue for that for the quarter was like 7.7 billion.
Which is still 42% year-over-year growth which is exciting cuz you you worry that eventually you're going to email when you
that gets a big that it's harder to keep growing at that pace I'm so I do think the pace of growth is slightly decelerating for Amazon web services but it's still very fast growth and,
just a quick reminder like an unlike the retail side of the business that 7.7 billion is considerably more profitable so that's a nice revenue or profit driver for long for Amazon as well.
Those are kind of some of the the financial highlights what what else would you take away from the the quarterly earnings.

[39:53] Yeah there was a third-party side 53% of the units for third party that was a new high Wall Street was expecting the kind of you that has a missed their revenue that Amazon does report from third-party
services that was a little light another positive was subscription Services which grew 49%
and the CFO in his is kind of color commentary and answering some questions
I know at the 4th quarter report listeners remember we talked about Amazon said they had more Prime users added in the 4th quarter than ever before
so one street Wall Street analyst kind of said hey how are those new ads kind of converting is there is. There and they
it said that you know they saw a really good activations across all the different rhyme
capabilities suits what they mean there is no way they do it is in a Bezos says that you'd be
I want to make prime so good you'd be responsible not not sign up for it so so you've got. Obviously the fast free now going to one day normally two days you've got.

[41:05] You got all the Kindle stuff you got music you've got the video star.
I called the Alexa and puts in their busy even more in their exclusive products and all these things so one of the things that they kind of said body language was on the call was there fishing really good kind of.
Is increasing I kind of read it is increasing and this line item called subscription Services where that would show up that grew 49%
what kind of cars do you everything in the first quarter that was kind of the fastest-growing peace which I think it's well if if Prime is prime sign up for when your fastest growing things that that.

[41:43] What's the acceleration on the road as those people start ordering and taking advantage of their subscription
advertising one this was this is interesting so we talked a lot about this on the show it really slow down prematurely it's been growing kind of north of 50% I believe in this load to 34% year-over-year the
there was some talk
the system of all she has reported that there was an accounting change their that some of the third-party types of ads have now moved over into more this merchant services kind of line item and aren't showing up in advertising so I think they're kind of you know.
Are some apples and oranges there and then the CFO did say you know if you
adds grew faster than other so the other line with 34% so he was kind of trying to signal I think if accounting changes out there is still growing pretty rapidly
John Blackledge I referenced earlier you got to put sad visit 13 billion this year and she's at about 35 by.
What kind of the new multibillion-dollar line that Amazon is growing up a lot on the call about how.

[42:55] And I'll take this over to you cuz this is your bailiwick they're adding a lot more capabilities here for agency types of folks to have apis and ability to.
Run multiple accounts and I think they they realize that something that has large agencies need to include Amazon and a lot of ads and it sat out there.
The biggest concern from Wall Street is they have this metric called paid units.
That has slowed those 14% growth in Q4 at slowed to 10%.
Speed unit growth only go 10% yet will Revenue gross means the.

[43:39] The average order value is kind of doubled the only way to make that work in the retail world so there are some bears out there saying this feels like maybe Amazon starting to bump up against.
Challenges of scale in saturation there's a lot of reports that show that there at like 85% less of the.
High-end cameras out there are on Prime and those kinds of things so that's give me a metric I want to watch this really close when they did their forward-looking projections it does feel like a little bit of acceleration but it's not clear
is that coming from a TBI sads or the retail business are our what soaks I was kind of like the only little
kind of cloud on the horizon I would say is the speed unit growth really decelerate it pretty hard it's the lowest it's ever been
Child Say the bottom line on the first quarter is a really solid showing by Amazon the big surprise was the one day Prime that definitely kind of got everyone's attention and like I said before most of the Wall Street folks were pretty pleased and we saw a lot of
yeah raising of price targets to your kind of that north of a trillion-dollar territory up into the the $2,250 kind of ranch.

[44:58] That it's going to be interesting to watch that the advertising thing a lot of the new device are right after the announcement like people people miss that
certified accounting change and there was a little bit of a panic in the advertising world because there's been all this talk about oh my gosh Amazon's the fastest growing advertising platform and and you know number of the newest episode of forecasted at 2
do certain eventually be able to compete with a Google's and Facebook's of the world and so.

[45:30] At this point to already have decelerate in growth would have been a concern but obviously if that's.
I'm sure they explained Away by just went buckets Amazon puts the the revenue in then that's that's not as big a concern so it'll be interesting to see.
Like is that does that explain 100% of it or have they had a deceleration.
Well I am sort of bullish on on Amazon's prospects as an advertising platform,
I think you you hit one of the pain points that that's going to keep them from scaling is there there.
They're advertising tools and capabilities are are much more nascent than
say Google or Facebook in and you mentioned agencies don't like that and that's certainly true but like increasingly the the Google and Facebook tools are good enough that clients like to run their own campaigns on and that's
that's way less true on Amazon today so Amazon has a lot of.
Catch up to do on tools and you know you could see that like I'm sure they're they're investing a lot in the tools right now like we see a lot of new apis and capabilities coming out all the time
but but that could be a constraining factor on their advertising and another thing that I still speculate.
Is Eliza constraining factor in the short run is the budget that these advertising dollars are coming out of so.

[46:54] You know I still think the majority of advertising it happens on Amazon is advertising for a particular product that a brand is trying to sell on Amazon and Those ads usually come out of what's called a trade budget
and a lot of the dollars that gets spent on Google and Facebook come out of
a marketing awareness budget and I'm not sure Amazon his establish themselves as as a viable platform for those
those kind of top of the funnel advertising dollars in the same way that that Facebook has yet I think they're ever going to really scale they're going to have to demonstrate that they're good at that too and so I think.
Time is going to tell there but that's probably a good place to leave it's got unless you have any any closing remarks cuz we we've used up the are budgeted time for for the show.

[47:49] I think that's all the exciting news on the Amazon side will it's just kind of keep it there and we'll be back with more guests and more news and future episodes next for joints.

[47:59] Yep and if you didn't try this episode we sure would appreciate that five star review on iTunes as always if you have any comments or questions or we got anything wrong feel free to
the reach out to us on Twitter or leave us a note on her Facebook page we loved to have a dialogue with our listeners and until next time happy commercing.

Apr 24, 2019

EP171 - DTC brands physical experiences 

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

Episode 171 of the Jason & Scot show was recorded on Monday, April 8th, 2019.

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


[0:24] Welcome to the Jason and Scott show this episode is being recorded live from Austin Texas on Monday April 8th
2019 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scott Wingo.

[0:41] Hey Jason and welcome back Jason and Scott show listeners,
this is the first worst Jason not only are we in the same place together but we’re outside and I know listeners love your trip reports because you are the roving retail trip report.
Ninja but we are actually out at a shopping mall in Austin doing a live Jason and Scott show.

[1:03] Yeah this is awesome I feel like we are completely breaking all the usual conventions of podcasting because I am actually,
actively shopping with you here at the Domain at Northside in Austin while we’re doing a podcast I’m really excited to find out if this is going to work at all.

[1:21] Yeah yeah so I’m sure their listeners are already hearing some interesting sounds were,
kind of sandwich between a bar some construction and a lot of these noisy birds that live in Austin I’m not exactly sure what they are but hopefully that adds to your Ambiance as you’re listening out there.
So the how we get here so bad a year ago my wife and I went to Austin on a little trip and we discovered the small area,
I have been looking for one of those hot handbags are suitcases I should say called in a way and we were drawn here by the had an Auburn Pop Up and Away so we came out here,
and had the digital native brand experience it just really loved the small I think it’s one of my favorite,
malls in America if you will so we decided since you and I are here for channel advisor connect that we would do a live remote.

[2:10] Is an awesome idea.
So this isn’t one of these outdoor lifestyle mall so we’ve we’ve talked about those before like they tended that tends to be the format.
That is thriving more than some of the other formats it has a couple of traditional big anchor tenants like a Neiman Marcus I think the new Big anchor tenant is Nordstrom that might have opened here a couple years ago,
as you mentioned most of the digital native brands that that are in a brick-and-mortar business have a,
a location here so that’s interesting you can see the the Caspar Warby Parker been of us,
Etc all here and Scott what were your sort of initial Impressions the mall you mentioned it’s your favorite Mall why so.

[2:58] Gets a little another background thing this mall is owned and operated by Simon Property Group one of the larger Mall operators,
YouTube haven’t come here three or four times now what I was surprised with the day is there’s a lot of clothes stores I wouldn’t say.
I would kind of guessed 10% maybe a size 15 my little surprised by that because it does seem to be a pretty hot Mall area,
now most of them already have a coming soon so we’ve seen the ones that are close are already kind of being back filled so so that was a little bit of a surprise so I don’t think anyone is immune from all getting would be my first impression.

[3:34] Yeah and I are going to have to burst one of your bubbles not all signage is truthful.
So if you’re an operator and a tenant leaves the wallpaper you put over the front of that store says coming soon whether you have a tenant soon as a very flexible definition.

[3:52] Brands so I assumed that they were like.

[3:55] I think that’s actually the way you can tell into this mall feels like it has about a hundred 75 stores and that’s probably a fair estimate that like 15 of them are so seem like they’re vacant and at least half of those deer Point felt like.
They had a named tenant moving in and I would argue.
In the modern era that’s just the.
That’s the sign of a healthy mama like there’s some Concepts people open here that just didn’t work and stuff goes out of business and and stuff opens up we are here on a Monday afternoon in the middle of the workday,
and I would say traffic feels adequate like it definitely is not bustling but there’s a significant number.
A folks here shopping on a three on a Sunday afternoon or Monday afternoon and as with most of these lifestyle malls it is sort of a mixed-use.
Model so there’s a lot of retail here there’s a lot of dining here some of what you know it’s sort of higher in than a food court might be there’s a couple hotels on this property,
because we’re here for channel advisor we’re staying at much fancier hotels downtown but there are cool hotels here and there’s some entertainment venues as well so like some of that traffics probably retail but some of it maybe,
locals coming for lunch or something.

[5:21] Yara Uber driver live is live in Austin for about 40 years he kind of called it this domain area we’re in the little subsection called Northside he called it the new Main Street of Austin so it is definitely kind of,
not only a shopping destination but people are kind of moving here and living that go that the the busiest part of the mall today is definitely the food and and kind of services.

[5:43] Shout out to Velvet tacos that took care of us.

[5:45] Yes delicious.
So let’s do some sort reports to the first store we went into his beta and Jason if you have a superpower I haven’t witnessed it before but your superpower is getting store associates,
to spill their guts about what’s going on in the store so tell us what you learned about me.

[6:03] Yeah we talked about bananas on the show before one of the founders of FUBU his has been on an episode so just as a reminder for listeners that maybe didn’t hear that this is sort of a.
A retailer Services mall or another way to say it would be a physical Marketplace so this is a a store,
the brands can buy a shelf slot on and tell their story and so it tends to be,
young up-and-coming Brands and novel product that maybe don’t have huge awareness or distribution yet.
And or product they require like better demonstration or explanation to be,
to be sold and so they they would pay a beta to have a slot in the store data gets a commission on everything they sell and so it is very much is like beta is a Marketplace operator and their individual brand selling their products.

[6:55] In the store fun fact this is my second one I’ve been in this week cuz I was in the Santa Monica store in LA or earlier within the last week.
So the thesaurus get a lot of traffic one of the pros and cons of beta is it’s a great store for,
what I called Discovery like if you don’t know you’re looking for something you walk in your aunt you’re very likely to find something you didn’t know exist that you think is cool and you want to buy.
And so for example I think Scott and I both desperately want although I guess I’m guessing neither of us have it used for,
one of these Neo digital pins which is a physical pain that you write on paper,
and everything you you doodle or right or no to take are stored in the pen you can download them in real time or after the fact as PDF stand iPad.
And it just kind of cool thing that you maybe didn’t know existed before you walked in the store.

[7:51] Yeah they have a ton of that D on my first impression this paid I’ve been in the one in in Palo Alto,
first of all this felt like a Google take over so almost entire perimeter of the store was taken over by Google home kind of what I would call Little vignettes vignettes they had a device may be some Associated kind of,
Google device maybe maybe a phone or something but then also they were trying to walk you through some use cases for how to use the Google home devices so there was a recipe than yet,
there was a weather temperature vignette have an ending like a travel kind of a 1000 Rushing look like Google is spending pretty big bucks are there two.
The new used for superpower and got the store so she has to say some the top selling things and this particular beta are the key smart system.
And Shout out we know some of those hooks are listener so.

[8:42] Sometimes known as the smart key.

[8:45] Bone-conducting headphones are popular,
the Neo smartpen and then there’s a lot of really cool musical instrument stuff so jamstik so you could teach yourself how to play guitar,
is it my favorite thing was because we’re always have to do this company meetings and you always are shouting out in these Open Spaces had this really cool I’ll do it was $900 call the sound box Co KS,
I was just a ginormous Bluetooth speaker that you could either take take to the beaches like a mega Boombox or I would use it for like a PA system at a company meeting.

[9:20] And when you say ginormous you mean 30 lb.

[9:22] Yeah this guy has like a whole system for carrying it and what not but it looked quite robust like you could stand on it or whatever have some sand get on it and it wouldn’t wouldn’t get destroyed.

[9:32] So that again. I think this works great for that kind of thing that you discovered something you didn’t know existed. Point about Google
Google’s a perfect example they don’t have a network of their own stores and they have products that you may not know you need unless you see them used or demonstrated you may not understand,
some of the Google products and so they need physical brick-and-mortar demonstration Apple solve a problem for their products by opening hundreds of their own stores Google hasn’t done that yet and so it makes sense that they would invest in these,
opportunities to create a physical presence the downside of a store like this is you can’t rely on them having any particular product.
Before you walk in the door so it’s not a store you walk into with a mission like it’s unlikely you’d go I need new headphones I’m going to go to bed at like.
That headphones in particular it’s likely there’s going to be several different kinds of headphones in a beta store.
But they may not have the complete breath of Assortment or the brand you’re particularly in.

[10:32] They’re not going to have like a Bose QuietComfort they’re not have some any kind of pedestrian thing that that you would go to like a Best Buy for absolutely.

[10:38] Exactly so it’s interesting that we were talking to the guy,
and we’re talkin about some of the other good retailers in the in the mall and he mentioned Peloton and Casper and in his POV was that those guys would do great in a beta store.
And that you know that they all have like sort of physical elements that would resonate with a betta customer a we also talked about a way he felt like the away bags would do particularly well in the.
In a beta store and I was kind of.
Going down on that a little bit I actually don’t think a beta store can offer the immersive experience that a Casper store can offer so I would actually argue when you have the opportunity to have a Casper store in the mall.
That’s what you should do is have a Casper store not being beta but if betta is in a mall that Casper isn’t in you can imagine that that.
Peter could be a supplemental experience for sort of expanding the footprint for some of these other brands.

[11:40] Yeah yeah I think they could be in or kind of a Thing versus just a you know you have to choose between 1.
So I can pay the we went we walked by Peloton they had kind of a class going on in there and,
yeah it looks like it looked to be quite busy they had many of their their signature devices that’s on the treadmills that’s their newest widget there’s a lot of Buzz out on Wall Street that this company is going to
dummy onesies that goes public as we speaking today lift has filed as done their IPO if someone,
this is been a little bit of a rocky start for tpd on what that was is good for the company not so good for the investors that that bought the IPO,
I’m and then Pinterest is actually starting the road show today so we’re starting to see this IPO Log Jam clear and a lot of chatter out there about Peloton being one,
and a big surprise about Peloton is it’s not really a hardware company it’s a subscription song.

[12:35] Yep exactly so it Center.
The hardware is a little bit of the razor in this model and then the the monthly subscription for content is the Razer Blade so you the original product was stationary bike,
with a big screen on it and they have a great group gamification model so you take live classes.
With other remote participants so you can get a very famous instructor if they were teaching at a spinning studio in New York they’d only be able to accommodate 30 bikes but now this instructor can have to get two thousand people in their class,
and you get the instructor on the video screen in front of you you’re competing against all other two thousand people you can see how many watts your making it hard you’re working,
against these other two thousand people and that access to.

[13:24] The the finite commodity of really good instructors and the in the sort of competitive gamification in the fact that.
There’s so many classes that you kind of have you can have a completely flexible schedule.
That those set of factors have caused Peloton to do really well and get a really zealous user base a lot of people think that they’ve taken a big chunk out of the the dedicated,
spinning businesses like SoulCycle in those guys,
so the newest thing for them they were a direct-to-consumer business they only sold the bikes online they did infomercials and so retail is a very new model for them that they’re rapidly opening stores,
probably because they captured all those early easy customers online and now to expand the footprint they’re having to have a brick-and-mortar present.

[14:14] Yara are class a mall in Durham has a Peloton pop up so it’s like the slow glass enclosure with two or three in there.
The last I heard I think there they’ve crossed over a million subscribers so you know starts to feel when I talk to a lot of people there, like it’s just like going to be almost like the next Netflix there’s nothing.
You know the that software you could have imagined it on tons of different devices and this whole in-home exercise area is hot with feces so some companies to kind of keep an eye on if this is interesting to you
others mirror and tonal who have all raised substantial Capital to go after this Market they all have different approaches.

[14:51] Yeah yeah and there’s you might expect a lot of sort of me choose even on the original equipment like that the cycling bike and Peloton is expanded now to treadmills,
so yeah it’s an interesting hot space and I think I may have mentioned in our seat yet show,
there’s a whole Exhibit Hall at CES dedicated to this sort of connected Fitness face and these guys all had a prominent presence there.

[15:14] Cool so then we we wanted around we walked by bonobo Sonora be no need to go in those those are well well treaded for us then we went to the bakery and sampled some some Bakery items and some.

[15:28] The seasonal oatmeal cookie really hit the spot.

[15:30] Yeah 10 minutes of Gone by since a latte so Jason was was he was she.

[15:34] Unless my wife is listening in which case I had the fruit parfait.

[15:38] Yes good job having just that one strawberry then we went into the Casper store and it was my first Casper so I’ve seen their little kind of in Target pop-up before but I never been in a Casper store how about you.

[15:50] I have been in a number of Casper stores in so this is on the smaller value side of Casper stores.
So they they do a good job and Merchandising their products so they have their primary product is a mattress that can be a direct home delivery that they they sort of.
I want say they invented the product-based they were the first runaway success in the.
Foam mattresses that you can press down small enough to UPS them home,
and so they have a lot of these these sweeping vignettes these little mini houses with their various mattresses in them,
that you can lay down and try and what will get back to the Deep Dives to God did in trying a mattress in a minute that they ought they expand until I bedding and they have a very cool like bedroom lighting system.

[16:39] Oh yeah that’s my favorite.

[16:41] Serta hypnotized asked for about 15 minutes and we were playing with that.
What’s different about this Casper store that’s kind of weird this Casper start-stop bigger Casper stores have sort of more of a social media component so they might have had like like.
Photography set where you can take a cool Instagram picture of you in a in a Casper vignette and in the Marquis thing that some of the big Casper’s have is this thing called the dreamery.
And the dreamer is kind of the wework of nap.
So you you make a reservation and you pay to go into this isolated soundproof pod with a Casper mattress and premium bedding and you literally can pay to just have an app for,
for half an hour and my understanding is that like you think sell out till like.
Team offsites and team building and things and it’s it’s kind of a cutaway they’re monetizing people trying their product which is pretty clever.

[17:38] Michael you should see the associates look on his face when Jason asked if he could take a nap.

[17:43] Side note if you’re going to do at a store visit it’s important to have a super cheesy annoying joke as an icebreaker for everyone so thanks man.

[17:52] Yes you’re really good at that your dad jokes are off the chart.

[17:57] I work hard on I’m so we didn’t mention this in data but I highly encourage our listeners whenever you walk in a beta store and someone comes up and asks you if you need help the first thing you should ask them is when they’re expecting to get out of beta.

[18:08] Yes the guy gave.

[18:10] He almost fell on the ground laughing.

[18:12] Epic Gyros and side eye.

[18:15] The @apple what you like to do is go stand by the laptops and when someone comes up and offers to help you which will no longer have an Apple store by the way but I pathetically if it did what you want to do is go yeah,
when did iPod start making computers they love that joke.

[18:32] Uncle Joe in Casper the little vignettes for funny Casper always has his good better best mattress system nice get the names they have like the wave and the This Not That,
I’m so you could try those in six or seven will vignettes and then they had to find one that has the,
the self lifting feet and head and like it’s got magic fingers so that what that was I I spent quite a bit on time on that one,
that was fun and all lights were cool so it’s kind of a lightly but next your bed you can just rotate the light it’s it’s a cordless so it sits on what looks like a what are those kind of chargers the conductive charger,
an induction induction charger I’m sitting kind of like turnitin dim series of lights or you just turn it upside down and it turns lights off so that was pretty cool device.

[19:17] Yeah I like the fact that the light seem like they’re Wi-Fi network so literally like it when you say turn you don’t mean to Nob you mean literally spin the lamp itself.
An atom’s but if you have you could have 10 lights in your room and they would all of them and you can flip the one lamp upside down and all the lights in your room go off and flipping it won’t come back on.

[19:36] Yet sad much it is a lot of effort compared to talk into Alexa them so I don’t know I don’t know how successful I was exhausted flipping the light two or three times.
Not sure not sure I needed that much of work out here today. I think we should talk about briefly is
one of our listeners is here in the area super listener I guess we should call him Ted and he was able to secure a demo for us and a tour of Brigham and Borrego has a robot coffee,
kind of a experience so imagine if you will a 8 by 5 by 6 7 ft,
a little a little Hut with a lot of touchscreens and stuff that has a little robot Barista inside of it,
sounds really cool to see I’ve seen it here in the Austin Airport and apparently it’s in other airports like DFW and I guess coming soon to maybe SFO so what did you think about that mr. espresso.

[20:35] For me it’s all the fundamental problem which is called 24/7 availability of expresso,
so do you know anything about staff coffee shops that they don’t tend to be staffed at 3 a.m. but with one of these automated systems you you can get a delicious iced latte anytime of the day or night.

[20:55] In that sense obviously I love it it’s interesting to me what the ideal use cases for that so this feels like.
Something that you’d want to put into a high-traffic public space I do a space that’s open a lot of the time or all the time like a bus terminal or some kind of public transit are the airport,
and you would put it in in lieu of a man Espresso Bar so it does it takes up less space than I am and expresso bar and it can make all the different drinks and stuff it does not seem like something you’d add to an existing.
Coffee place or something you know I think it’s meant to be sort of a stand-alone mini coffee shop in the moment it’s meant to be indoors which.
You can imagine a lot of the 24/7 use cases that would be interesting are,
I could potentially be outdoor installations I think we saw their business from model problem for him while we’re there I really think they should be partnering with the Tesla superchargers,
and you can actually order your coffee from your car and have your car waiting for you when you arrive to plug in and charge it.

[22:05] Yeah and I think they should be branded a human supercharger I met him at that my song.

[22:12] Nice that could be your eyes breaking joke whenever you you know anyone.

[22:16] All right I’ll tell you something delicious case I thought of and that it is popular is convention centers and I flash back to you and I have been to the NRF Big Show,
some ungodly number of years and even though there’s two Starbucks some unbranded espresso place and another place the line is always 2 hours long.
I’m sort of the cool features of this is if you download their app you can you can pre-order and the Machine will,
you can you can actually schedule when you want your coffee made and then you go it doesn’t just have to make the coffee and spit it out so you go to the it holds it for you for for up to two hours,
and then which finally makes sense with iced drinks anyway.
And then you go up when you enter either you swipe your card or enter code and it didn’t dispense is the drink so I was thinking you know and those times in RF where we’ve got,
1520 minutes between now be a perfect use case for it because there is so much of the Cyber Monday for coffee demand really far outstrips the supply and the lost opportunities.

[23:17] Yeah and I feel like it’s one of these categories almost every category that gets did we disrupted there’s like the the sort of,
traditional players that are like oh my gosh a big part of the espresso experiences talking to the Barista and everyone wants to interact with a human and that’s you know it’s the third place and in this sort of impersonal robot is never going to work,
but I would remind people that 20% of all Starbucks orders are now online order and pay and you essentially don’t,
ever interact with a human you you order the drink on the phone you walk in you hope that you get easy access to grab your drink and never see a person and walk out and so this kind of automation,
you can imagine really being a primary fulfillment vehicle for those kinds of experiences.

[24:01] Yeah one lens you can look through this is the the human in the equation actually adds a lot of cost and then also a lot of variability right so you know the one thing I think you would find from a robot coffee maker is going to be,
obviously a more consistent experience and they’ve done a lot around that that’s pretty wild,
another cool thing is we’re able to see their Network Operating Center so they could see all the machines was going on and you know she number six is a little low on its cinnamon and this machine is low on this size cup,
it’s a really cool demo and wanted to thank the guys for doing that especially shout out to Ted for inviting us on that.

[24:35] Yeah and get any top animated caffeinated today hopefully that will pay off when we give our presentation at Channel advisor later.

[24:42] Yeah I’m just hoping you don’t Peak too early so we got it we got a time this right.

[24:46] I’ll always a challenge so what was the last store we visited before we sat down at the podcast how was your I think your original impetus for coming to the mall the away store.

[24:57] Yeah we we popped into the waste or I tried to convince Jason and I had a robust argument in the middle of store around 2 vs 4 Wheels we will not bore you guys with that that argument,
but the staff I have a little problem with my suitcase and those that was actually quite helpful with that and,
yeah I love this store it’s a great suitcase it’s pretty cool how they can’t take in a suitcase and put a Lifestyle brand on it,
so why the packaging and all is really geared towards people that travel a lot and talks about Adventure and since the last time I was in the store they’ve added a lot of accessories and other little kind of travel do dads and gadgets the,
you know when you do travel those things I do to improve your life so I thought it was a great story if you have a chance to visit one of those used to definitely try it out.

[25:44] And I think I’ve mentioned this in a previous tour visit.
I have mixed feelings cuz I feel like it’s a way as a great brand new had a lot of success they obviously evangelized you and I think if you hear the founders speak,
Del Taco watt about it being a travel Lifestyle brand not a luggage brand right and so.
I had a chance to visit their first pop up before they open retail stores and I would have said their pop-up was brilliant I thought I was really well-executed and it perfectly matched,
that story about them being a lifestyle travel brand so the store was set up in vignettes and the vignettes pretended to be different aspirational travel destinations so you might have had like,
Lake Como in Bellagio Italy and you might have had I don’t I don’t know it just an Bull in turkey or something.

[26:33] Myrtle Beach South Carolina.

[26:34] And then obviously Myrtle Beach South Carolina for the golfers.
And yes I did have a vignette of each of those things and it was like yeah you needed a suitcase but what they’re really selling was this aspirational lifestyle of traveling and taking great vacations.
I know that Austin has very interesting bird life by the way for those that was not Scott,
so I feel like the store did a good job of creating that aspiration and kind of telling that travel story and they were almost selling the destination more than the products,
and then when they close this New York pop up and they open their permanent stores,
I feel like they’re way more water down it’s a lot more shelves with suitcases on them and it’s a lot more talkin about the,
the act of using the features in the benefits of the luggage and less about the lifestyle selling is a lot more subtle and I guess is what I’m saying that to me is mildly disappointing from.
Experiential retail price back.

[27:36] FairPoint yeah I did I get it I think they’re struggling with one of the knock knocks on these kind of show Rumi kind of places like,
when I talked to your average consumer about bonobos
they think it’s really weird you can’t go in there and buy stuff so I think away is trying to kind of say for that that person that does want to walk in and buy something it is a weird experience to say thanks for stopping by to this kiosk and will ship it to you in 3 days,
irr what not to so I do think that kind of you know that’s probably why it has that feel to to compare to what you had in the pop-up.

[28:10] Yeah I know and I I certainly am not going to argue against than having inventory in immediate gratification light,
yeah in general those are all good things I N D Dunn Mesa a reasonable argument why he doesn’t want it but there’s pros and cons but I will say that sort of highlights my key takeaway from this whole Mall,
is is.
An increasing percentage of this mall and other good malls are filled by these digitally native vertical brands that are expanding to brick-and-mortar so you know we talked about malagueta and then lots of stores closing,
you know it’s a big number right now it’s it’s over 5,000 stores that closed this year which is more than close the last year and there are.
Thousands of openings like two or three thousand but not as many as closings and the openings are all these digital native brand so I do feel like that’s the future of the mall are more of these brands that were born online and,
are now moving to Brick and Mortar but here’s my one knock on all those experiences.

[29:07] They do still feel like isolated brick-and-mortar experiences so none of those cool stores we talked about could you have started shopping online,
and resumed that that experience in-store none of them had,
digital tools that the salesperson was holding to know which size away bag you looked at online before you came in the store none of the Casper when you know employees knew whether you were a Casper,
customer or not already and what kind of relationship you had with Caspar I feel like it’s a lost opportunity,
that you know these are a lot of brands that people have discovered online and then they’re exploring further in store and I really feel like the the omni-channel experiences.
Continue to be lacking across the board.

[29:52] Yeah yes all the reason I like this mall is you know where I am it’s very vanilla in the Southeast your your malls have,
your standard Sears JCPenney Macy’s kind of an and that that’s maybe get a belts as an anchor in there so we don’t get almost any original stores at all so even Apple Stores we got like four of those,
I’m too I think Center see about it is it is one of the few places you can go and find these kinds of stores that you just can’t find anywhere else,
I’m going on vacation to New York in a couple weeks and I’m going to stop stop by Hudson yards they don’t know whatever you do don’t call them all but they’re,
the collection of stores at Hudson yard I’ve heard native New Yorkers don’t like it but I’ve heard that it’s a fun destination because a lot of really unique things there so I look forward to seeing how that compares to this mall.

[30:42] Yeah I’m going to eagerly await your trip report cuz I’m somewhat humiliated that I feel like you’re going to beat me to Hudson yard I I got to visit it before it opened but I haven’t been there since the grand opening.

[30:52] Yeah I feel as Chief strategy retail digital e-commerce officer at Publicis pretty bad that you’ve let a landlubber like me get to get to the store before you so I hope none of your bosses are listening.

[31:05] Well you know it would not be a Jason and Scott show without mocking Jason’s title and that’s probably going to be a great place to leave it because we’ve used up our a lot of time for this very first,
Jason and Scott mobile podcast I hope the wisner’s enjoyed it and would love to get some feedback if if,
ask schlepping on the podcast gear on our backs and walking through a mall in the blistering heat Scott wearing like a giant flannel jacket.

[31:34] I’m being attacked by bear loud birds.

[31:36] Baibars exactly if that’s the thing to put you over the edge really well to show we sure would appreciate that five star review.

[31:44] Thanks everyone and if you are interested in learning more you could either Google or come visit at next time you’re in Austin this location is called domain Northside that stewards domain Northside and that is by Simon Property Group.

[31:57] And so until next time happy comercing.

Apr 9, 2019

EP170 - ThredUp President Anthony Marino 

Anthony Marino (@amarino) is the President of thredUp (@thredup), the nation's leading online marketplace for women's and kids'​ like-new apparel. Over 25,000 brands, ranging from Gap to Gucci, are listed on at prices up to 90 percent off retail. 

In this interview, we cover the basic thredUp value proposition, challenges and opportunities for the re-commerce business model, the dynamics of operating a two-sided marketplace, customer acquisition, reverse logistics, and the dynamics for brands in the re-commerce space.

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

Episode 170 of the Jason & Scot show was recorded on Friday, February 22, 2019 from the eTail West tradeshow in Palm Desert, CA.

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


[0:24] Welcome to the Jason and Scott show this episode is being recorded on Friday February 22nd 2019 live from the etail West Trade Show here in,
somewhat Sunny Palm Desert.
I'm your host Jason retailgeek Goldberg and unfortunately due to travel issues Scott couldn't be here today so you're getting twice the Jason for half the usual cost,
Kira detail one of the big topics of conversation has been new retail Concepts that are blowing up and so we thought.
What better guess to have on the show then one of those Concepts so today we have the president of thredup,
Anthony Marino on the show welcome to the show Anthony.

[1:08] Thank you Jason great to be here.

[1:09] We are thrilled to have you long time listener that the show will know we always like to start by getting a little bit of background about the gas so I can you tell us how you you came into your role.

[1:18] Sure so I've been at thredup about 6 years.
And I came to thredup it's it is actually an interesting story I came home from work one day six seven years ago and my wife had a big green polka dot box on our kitchen table.
And that was a threat of box,
and she reached into the box Sycamore have to show you something and she reached into the box and Sheepshead of unfurled this very good-looking cashmere sweater.
And she said I bought this for a box and I was like okay and she said this is a $500 cashmere sweater and I was like.
Okay and she said and it's used and I was like what and so she then told me the thread up story where she had sent in a bunch of our kids and her clothes to thredup. Credit.
The shop on the site from sending in her stuff.
She could have cashed that money out but she kept it on thredup the shop and she bought this amazing sweater that was used a great deal and she said to me you need to go work for this company.
And then about six months later we moved to California I was renting a house in the East Bay my kids were crying cuz they missed all the friends in New York and a big adventure in an e-commerce marketplaces in retail and second hand started for me.

[2:37] Wow so decide note I'd be really focused on your wife's new interest in shopping habits if they're going to that directly affect your career.

[2:45] Yeah she's she's she's a smart smart person so I listen to her advice at least that's what I say publicly.

[2:49] I feel like we exactly we all benefit from marrying up so used to it but let's jump into the threat of story little bit like down and give us the the rundown on the value prop.

[3:03] Yeah well that the the founding story precedes me by a couple years are founder and CEO James Rinehart look into his closet and just saw a closet full of clothing that eat that he didn't want to wear,
but all the clothing was in was in fantastic shape and I think if you.
A few fast forward to today where Marie kondo is encouraging people to the spark Joy by removing things from their homes that they don't use or don't love anymore,
his inside in his closet and on that one day many years ago and in Cambridge Massachusetts turned out to be something that millions and millions of people were experiencing as if they bought a lot of things that they weren't wearing or enjoying the fact those things,
making them feel guilty or unhappy because they were taking up space and they were reminders of mistakes from purchases past and he said I want to figure out a way to,
I make it easy for people to easily get rid of these things know that they're not going to be wasting their for destroying the Earth and getting into the hands.
And and that was really the birth of thredup it was how to help people,
clean out and make amazing you so the things are no longer wearing a particular women's and kid's clothes and then provide amazing deals for the people on the other side of that equation for whom those fought those were amazing finds there are Treasures.

[4:17] That's awesome so if I like to read repeat to see if I get it right basically you're a sort of a two-sided Marketplace for Consignment so,
people that have stuff in their closet that they come to regret or in end of usefulness for them they send those to you,
you go through a process on board those keep the ones that are resellable and wisto's on a e-commerce site that consumers can then shop for
like a high-value products at meaningful prices.

[4:48] That that's right about there's about twenty-five to thirty five thousand Brands listing on thredup at any given moment there's 2 million plus items on the site.
And they're up to 70 80 90% off retail and there in like new condition so it's the things that America has in its closets are.
Beautiful but for the most part of what the vast majority are and we take those things that come to us and we we price them and attribute them and photograph and put them online so it's super easy with a person who wants to clean out,
and then for the person on the other side who wants to buy great brands at great prices is just as easy as shopping do you want any other e-commerce site.

[5:25] Awesome and I have no trouble imagine that there's a super valuable merchandise and all of our closets that we don't use I imagine not everything in our closet is super valuable and I feel like there's some
remorse about what happens to that like I'm guessing you're going to tell me you have a good story for how you disposition the stuff that maybe isn't as hell.

[5:46] Yeah where are our goal and our commitment is that you know we have a 100% reuse goal and commitment for the items we receive so there's a couple things we can do.
With items that people send to us that aren't high enough quality to be listed on our site or in one of our stores or with one of our Retail Partners so what will we can send those things back to them we can say hey,
after the animatronics app you can you can pay a little bit and shipping and will send them back to you by the way most people.
Do you know they do that only wants they that they don't want to see it come back again or like wait how'd that happen why did I do that and then there are some things that we can.
I'll distribute through our partners who can sell those at consignment stores that don't have the quality standards that we have,
some of those things can be recycled into carpets and and if you've ever gone to the car wash those those Rags that they use to dry your car off those fibers can be recycled into into other future fight future Fabrics,
and I'm so yeah that's that's how we do it.

[6:47] Got you and what are things that seems cool about your model to me.
2 fundamental problems you have with a lot of marketplace models are that you have trouble guaranteeing a service-level so I went eBay matches a buyer to a seller,
they can't necessarily guarantee how fast that sellers going to ship the goods to the buyer,
and they're also can be a trust problem the eBay can't necessarily guarantee the web the sellers selling is authentic in in the condition that the,
the seller promised it's in so you can send it to me you feel like a two-sided Marketplace except
you handle all the logistics and fulfillment so you basically can guarantee a service level and you also act as a sort of independent trust verifier that gets to see all that merchandise before the consumer buys.

[7:31] That's exactly right we are the we are the seller of record you know so we take possession of the goods we have for distribution centers throughout the us and we're increasing our volume of those,
are those items are upcycled did an incredible incredible volume I mean we will,
up until today have a vial cycled over the past couple years over 60 million items this year alone will do another 30 million so.
Yes we take possession of the goods we make sure there in like new condition we photograph them and put them on a hanger and then we can ship them in a beautiful box wrapped in tissue paper and and send them out to our buyers and they are.
Generally Blown Away by the quality of the product.

[8:10] And so does all that merchandise that you've received an unloaded within a single fulfillment center somewhere in the US or out of the Majestics work.

[8:17] It lives in in for facilities in a distributed across the u.s.
And we do all kinds of interesting things TARTA route inventory and product to different centers depending on supply and demand and how the overall market place is performing but yeah those those four facilities process all those items,
for sale online and offline.

[8:38] Got it and is everything in the Fulfillment center available for sale right now or do you try to I can almost imagine you get a lot of new merchandise from Spring cleanings and there could be a lot of fall merchandise in or winter merchandise in that
and in that stops or try to sit on any of that or how does that work.

[8:55] You mean how do I optimize for seasonality.

[8:57] That's a way more elegant way.

[8:58] So so so it's a great question because it's a really tricky math problem because think about it from from the consumer's perspective,
they don't necessarily want to go into the closet to be like is this fall is this spring is this winter all they see is too much stuff.
And they want open up a bag or open up a box and put it all in it and and move it out so.

[9:23] All of that said you know we've been at this a while and we have millions of Sellers and when a seller sends you a box of stuff there's an incredible amount of data that you know about that seller their sizes their brands.
What they're what the what the what the what brand items are moving into versus clearing out of as you get multiple bags over time so we found that there are ways.
To influence what the what the seller will put in their clean-out bag to thredup and it has a can have a significant impact so,
we are we are we work with wood sellers in a way that's this pretty light touch but the people generally want to do the right thing if they feel like,
they can put a few extra more seasonal things in a bag and maybe learn a little bit more because we'll see faster cell to run an item that's it's perfectly in season we want to share those economics and incentives with sellers we're not heavy-handed about it,
we try to use our data and what we can do on the types of people who you request bags from that helps us,
can we just want to make it as easy as possible for sellers but yes we are everyday getting more and more seasonally relevant I think it'll actually be.

[10:35] Don't forget I think if I think ahead and 6-12 months I think you'll see the the seasonal element of our site really really kick out cuz we're.
We have so many billions of data points on this now that we're actually starting to figure it out.

[10:48] That's awesome and I can come and there's this healthy tension on the one hand
you really like to sanitize that person to only send stuff to you that you know you're going to be able to sail and is highly monetizable and like frankly that's going to let you come back to that cellar with the best news hey we got you a bunch of money
I can imagine there's a subset of your sellers that like.
Appreciate the money but there's some catharsis bike again for your earlier Point their Marie kondo followers or whatever in there that you aren't a,
new better way to get everything out of my closet than the Salvation Army was last season or something like that and.
In a way you don't necessarily want to discourage those people because 10% of what they send you is going to be exactly what you want you're just going to,
after project lights out in general do you try to get people to just any of the 10% that you're going to resell or are you happy to take everything because it makes you more seller friendly.

[11:47] This is something that how we treat.
Salaries in how we think about their experience and why they they decide to order a front of clean-out bag has been.
Something that we've always wanted to be very very clear about from the beginning cuz you're exactly right do you want them to only put.
Perfect things in the bag or do you want to shove everything in there and there's real trade-offs you know them or prescriptive to get with people the more they'll be like to know what this is a little bit too hard but if you just let him do put anything in there then it then it becomes hard for us and I think what we.
Decided in general is that we want to make it really easy for consumers and let us as a as a business that is built on,
reverse Logistics and data let us figure out and become the most amazing company at figuring out how to make the best use of those goods and monetize them in a way that's great for suppliers great for our consumers and great for the environment,
so I think that has been our our our challenge you know but I think we've come a very long way and look there's always.
There's incredible benefits over the long term for making things easy for consumers and if we're the company they can figure out how to crack those problems.
Then I put you in a very powerful position to build quite a moat around that that volume the quality of the supply that customers are going to send you.

[13:07] That's awesome let's talk about that reverse logistics for just a sec because it is funny in apparel.
I've been in this industry long enough to remember when it was like oh no one will ever buy clothes online like they need to fit everything and feel everything and obviously that.
Could have been disproven but it is the case that the economics of e-commerce prepare alarm or challenged in some other categories largely because
there is such a high return rate right and you could talk to most retailers and it's like me and the return rates are tripling and those returns are so expensive though it just takes of getting that stuff back and then how that retailer.
Dispositions that can they resell it is new what do they do all of those problems most retailers would say we're not very good at it and it's a core fundamental challenge with our economic model and I'm looking you and it's like,
that's your business is convincing people
to send stuff to you so I'm curious like a view if you found a Magic Bullet like what what is the experience and how do you how do you tackle that that sticky reverse Logistics challenge.

[14:12] We found the Magic Bullet is to be extremely transparent with your customers so we love to say to our customers when they call customer service or when they write in.
That there's no such thing as free returns you're paying for it somewhere you're paying for it in the product or paying for it in your membership fee you're paying for it somewhere it will be like to see the customers is our goal was a business,
is to be able to list online.
The greatest volume of high-quality second-hand apparel at the lowest possible prices and we will be explicit with you this is what it cost for us,
to take that item if you send it back to us and put it back online whatever cost $0.50 or $0.99 whatever it is and so if you send those items back to us.

[14:58] It's going to cost you this but we also say to our customers hey if you are shopping with us and you don't seem to return a lot.
When it will never charge you a return fee if we then we bought but by equal measure will say to customers who buy 10 things and return 9,
hey we we see you but you been doing this,
we love you but you're killing us and so what we're going to do is we're going to give you a one more free V but if you keep returning 90% things you buy we're going to have to start the charge you a dollar 99 per item to restock it so,
we just want to be really upfront with people about the reality of the business and.
Is yours a good news about returns they affect everybody equally they're equally miserable for every e-commerce company so what this forces us to do is just have the best possible product you keep the core proposition
it's got to be in a bang on as far as the brands we are for the quality of the product the selection daily freshness and pricing so forgetting all that right.
Then we should be able to sustain returns if you can't then you got to figure out a different business model.

[16:03] Got it better in general it sounds like you almost have a dynamic pricing model based on customer Behavior but you're super transparent about it.

[16:11] Very transferred there's no mystery maybe call him we call you use your level return policy and.
Looking to maybe some customers who we say you know what you eat we see you're returning a lot if you want to pay 999 a month.
And you can return as much as you want then then we'll offer that to you so I think you I think we just got to think about and see where you're going to meet them where they're at and left with them about what it takes for us to stay in business if they love the product to be like you know what I get it,
it's like I don't know actually returning nine things back to you until we actually created a product called a buying bundle,
we're and we found a lot of customers were buying lots of things and they were paying shipping from you know from us to get the stuff sent to them and then returning stuff in the way back,
we gave them its ability to,
can I purchase things we didn't ship it to we have critical mass of their items on the site and then they would they would avoid the the shipping fee until there's things you can do when you understand a job your customers trying to do,
then you can start to say okay I see what you're trying to do here is what it what it looks like on our end and hear some here's some options on ways we can,
we can make it work for you and Mike brought work for us we're big fans of that we we love experimenting with things like that we think it's the way he Commerce has to work.
And yeah there's no such thing as free returns.

[17:31] So one of the fundamental challenges usually have with a two-sided marketplaces is you have to win at two things you have to convince a bunch of people to be sellers on your platform and you have to come in too much of people that want to buy goods from your platform on most resided marketplaces
the strategy is usually to be great at one of those which,
facilitates the other if you get a ton of buyers it's easier to get sellers if you get a ton of great merchandise it's easier to get buyers like in your case have you found that there's one side that you absolutely have to win at or what what is the strategy around customer acquisition.

[18:02] There are really two so that the needs and the in the complexities of the marketplace of significant they're very different on both sides and so so what start with with suppliers generally speaking.
Are our core supplier the value proposition is the clean out the closet in a really simple way and to feel good about it and so we've invested a lot of time and effort,
and delivering on that value and so suppliers come to us in droves we we do not have a difficult time attracting suppliers to thredup in one thing I think,
people are often surprised to hear about our businesses are like well okay so they come once you know when do they come back like in 2 years I'm like no they come back in like 3 months,
because they go out and they keep on things so it's not it's not as if they clean out their closet and their I'm good you know they're good like until the next season rolls around so.
So that side of the business is very viral and it drives itself.

[19:03] And for us we spent a lot of time and effort understanding at the really at the at the at the user level you know how to get the best Supply I had to get it at the right rate how to manage that with the with the overall growth and scale of our Marketplace,
on the demand side little bit different there's lots of places in the universe for people to buy inexpensive clothing.
If you are looking to buy a $8 dress you can go to Walmart if if you're looking to buy an $8 J.Crew dress little bit harder so we we've learned a couple different things on the demand side which is the,
are Brands matter customers love.

[19:40] Defined the brands they love and trust and who's quality they believe in at great prices and the fact that it's second hand is almost incidental to them,
if we can maintain the quality part of the equation that they don't even I think they actually probably forget that they're shopping second-hand I think another thing we found,
that app that that our customers love on the demand side which is a key part of the value problem I'll come back to you that your acquisition point in a second,
is they love to see new things.
Every day we have customers would love to see new things on thredup every hour and they come back that that much they're hitting refresh if they're going to their app that much because not unlike their Instagram feed,
we're all day long we're listening 60 70 80 thousand fresh items every day so if they didn't see that dvf wrap dress,
or that Banana Republic jean jacket,
that they were looking for right away if they come back in an hour at the rate which were processing Goods to our system but there's probably something there that's if not V things are looking for it's pretty darn close so that's a very
powerful part of the demand side proposition that makes it look a little bit different from being just you know hey I'm looking for a great value on clothing and I think the final thing is.
One thing about Millennials and and younger Shoppers these days is that they never want to be seen on Instagram wearing the same thing twice.

[21:01] But at the same time they they don't want to be conspicuous consumers they don't want to feel wait so about what they're doing and thredup is is an interesting solution to that problem because they can.
They can scratch their x444 wardrobe that can move at the speed of their feed,
but at the same time they can take those things put them in a bag send them back to us and feel like they're part of the solution and not part of the problem.

[21:26] That's why I make sense you you hit something in the in the course of that explanation that it just occurred to me,
another word justice problem you have that maybe more cute than a traditional retailer is your onboarding a heck of a lot of new SKU so like I'm pick and and you'